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OVHcloud cuts sales growth target citing economic conditions

OVHcloud’s shares fell sharply on Wednesday after the French cloud services provider trimmed its forecast for full-year sales and margins, flagging signs of weakening customer demand.

The company now sees organic revenue growth between 13% and 14% in 2023, against a previous outlook of growth in the range of 14%-16%. It expects its 2023 adjusted core profit (EBITDA) margin to be above 36%, against a previous forecast for it to be in line with the 2022 level of 39%.

“In March and so far in April, we have seen signs that some clients are taking longer to conclude contracts,” CEO Michel Paulin said on a call with analysts, adding it was prudent to temper guidance.

The company’s shares were down more than 11% by 1008 GMT.

An uncertain economic outlook has led to cutbacks across the tech sector, including at Amazon, which last month said it would axe another 9,000 jobs, focused on its cloud and advertising divisions.

Although OVHcloud is expanding into new markets and recruiting rather than laying off, it faces tough competition from the likes of U.S tech giants Amazon (AMZN.O) and Microsoft (MSFT.O), while the cloud sector also grapples with higher prices for electricity needed to power data centres.

The company flagged higher personnel and operating costs, particularly higher spot electricity prices in Germany.

It said it expects electricity costs to “normalise” over the next few quarters, and added its price increases will take full effect from the fourth quarter of fiscal 2023.

When asked about Microsoft Corp (MSFT.O)’s offer in March to change its cloud practices to settle an antitrust complaint filed in part by OVH to the European Commission, Paulin said unfair competition was a rising concern especially for customers, who want predictable prices.

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. ( Reuters

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