Amazon Q4 results: According to Nuvama, the cost takeout measure of clients has slowed down, and the results of all three hyper scalers—Amazon, Azure, and GCP—show an improvement in the overall growth trajectory this quarter.
Growing cloud computing is good news for Indian IT companies, according to domestic brokerage Nuvama Institutional Equities, which released better-than-expected Q4 numbers from Amazon. According to Nuvama, this quarter’s general growth trajectory has improved for all three hyper scalers—Amazon, Azure, and GCP—as client cost takeout has moderated and demand driven by artificial intelligence has rekindled overall growth. – Amazon Q4 results
“Although it’s still early, there are positive indications that discretionary spending is starting to rebound, particularly in the cloud. After a slow CY23, we anticipate a pick-up in cloud spending in 2024, which will boost total growth in FY25 (over FY24),” the statement read. Amazon exceeded the Street’s $166.2 billion estimate in Q4FY23 with revenue of $169.9 billion, up 13.9% YoY. These were respectable results for the company. Operating income exceeded the Street forecast of $10.5 billion, growing 382.6 percent YoY to $13.2 billion.
Amazon had a 13.2% YoY growth in revenue and a 100 bps QoQ increase. AWS increased its annualized revenue run rate to $100 billion in Q4 by more than $1.1 billion. Lead by newer initiatives and re-accelerating current migrations, management continues to witness the declining impact of cost optimization, which should eventually transfer into growth in the cloud company, according to Nuvama. According to Nuvama, Amazon predicted net sales in Q1FY24, or the March quarter, of $138–143.50 billion, or an 8–13 percent YoY increase.
Similar to other hyperscalers, Amazon expects its capex to increase in FY24, primarily driven by increased infrastructure spending, to support the growth of its AWS business, including additional investments in generative AI and large language models, Nuvama stated. Kotak Institutional Equities stated in its Q3 assessment that the Q4 exit rate, the rebound in discretionary expenditure, and the revenue from new major transactions determine the FY2025 growth rate.
We anticipate that the Indian IT sector will expand from 4-5 percent in FY2024 to 6-7 percent. For FY2025E, Infosys, TCS, and HCL Technologies have committed to growth of 2-3%. We anticipate that TCS and HCL Tech will outperform the industry thanks to an increase in megadeals. We anticipate Infosys to grow by 6.6%, with a weak exit having an influence. The growth outlook for FY2025 is dependent on a few as-yet-uncertain circumstances, which we have outlined below,” the statement stated. This brokerage’s preferred stock selection is Infosys, but it also finds TCS fascinating. The domestic brokerage recommends Cyient in the midcap category.
According to Kotak, certain IT companies have identified some encouraging signs, particularly in the financial services sector. However, many IT companies maintain that discretionary expenditure has not increased on a broader scale. “Cost-reduction priorities are the primary focus of enterprises (clients of IT services companies) across most sectors.” According to our data, a lot of businesses have set goals for cost savings that extend until 2024. These don’t give hope for a noteworthy rebound in discretionary spending, at least not in 1HCY24. The statement read, “We have emphasized these trends in our note on the CY2024 IT spending outlook.”
