Dive Brief:
- For the third-consecutive quarter, global spending on cloud infrastructure services grew by $10 billion year over year, an increase of 18% for the three-month period ending June 30, according to Synergy Research Group.
- While Microsoft and Google Cloud each increased their worldwide market shares by one percentage point year over year, to 22% and 11% respectively, AWS remained dominant, swallowing up one-third of total spending.
- The three-biggest cloud companies, AWS, Microsoft and Google, retained control of nearly two-thirds of the global cloud market, the market intelligence firm found.
Dive Insight:
A slowdown in new workload migrations spurred by economic unease and a desire to optimize existing deployments flattened cloud’s growth curve over the last nine months, freezing the balance of power among hyperscalers.
"For a strategically vital market that has been driving fundamental changes throughout the whole IT ecosystem, the topline story has almost become a bit repetitive," John Dinsdale, chief analyst and research director at Synergy Research Group, said via email.
As the size of the market has increased, growth slowed to 18% year over year, from 19% and 20% in the two previous quarters. Cloud’s year-over-year growth rate was 29% in 2022’s second quarter.
However, spending was up 3% compared to the previous quarter, the report said, roughly the same increase seen as the optimization trend took hold in Q2 2022.
“There are now tailwinds out there that could change that trajectory a bit,” Dinsdale said, pointing to market recovery in China, a general easing of macroeconomic pressures and appetite for cloud-based generative AI capabilities.
The hyperscalers are banking on the new technology to drive demand as the optimization cycle winds down.
“While customers have continued to optimize during the second quarter, we've started seeing more customers shift their focus toward driving innovation and bringing new workloads to the cloud,” Amazon CEO Andy Jassey said Thursday, during a Q2 2023 earnings call.
Microsoft Chairman and CEO Satya Nadella credited a quarterly bump in cloud earnings to new AI workloads during the company’s July earnings call, and enterprise appetite for AI helped push Google Cloud through its second straight quarter of profitability, according to Alphabet and Google CEO Sundar Pichai.
The hyperscalers command nearly three-quarters of the public cloud market, according to Synergy Research Group. Cloud infrastructure service revenues — which include IaaS, PaaS and hosted private cloud services — totaled $64.8 billion in Q2, with trailing twelve-month revenues reaching $247 billion, the report said.
