A new report warns that public cloud companies in the US and Europe have lost $1.6 trillion in total market value over the past 12 months.
Search (Opens in a new tab) By analyst firm Accel, it looked at valuations of 100 publicly traded US and European companies that focus on their business models cloud storage services.
It concluded that valuations of these companies had fallen to nearly pre-pandemic levels, before the sudden shift to digital caused an explosion in demand for cloud computing.
Cloud companies: in decline?
The total collective value of cloud companies monitored has fallen from an unprecedented peak of $2.8 trillion in September 2021 to just $1.2 trillion in September 2022, a decrease of 57%.
But it’s not just the valuations of publicly traded companies that are missing. The Accel report also found that the cloud initial public offering (IPO) market is experiencing its “largest drought” since the 2008 financial crisis.
Outside of the stock market, not everything is bleak. M&A activity remains high, fueled in part by money taking public companies private, and reportedly paying a 33% premium to the stock price on average.
For example, the cloud-based SaaS company Zendesk was bought for $10.2 billion by two private equity firms in June 2022, at a 34% premium to its share price.
Private funding engines for cloud companies have not been hit as much as public valuations. The total capital raised by cloud companies in Europe, Israel and the United States has not changed significantly, with total funding of $74 billion in 2022 so far, just 12% lower than in 2021.
With conflicting data, it’s hard to say if cloud computing’s dominance will really end.
However, the benefits of cloud computing such as Hybrid workThey remain critical to organizations as the pandemic continues. This is especially true if superiors want to reduce the disruption caused by another black swan event in the future.
