UBS: Corporate cloud spending is stable and healthy; Amazon, Alphabet - C, and Microsoft will benefit
UBS analyst Karl Keirstead stated that Amazon, Alphabet - C, and Microsoft are about to announce their earnings reports, and are expected to benefit from "stable" and "healthy" cloud spending. Although several Fortune 500 companies mentioned that their IT budgets for 2025 will remain flat, there are no plans to cut spending. The growth in demand for AI-driven data software will help hyperscale cloud service providers. The overall improvement in the cloud infrastructure spending environment is noteworthy
According to Zhitong Finance APP, as Amazon (AMZN.US), Google (GOOGL.US), and Microsoft (MSFT.US) are about to announce their financial reports, UBS stated that these three tech giants are expected to benefit from "stable" and "healthy" cloud spending.
UBS analyst Karl Keirstead pointed out after communicating with 11 clients and partners at the Oracle AI World conference that the discussion atmosphere surrounding core cloud infrastructure spending is positive. He added that spending on artificial intelligence inference and training should also bring upward potential. He stated, "We believe that AWS has limited upside relative to Wall Street expectations, while Azure and Google Cloud have greater upside potential."
In-depth, Karl Keirstead noted that the overall tone of this communication is more positive than three months ago, "The improvement in the overall cloud infrastructure spending atmosphere is noteworthy." He explained, "Although several Fortune 500 companies mentioned that their IT budgets for 2025 will remain flat, none—zero—plan to further cut or delay spending. In fact, some partners indicated that they began to see budget loosening in the third quarter, with signs of 'thawing' appearing." "While this survey focused on the approximately 85%-90% of enterprise customers (i.e., 'core' demand) in AWS, Azure, and Google Cloud revenues, the demand for cloud GPUs from AI model suppliers and startups remains strong, with no significant signs of slowdown in the third quarter of 2025."
Other noteworthy conclusions from the communication include: the growth in demand for data software driven by artificial intelligence should benefit hyperscalers and companies like Snowflake (SNOW.US).
Additionally, there is a general belief in the industry that Microsoft Azure is gaining market share, with three partners stating that their Azure business accelerated in the third quarter or is expected to further accelerate in the fourth quarter. In contrast, these partners described their AWS business as "slightly below expectations" in the third quarter but expect stability in the fourth quarter.
Microsoft and Google are expected to announce their quarterly financial reports after the market closes on October 29, while Amazon will release its quarterly results after the market closes on October 30
