Amazon's cloud warning will wipe out nearly $60 billion in value

There was a near 5% drop in shares of Amazon.com Inc (AMZN.O) on Friday after the company warned that its lucrative cloud services business slowed further in April, fueling worries that the long-time growth driver is struggling with a slowdown in technology spending.

It has been estimated that the giant company, which has a market capitalization of over $1.126 trillion, is on track to shed about $60 billion from its market capitalization of $1.126 trillion if losses persist.

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The slowdown is attributed to Amazon Web Services greater exposure to technology companies and start-ups, which have cut spending over the past months in response to rising interest rates and high inflation, according to Atlantic Equities analyst James Cordwell.

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"In light of this, Cordwell said that it will be increasingly difficult to have confidence that Q2 will mark the bottom of the decline in terms of retail sales.

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Amazon's cloud business, which has had a steady cash flow for many years, has been one of the major sources of capital for the company to invest in other areas, including online retail, but its growth has already slowed in the first quarter to the lowest rate since it has begun reporting the business on its own.

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Despite this, Amazon's finance chief Brian Olsavsky said on a post-earnings call that growth in the business would decline by 5 percentage points this month from the 16% recorded in the first quarter in part due to lower billing rates for cloud customers.

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Microsoft Corp's (MSFT.O) Azure, on the other hand, had a 27% growth rate in sales over the same period of time.

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Microsoft increased the proportion of its cloud infrastructure market share by a percentage point to 23% in the quarter, while Amazon, the market leader of cloud infrastructure, remained within its long-held share range of 32% to 34%, according to Synergy Research Group.

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The majority of analysts, however, were optimistic about Amazon's cloud prospects, with 17 raising their price targets for the stock, as opposed to the ten that lowered their price targets.

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Analyst Arun Sundaram, a CFRA Research analyst, believes that the slowdown is largely due to Amazon helping its clients move into lower-price tiers and that the company is not losing customers to other big players in the field.

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"Amazon has the biggest market share in the cloud computing industry and they will remain that way for a long time to come," Sundaram stated.