(News Bulletin 247) – The cloud computing group posted a lower-than-expected margin in the first half and lowered its entire outlook for the 2022-2023 financial year ending next August.

Cloud services (dematerialized computing) may show robust growth on paper, but it takes more to seduce the market.

Thus, the strong growth of OVHcloud recorded over the first six months of its 2022-2023 financial year, i.e. from September to February, is hardly enough to carry its action, which on the contrary fell by 10.4% this Wednesday around 11 a.m.

The group’s dynamic has been in line with revenue expectations, notes Stifel. First-half sales amounted to 439 million euros, up 15% on a reported basis and 12.8% on a like-for-like basis.

A quack on profitability

The disappointment of the publication is at the level of profitability. The gross operating margin (Ebitda) was 35.6% when analysts expected a figure above 37%.

“Personnel and operating costs (impact of the rise in spot electricity prices in Germany in particular) increased under the effect of the sharp upturn in inflation, to which is added a lag effect between increases in costs observed from the beginning of the year and the gradual contribution of price increases”, underlines the company.

OVHcloud explains that it has put in place “an action plan” to contain its costs from the second quarter, i.e. from December. The company has also adopted a hedging strategy which should allow it to benefit in the coming months from a normalization of its electricity costs, OVHcloud operating in a sector that is inherently very energy-intensive, with its datacenters.

The company’s net loss is also almost stable at 26.6 million euros against 26.3 million euros a year earlier.

Demand affected by the economic slowdown

The company’s downgrade to its full-year 2023-2024 outlook is the other market-sanctioned setback.

OVHcloud is thus counting on like-for-like growth of between 13% and 14% compared to a range of 14% to 16% previously, while the Ebitda margin is now expected to be more than 36% compared to a rate of 39% previously.

OVHcloud notes “recent changes in demand” which “reflect in the short term a shift in certain migration projects to the cloud or extension of existing infrastructures”.

This warning shows that even a sector as dynamic as cloud services is not immune to the macroeconomic slowdown. Which is also consistent with the message sent by Amazon, one of the heavyweights in this industry with its Amazon Web Services (AWS) branch. In a letter to its shareholders last week, the e-commerce group said AWS was facing “near-term headwinds” as “companies are more cautious in their spending due to macroeconomic conditions. “.

“AWS experienced a significant slowdown in its growth, which fell from 40% to 20% in a few quarters. OVHCloud’s warning is therefore not totally surprising and the group’s results, beyond the financial year 2022-2023 should improve but the market, for the moment, is focused on the short term”, judges a financial analyst.

Stifel shares this observation, believing that profitability is destined to start again. “The Ebitda margin will improve in the coming quarters due to the normalization of electricity costs (the group is 100% hedged for the financial year 2022-2023, except in Germany, and at more than 90 % for 2023-2024, at an average price lower than that of 2023) and price increases will be passed on”, explains the design office.

For the time being, the OVHcloud share price is evolving close to the lowest in its recent stock market history (the group was introduced on the stock market in October 2021) and has shown a drop of more than 50% over one year.