I’m watching public company earnings to identify early weaknesses in the software market. This week Microsoft, Google/ Alphabet, & Amazon reported their third quarter figures.

The meaningful decline in growth rates started four quarters ago is hard to ignore.

Let’s put these figures into context. Infrastructure revenue growth averaged 33% this quarter, which is astounding considering we’re talking about businesses that sum to more than $50b of revenue per quarter.

Customers spent $12b more this quarter. At a 7x multiple of revenue, that is another $84b of market cap creation, in theory.

But, the change in slope is meaningful, too. A year ago, these business units grew at 44% annually. The current recession is evident in the charts: growth rates have declined by 25% in six months’ time.

The kink downwards in the red line at Q-2 shows a sudden deceleration in AWS’ growth rate. GCP is more volatile, likely driven by the volatility of bigger deals closing on a smaller revenue base. Meanwhile, Azure has declined in a more steady cadence.

The data suggests a broader slowdown in software spending as these companies are indices of software buyers’ behavior.

Public software multiples - 4.9x as of last week, not far from the decade low of 3.3x - should depress further given these results & forward guidance. Microsoft stock is down 10%; Amazon fell about 20%; Google about 12%.

Lopping another 15% off multiples implies the median software company should trade at 4.2x forward revenues, a far cry from the 15x we observed not twelve months ago.