New data from Synergy Research Group indicates that enterprise spending on cloud infrastructure services reached nearly $74 billion globally in the fourth quarter, with an increase of over $12 billion compared to the same period in 2022. The annual growth rate was 20% in the fourth quarter, significantly higher than the previous three quarters. Additionally, the market grew by $5.6 billion from the third quarter, marking the largest quarterly increase ever achieved. In total, the market grew by 19% in 2023 compared to 2022. While economic, monetary, and political challenges have decreased, it is clear that generative AI technology and services have had a significant impact, helping to further drive cloud spending. In terms of competitive positioning, among the largest cloud providers, Google and Microsoft recorded the strongest annual growth numbers, with Microsoft increasing its global market share by nearly two percentage points compared to the same quarter the previous year. Google’s market share also increased. Their market shares in the fourth quarter were 24% and 11% respectively. Meanwhile, market leader Amazon saw its global market share decrease to 31%, despite maintaining strong double-digit growth rates. Collectively, the top three leaders accounted for 67% of the global market. Among second-tier cloud providers, those with the highest annual growth rates include Huawei, China Telecom, Snowflake, MongoDB, Oracle, and VMware.
With most major cloud providers having already reported their earnings data for the fourth quarter, Synergy estimates that quarterly revenues from cloud infrastructure services (including IaaS, PaaS, and hosted private cloud services) were $73.7 billion, with total revenues for 2023 reaching $270 billion. Public IaaS and PaaS services account for the majority of the market and grew by 21% in the fourth quarter. The dominance of the top cloud providers is even more pronounced in the public cloud, where the top three represent 73% of the market. Geographically, the cloud market continues to grow strongly in all regions of the world. In local currencies, the APAC region had the strongest growth, with India, China, Australia, and Japan growing by over 20% year over year. The United States remains by far the largest cloud market, with a scale that surpasses the entire APAC region. The U.S. market grew by 16% in the fourth quarter.
Given improved market conditions and high expectations surrounding generative AI, Synergy had forecasted a rebound in cloud growth rates for the fourth quarter, but the actual growth was even higher than expected. The cloud is now a massive market and it takes a lot to move the needle, but AI has done just that. Looking ahead, the law of large numbers means the cloud market will never return to growth rates seen before 2022, but Synergy forecasts that growth rates will now stabilize, resulting in huge annual increases in cloud spending. Synergy expects the annual market to soon reach the $500 billion mark.
source: SGResearch