Headcount reductions and business closures will hit AWS and Azure in calendar Q4 and 2023.
Every time you read about headcount reductions or a startup that failed, that is likely negative news for AWS and Azure as the two remote server platforms (particularly AWS), are leveraged to the number of users and data generated/stored by those users.
AWS was the default platform over the past decade upon which startups were built. In recent years AWS and Azure moved upmarket with each vendor increasingly acquiring Enterprise customers.
- For example, it was just last December that META/Facebook announced it was deepening its ties to AWS.
- Salesforce and Netflix also heavily leverage AWS.
- No single customer will make or break AWS nor Azure, yet the cumulative effect of user and customer attrition will negatively impact AWS and Azure revenue growth.
Amazon will feel the AWS pain more so than Microsoft will feel the Azure pain as AWS was the only Amazon reporting segment that generated an Operating Profit (26% Operating Margin) in the September quarter. Conversely, Microsoft has multiple profitable business segments.
The headwinds will become more severe during 2023 as companies continue to cut headcount, as startups fail, and as zombie companies fold.