Despite expectations of broader cuts and delays in corporate technology spending, a new report says Microsoft and Amazon are poised to outperform many other enterprise technology providers in the aftermath of the COVID-19 crisis, due to their heavy investments in public cloud infrastructure and services.
Cloud providers such as Amazon Web Services and Microsoft Azure “will continue to see exceptional growth in their infrastructure offerings,” analysts with Moody’s Investors Service say in the report.
They add, “While the transition to the cloud is a headwind for certain legacy software and hardware providers, the overall shift remains a net driver of revenue growth. We expect double-digit growth from cloud infrastructure players though moderately slower than their earlier pace.”
“Though some new cloud migrations will be postponed, the leading public cloud providers such as AWS and Azure will benefit from their ability to offer scaled-up infrastructure as certain workloads see a spurt in utilization,” the report says. “When business conditions stabilize, the migration toward the cloud could accelerate as enterprises weigh the benefits of the public cloud IT model, including scalable computer capacity and usage-based costs against on-premise investments and other governance factors.”
This differs from the downturn of 2008/2009, when cloud technologies were still in their infancy, the report notes.
The Moody’s report also offers a strong outlook for the software-as-a-service sector, including offerings from Microsoft, Oracle, Adobe, SAP, Citrix, Salesforce and Workday. However, it cautions that legacy software and hardware products, including technology from some of those same companies, will be impacted negatively by the economic downturn.
Microsoft exemplifies both sides of these trends. The company has seen a boom in usage of its Microsoft Teams collaboration software as remote teams look for new ways to connect.
However, the Redmond company also still generates significant revenue from Windows on new PCs, which is one of the tech sectors that Moody’s classifies as “weak” in its analysis.
“We expect a surge in demand from at-home use in the short term but this will bring forward demand from the next several quarters,” the Moody’s report says. “We estimate that PC revenue could decline in the high-single digits in 2020, followed by more tempered rates of decline in 2021.”
Demand for PCs climbed significantly in the first quarter, due to an increase in remote work and distance learning, according to a report from the Canalys research firm, but worldwide PC shipments nonetheless declined by 8 percent due to supply constraints and logistical challenges created by the crisis.
In February, as the global crisis unfolded, Microsoft said it would fall short of its previously stated quarterly guidance in the division that includes Windows PCs.
Amazon’s e-commerce division has separately seen a surge in demand due to the COVID-19 crisis, even as it grapples with the implications of the novel coronavirus across its distribution centers. Shares of Amazon rose nearly 4 percent to an all-time high Tuesday morning, pushing its overall market value to more than $1.1 trillion.
Microsoft shares are up more than 3 percent this morning, outpacing broader gains in the stock market.
