OVHcloud lowers sales and margin targets due to weakening demand, shares tumble

French cloud services provider, OVHcloud, has cut its forecast for full-year sales and margins, signaling weakening demand from customers. The company now expects organic revenue growth to range between 13% and 14% in 2023, down from its previous outlook of growth between 14%-16%. It has also reduced its forecast for its 2023 adjusted core profit (EBITDA) margin to be above 36%, from the earlier prediction to be in line with the 2022 level of 39%.

The CEO of OVHcloud, Michel Paulin, said on a call with analysts that in March and April, some clients were taking longer to conclude contracts, which led to a prudent reduction in guidance. The company’s shares dropped more than 11% by 1008 GMT. Despite expanding into new markets and recruiting, OVHcloud faces stiff competition from US tech giants such as Amazon and Microsoft.

The uncertain economic outlook has resulted in cutbacks across the tech sector, including at Amazon, which recently announced it would axe another 9,000 jobs focused on its cloud and advertising divisions. Meanwhile, the cloud sector grapples with higher prices for electricity to power data centres. OVHcloud, in particular, highlighted higher personnel and operating costs, especially the increased spot electricity prices in Germany.

According to OVHcloud, it expects electricity costs to “normalise” over the next few quarters, and its price increases will take full effect from the fourth quarter of fiscal 2023. CEO Michel Paulin mentioned that unfair competition was a rising concern for customers, who want predictable prices when asked about Microsoft Corp’s offer in March to change its cloud practices to settle an antitrust complaint filed in part by OVH to the European Commission.

OVHcloud reported half-year sales of 439 million euros ($481.41 million), slightly above the 437.3 million expected on average in a company-provided poll. However, the lower forecast for full-year sales and margins has led to the tumble of OVHcloud’s shares.

Thomas Waner

A writer interested in artificial intelligence fields with good experience in programming. He is currently working for us as a writer, manager, and reviewer, with a strong CV.
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