International Data Corporation (IDC) reveals that cloud infrastructure spending saw a substantial surge in the second quarter of 2023, primarily driven by investments in shared cloud infrastructure. Investment in shared cloud infrastructure surged to $17.9 billion in the quarter, marking an impressive 13.7% growth compared to the previous year. This category has now outpaced non-cloud spending, accounting for a significant 45.8% of the total infrastructure expenditure in the first half of 2023. Meanwhile, the dedicated cloud infrastructure segment experienced a 4.9% year-on-year decrease in 2Q23, amounting to $6.7 billion.
Compared to the same period last year, spending on compute and storage infrastructure for cloud deployments, which includes both dedicated and shared IT environments, surged by an impressive 7.9%, totaling $24.6 billion in 2Q23.
This trend starkly contrasts with the non-cloud sector, which experienced an 8.3% decline, plummeting to $14.4 billion during the same period.
The demand for units in the cloud infrastructure segment dropped by 23.2%, but there was a notable uptick in average selling prices (ASPs), primarily attributed to an elevated volume of GPU server shipments to hyperscale providers.
Cloud infrastructure spending is now leaning towards robust configurations that cater to intricate workloads and pioneering AI projects. Despite the initial decline in system unit demand, the outlook for 2023 remains positive. This optimism hinges on the expectation that higher ASPs will persist throughout the year.
Cloud infrastructure spending growth YoY
IDC forecasts 10.6% growth in cloud infrastructure spending for 2023 reaching $101.4 billion, compared to 7.3% growth in 2022. Conversely, non-cloud infrastructure is anticipated to see a 7.9% decline, settling at $58.5 billion. Shared cloud infrastructure will experience a 13.5% year-on-year growth, reaching $72.0 billion for the full year, while spending on dedicated cloud infrastructure is expected to grow by 4.1% to $29.4 billion.
The restrained growth forecast for non-cloud infrastructure is attributed to anticipated market challenges. However, cloud spending is projected to remain resilient, driven by the introduction of new and existing mission-critical workloads, often necessitating high-performance systems.
Service providers collectively invested $24.1 billion in compute and storage infrastructure in 2Q23, representing a substantial 7.1% increase from the previous year. This spending accounted for a dominant 61.9% share of the total market.
On the flip side, non-service providers, including enterprises and government entities, reduced their spending by 6.9% year-on-year. Compute and storage spending by service providers is expected to reach $99.1 billion in 2023, marking a 9.0% year-on-year growth.
From a geographical perspective, cloud infrastructure spending in 2Q23 witnessed growth across all regions, apart from Canada, Central & Eastern Europe (CEE), which felt the impact of the Russia-Ukraine conflict, and Western Europe, where high energy prices and a constrained macroeconomic environment influenced client spending decisions.
CEE experienced a notable 15.2% year-on-year decline, Canada saw a substantial 36.4% drop, and Western Europe faced a 3.5% decrease.
Meanwhile, the USA, Japan, Middle East & Africa, Latin America, and Asia/Pacific (excluding Japan and China) (APeJC) experienced growth of 15.8%, 14.1%, 9.2%, 8.3%, and 2.8% year-on-year, respectively. China saw a modest 0.1% year-on-year growth by the end of the quarter.
For 2023, cloud infrastructure spending is anticipated to thrive in all regions except CEE and Canada. Latin America is projected to lead the charge with a remarkable 18.4% growth.
Long term cloud spending projections
IDC envisions cloud infrastructure spending to grow at a compound annual growth rate (CAGR) of 11.3% over the 2022-2027 forecast period, reaching $156.7 billion by 2027. Shared cloud infrastructure spending will constitute a substantial 70% of this total, exhibiting an 11.6% CAGR and reaching $109.7 billion in 2027. Meanwhile, spending on dedicated cloud infrastructure is poised to grow at a CAGR of 10.7%, ultimately amounting to $47 billion.
Non-cloud infrastructure spending is expected to exhibit a more modest 1.7% CAGR, reaching $69.1 billion in 2027. Compute and storage infrastructure spending by service providers is anticipated to achieve a 10.9% CAGR, reaching an impressive $152.6 billion in 2027.
In conclusion, we can say that the cloud infrastructure sector is set for significant growth, especially in shared cloud infrastructure, fueled by the rising demand for advanced workloads and cutting-edge AI projects, indicating a transformative role for cloud technology in the future of the digital landscape.
Source: IDC
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