(News Bulletin 247) – The cloud computing group is plunging on the Paris Stock Exchange after lowering its growth target for the 2023-2024 financial year ending next August.

Repeatedly. Like last year, OVH Cloud’s half-year results are accompanied by a lowering of objectives.

As in April 2023, OVHcloud explains that it is facing a slowdown in demand, “in an economic context offering little visibility”.

On the Paris Stock Exchange, the cloud computing group suffered the blow, and fell by 13.6% around 12:30 p.m., after having revised this Tuesday morning its growth prospects for its staggered 2023-2024 financial year, ending next August. The group is therefore counting on like-for-like growth of between 9% and 10% compared to a range of 11% to 13% previously targeted.

Quoted by Reuters, Valentin-Paul Jahan, analyst at Stifel, explains this plunge in the stock “by the downward revision of the turnover forecast and by the “prudence” of the company, which did not not raise its margin target “even though it was able to do so”.

A “financial communication problem”

The specialist judges that this is a “financial communication problem” considering that OVHcloud could have accompanied this downward revision of turnover growth with a slightly upward revision of the profit margin. Ebitda (gross operating profit, Editor’s note) anticipated,” he also told Reuters. Indeed, the group maintained its Ebitda margin forecast at 37% for the 2023-2024 financial year ending at the end of August.

Concerning its half-year results, OVHcloud, over the first six months of its financial year, i.e. from September to February, published a turnover of 486 million euros, an increase of 10.8% on a comparable basis and of 10. 6% in published data. This marks a slowdown compared to the growth rate revealed last year, of 15% in published data and 12.8% in comparable variation.

The group indicated that it is operating “in an economic context offering little visibility, particularly in Europe where customers are optimizing their cloud resources”. However, OVH generates 78% of its overall turnover in France and Europe.

An improvement in profitability

Note a clear improvement in profitability. Gross operating income (Ebitda) jumped 18.3% on a published basis and 19.6% on a comparable basis to reach 184 million euros. The gross operating margin also increased by 2.5 percentage points year-on-year, to stand at 37.9% compared to 35.4% in the first half of the 2022-2023 financial year.

OVHcloud attributes this clear improvement in profitability to “an improvement in operational leverage, with contained operational costs, a limited increase in indirect costs, and an improvement in the productivity of administrative teams”.

The company recalls having adopted a hedging strategy which allowed it to smooth out electricity costs, OVHcloud operating in a sector that is inherently very energy-intensive, with its data centers. This strategy paid off over the past half-year, with OVHcloud’s electricity costs representing nearly 6% of the group’s turnover, a stable percentage compared to the previous year.

During the second half of 2024, OVHcloud intends to “rigorously manage its various cost lines and invest its resources to continue innovation and the development of its high-potential cloud offerings”.

The group’s half-year accounts remain in the red. OVHcloud recorded a net loss of 17.2 million euros, however reduced compared to the deficit of 26.6 million euros posted last year.

At the start of the year, OVH Cloud had nevertheless given guarantees of visibility to the market with its strategic plan “Shaping the future”. The group intended to turn the page on two difficult stock market years with the promise of generating positive free cash flow for the financial year ending at the end of August 2026.

Alongside this biannual publication, OVHcloud announces the appointment of Benjamin Revcolevschi to the position of Deputy General Manager. He will take office on May 6.

SAP on a cloud

The publication of OVH Cloud contrasts with the excellent figures announced by the German SAP this Tuesday morning. The leading European software publisher benefited from a clear increase in its activity and its order intake in cloud computing, with a respective increase of 25% and 28% over one year.

SAP’s publication is accompanied by a confirmation of its forecasts. The annual turnover of cloud activities should be between 17 and 17.3 billion euros, representing growth of 24% to 27% at constant exchange rates.

Operating profit this year should be between 7.6 and 7.9 billion euros in non-IFRS data. A range which reflects growth of between 17% and 21% at constant exchange rates.

On the Frankfurt Stock Exchange, SAP shares recorded the largest increase in the DAX, with a gain of 3.4% after this publication, which was higher than expectations.

“SAP published solid figures for the first quarter, which should reassure investors in the idea that SAP’s turnover dynamics should remain strong in the coming quarters despite a difficult economic environment”, appreciates Stifel, which renewed its buy opinion and its price target of 195 euros.