Big Tech PE Ratios vs Pre-Pandemic Earnings

Cloud customers are cutting expenses. They use less expensive options wherever possible, rent less powerful VMs, use slower storage, and otherwise optimize costs on their end. On top of that, if economic activity goes down, clients naturally use less cloud services. Walmart does not need as much capacity as during peak pandemic, if people are buying less. They scale down until demand returns and pay less. Data centers are not that different from factories. If there are no orders, you get no money, but still need to spend to maintain the facilities. And maintenance became more expensive due to inflation, higher energy costs and supply shortages, cutting into profits. Sales are global and strengthening dollar cuts into profits too, because contracts are typically set in local currencies over a long period of time. European customers pay the same amount in euros as before, but revenue in dollars is down 20% over a single year. Top cloud providers will still be highly profitable, but profits will probably go down across the board and we might even see seemingly never-ending growth finally stalling. Btw, Google never made any money on its cloud. It was a continuous loss due to high capital investments, late entry, and small market share. And now it's going to get even worse for them. Google has money to weather this out, but smaller and niche players are in trouble.