US and European public cloud companies have lost $1,6 trillion in overall market capitalization in the past 12 months, a new report warns.
A study (opens in a new tab) by analyst firm Accel examined the valuation of 100 publicly traded US and European companies that focus their business models on cloud storage services.
It concluded that the valuations of these companies had fallen to pre-pandemic levels, before the sudden digital shift caused an explosion in demand for cloud computing.
Cloud Enterprises: On the Decline?
The total collective value of monitored cloud companies fell from an all-time high 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 faltering. Accel's report also found that the cloud IPO market is experiencing its "worst drought" since the 2008 financial crisis.
Aside from the stock market, not all is gloomy. M&A activity remains high, fueled in part by funds that privatized state-owned companies, reportedly paying a 33% premium to share prices on average.
For example, cloud-based SaaS company Zendesk was bought for €10,2 billion by two private equity firms in June 2022, a 34% premium to its share price.
Cloud companies' private fundraising campaigns have not been as affected as public valuations. The total capital raised by cloud companies in Europe, Israel, and the United States has not changed dramatically, with total funding reaching $74.000 billion in 2022 so far, down just 12% from 2021.
With conflicting data, it's hard to tell if cloud computing's dominance is really coming to an end.
However, the benefits of cloud computing, such as hybrid working, remain crucial for businesses as the pandemic continues. This is especially true if bosses want to minimize the disruption caused by another black swan event in the future.