Cloud Infrastructure Spending Hits Record $74 bn in Q4 2023, Driven by Demand for AI Services

Enterprise spending on cloud infrastructure services during the fourth quarter of 2023 reached a remarkable $74 billion globally.
Cloud market share of AWS, Microsoft, Google 2023

This marks an impressive surge of over $12 billion compared to the same quarter in 2022, with a substantial year-on-year growth rate of 20 percent in Q4. This growth notably outpaced the rates observed in the preceding three quarters, signifying a significant uptick in the market’s momentum.

What stands out even more is the unprecedented quarter-on-quarter increase of $5.6 billion from Q3, setting a new record for the largest quarterly surge in cloud infrastructure spending. The cumulative annual growth for the entire year 2023 stands at an impressive 19 percent from the preceding year, Synergy Research Group said.

While factors such as economic, currency, and political challenges have somewhat abated, the driving force behind this extraordinary growth is attributed to the transformative impact of generative AI technology and services, amplifying the expansion of cloud spending. In terms of market competition,

Google and Microsoft emerged as frontrunners in cloud infrastructure business, boasting stronger year-on-year growth numbers.

Microsoft increased its cloud infrastructure market share by nearly two percentage points from the fourth quarter of the previous year, reaching 24 percent.

Google also experienced an increase, securing an 11 percent share in cloud infrastructure market.

In contrast, market leader Amazon witnessed a dip in its worldwide market share to 31 percent in cloud infrastructure market, despite maintaining robust double-digit growth rates.

Collectively, the three major players accounted for a substantial 67 percent of the global market.

Among tier two cloud providers, notable performers in terms of year-on-year growth include Huawei, China Telecom, Snowflake, MongoDB, Oracle, and VMware.

With earnings data from major cloud providers now available for Q4, Synergy estimates that quarterly cloud infrastructure service revenues, encompassing IaaS, PaaS, and hosted private cloud services, reached an astonishing $73.7 billion. The full-year revenues for 2023 reached an astronomical $270 billion. Public IaaS and PaaS services took center stage, contributing significantly to the market’s growth with a 21 percent increase in Q4.

The dominance of major cloud providers becomes even more evident in the public cloud sector, where the top three players command an impressive 73 percent market share. Geographically, the cloud market exhibits robust growth across all regions, with the Asia-Pacific (APAC) region leading the charge. When measured in local currencies, India, China, Australia, and Japan experienced growth rates exceeding 20 percent year over year. However, the United States retains its supremacy as the largest cloud market, with a 16 percent growth rate in Q4.

Anticipating market improvements and the burgeoning excitement surrounding generative AI, Synergy had projected an upturn in cloud growth for Q4, and the actual growth surpassed expectations. While the cloud market may not return to pre-2022 growth rates due to the law of large numbers, Synergy forecasts a stabilization in growth rates, resulting in substantial annual increases in cloud spending. The research group expects the annual market to soon breach the $500 billion milestone.

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