OVHcloud cuts sales growth target citing economic conditions

French cloud services provider OVHcloud (OVH.PA) cut its full-year revenue growth projection on Wednesday, blaming the macroeconomic environment and delays in some projects.

In contrast to an earlier forecast of growth in the range of 14%–16%, the company now anticipates organic revenue growth in 2023 of between 13% and 14%.

The updated revenue projection “includes… recent developments in demand which in the short term reflect a delay in certain migration projects to the cloud or the extension of existing infrastructures,” the business said in a statement.

Since their data centers consume a lot of electricity, cloud companies have noticed signals of a slowing demand as well as higher expenses. Energy bills stand out among these costs.

Earlier this week, Societe Generale analyst Derric Marcon cited an interview this month in which Amazon’s (AMZN.O) CEO stated that AWS, the American company’s cloud services division, was still experiencing a slowdown. Employers in the tech industry, notably Amazon, have been laying off workers due to unstable economic conditions.

According to Marcon, “Investors… will inevitably wonder if a challenger or niche player like OVH can continue to grow as much as they said in a context where others say it’s slowing down.”

In contrast to a prior prediction that it would be in line with the 39.0% recorded in 2022, OVHcloud has modified its adjusted core profit (EBITDA) margin target for the full year 2023 and now anticipates that it will be above 36%.

A rise in personnel and operating costs, particularly as a result of higher spot electricity prices in Germany, was also mentioned by the group.

In the coming quarters, OVHcloud expects electricity prices to “normalize,” while its price rises will fully take effect in the fourth quarter of fiscal 2023.

It announced sales for the first half of the year at 439 million euros ($481.41 million), roughly in line with the 437.3 million average expected in a poll conducted by the business.

($1 = 0.9119 euros)