Dive Brief:
- An ongoing global surge in cloud consumption has challenged even the largest hyperscalers to ramp up capacity. As a measure of rising demand, the growth rate for enterprise spending on cloud infrastructure services increased for the fourth consecutive quarter in Q3, growing 23% year over year, according to a Synergy Research Group report published Friday.
- The firm’s analysis indicates quarterly infrastructure, platform and hosted private cloud services jumped to nearly $84 billion during the three months ending Sept. 30, increasing almost $16 billion year over year. “Given the already massive size of the market, we are seeing an impressive surge in growth,” John Dinsdale, SRG chief analyst, said in the report.
- Even AWS, which commands the largest share of the market with 31% of global revenues, faces capacity constraints, Amazon CEO Andy Jassy said Thursday, during a Q3 2024 earnings call. “We have more demand than we could fulfill if we had even more capacity today,” Jassy said. “Everyone today has less capacity than they have demand for.”
Dive Insight:
As demand soars, Microsoft is grappling with capacity issues, too. The second largest cloud provider nearly doubled infrastructure capital investments since last year to absorb anticipated demand, the company reported last week.
The surge is tied to AI workloads, which have joined enterprise modernization initiatives as a prime driver in cloud. AWS, Microsoft and Google Cloud have all grown their cloud business over the last year and invested heavily in capacity buildouts.
All three providers are banking on the surge to continue as they try to align capacity with demand.
“One of the least understood parts about AWS, over time, is that it is a massive logistics challenge,” Jassy said Thursday, pointing to 35 cloud regions, 130 availability zones and thousands of offerings dependent on data center facilities.
Getting the balance just right is the challenge. “If you land too little of them, you end up with shortages, which end up in outages for customers,” Jassy said. “If you end up with too much, the economics are woefully inefficient.”
While the ongoing boom is changing the cloud’s underlying infrastructure, it has not had a marked impact on market share numbers. AWS remained the leading cloud infrastructure service provider in Q3, with Microsoft and Google Cloud owning 20% and 13% of the market, respectively, SRG found.
“The market is now so massive that it is difficult for anyone to move the market share needle substantially in a short space of time,” Dinsdale said in an email. “By the same token, small shifts in market share are notable just because the market is so massive.”
The shifts have indeed been small. AWS lost roughly one percentage point over the last year, while Microsoft and Google Cloud each gained a little over one percentage point, according to Dinsdale’s analysis.
Microsoft’s share of infrastructure services declined by three percentage points after the company restructured its financial reporting in August, shifting the Power BI analytics solution and enterprise security and mobility platform from Intelligent Cloud to its productivity and business processes segment.
“Total Microsoft revenue has not changed,” Dinsdale said. Rather, revenues previously attached to Azure infrastructure and platform services are now reported as software services.
