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Q1 cloud infrastructure spending surpasses $63B globally; Google, Microsoft & Amazon hold 65% marketshare

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cloud spending

Enterprise spending on cloud infrastructure services in Q1 2023 surpassed $63 billion globally, representing a growth of more than $10 billion compared to the same period in 2022. The year-on-year growth rate reached 20% in Q1, which is slightly lower than in previous years but similar to the growth rate observed in the previous quarter. Q1 spending also increased by 4% from Q4, which is consistent with the quarter-on-quarter growth rate witnessed in Q1 of 2022.

Microsoft and Google had stronger year-on-year growth numbers compared to other major players. They increased their worldwide market share by one percentage point from the first quarter of the previous year. Microsoft’s Q1 worldwide market share in 2023 stood at 23%, while Google’s was 10%. Amazon, the market leader, maintained its market share of 32-34%, as per its long-standing trend. Collectively, these three leading providers held 65% of the worldwide market.

In the category of tier two cloud providers, Oracle, Snowflake, MongoDB, Huawei, and the three leading Chinese telcos saw the highest year-on-year growth rates. These cloud providers have emerged as potential competitors and offer a range of services that cater to diverse business requirements.

Q1 2023 cloud spending market share

According to a report by Synergy, most major cloud providers have released their earnings data for Q1, estimating that quarterly cloud infrastructure service revenues (including IaaS, PaaS, and hosted private cloud services) reached $63.7 billion, with trailing twelve-month revenues amounting to $237 billion. Public IaaS and PaaS services contributed the most to this market growth, with a growth rate of 21% in Q1. The report also reveals that the major cloud providers dominate the public cloud sector, with the top three controlling 72% of the market.

The cloud market continues to expand at a rapid pace in all regions of the world. North America, APAC, and EMEA regions showed growth rates of well over 20% year over year when measured in local currencies. This global growth trend emphasizes the importance of cloud infrastructure services for businesses of all sizes and industries.

Although economic pressures may have hindered cloud spending in some quarters, the core advantages of cloud adoption continue to propel the market to new heights. Despite this, the traditional internet companies in the large Chinese cloud market have seen a slower growth rate compared to the telcos. Additionally, as the US dollar retreats from its recent high levels, this provides some positive momentum for cloud growth metrics in the EMEA and APAC regions, which together represent more than half of the global market.

Artificial Intelligence will drive cloud spending in 2023

The cloud computing industry is undergoing significant progress due to the emergence of generative artificial intelligence (AI). Hyperscalers, the dominant players in the cloud market, are expected to drive a surge in cloud revenue in 2023, given their immense computational power and resources. These hyperscalers are strategically positioned to capitalize on the potential of generative AI, and in turn, propel innovation in cloud-based services.

Gartner predicts that by 2026, 75% of organizations will adopt a digital transformation model that is centered on cloud technology as the fundamental underlying platform. It also forecasts the worldwide spending by end-users on public cloud services to reach $597.3 billion in 2023.

All segments of the cloud market are expected to see growth in 2023, with infrastructure-as-a-service (IaaS) forecasted to have the highest end-user spending growth at 30.9%, followed by platform-as-a-service (PaaS) at 24.1%. This growth in spending is expected to occur amid ongoing economic turbulence that is compelling many industries, including Big Tech, to exercise caution when allocating funds.

The future of the cloud market is promising, with the potential for further growth and innovation, especially as businesses increasingly rely on cloud infrastructure services to stay competitive in the digital landscape.

It’s worth noting that the current economic climate has created some obstacles to the growth of cloud spending. However, despite these short-term challenges, the cloud infrastructure services market is still expanding at a healthy pace. The enterprise sector is becoming increasingly aware of the long-term benefits of cloud infrastructure services, which are critical for streamlining operations and driving innovation. Businesses are continuing to invest in cloud infrastructure services to stay competitive and meet their evolving needs.

Read next: Gartner lists top 8 cloud infrastructure and platform services providers in 2022 Magic Quadrant

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