$Microsoft (MSFT.US)$ / $Amazon (AMZN.US)$ – UBS does a U-tu...

$Microsoft (MSFT.US)$ / $Amazon (AMZN.US)$ – UBS does a U-turn and gets cautious on Cloud spend after speaking to 20 large customers

We think it is likely we see outsized weakness in cloud names – $Datadog (DDOG.US)$ , $MongoDB (MDB.US)$ , $Snowflake (SNOW.US)$ , $Confluent (CFLT.US)$ , $Amazon (AMZN.US)$ , $Microsoft (MSFT.US)$ -- giving back some of their gains from yesterday. $Datadog (DDOG.US)$ is also a comp to $NetScout Systems (NTCT.US)$ (neg pre yesterday after the close) which could add further dnside pressure to the stock.

Details:
- UBS’ checks form 3 months had indicated that cloud spend had finally begun to stabilize and with some increase in new cloud bookings discussions hint at a hopeful 2H
- However, this optimism has since dimmed due to longer sales cycles and lower conversion rates amidst high cost pressures. In particular, checks indicated disappointing cloud spend in September, saying they are not seeing any pick up in on-premise cloud migration activity and impact from AI is still minimal.
- UBS is now less confidence in Q423 recovery.
- They model AWS at 11% for Q3 (buyside at 11-12%)

Our take: Karl and Wamsley from UBS tend to move stocks than other sell-siders. This is the first sell-side note I have seen that has been this cautious on AWS and cloud growth heading into Q4 and their commentary on Sept. aligns with other datapoints we have called out in software saying that September was particularly slow.