Enterprises are making big bets on cloud infrastructure services, a trend that Synergy Research said continued into the fourth quarter as spending rose to almost $74 billion worldwide, up over $12 billion from the same period in 2022.
The research firm noted that the year-on-year growth rate was 20% in the fourth quarter, “markedly higher than the previous three quarters.” Also, the market grew by $5.6 billion from the third quarter, marking the most significant quarter-on-quarter increase ever achieved.
Overall, in 2023, the enterprise cloud market grew 19% compared to 2022. A significant factor driving growth in the fourth quarter was AI. Synergy noted, "While economic, currency, and political headwinds have diminished somewhat, generative AI technology and services have had a major impact, helping to boost cloud spending further.”
Google, Microsoft retain dominance
Google and Microsoft remained the largest cloud providers with what Synergy said were “stronger” year-on-year growth numbers.
Microsoft increased its worldwide market share to 24% by almost two percentage points from the fourth quarter of last year, while Google's share rose to 11.
Alternatively, Amazon saw its worldwide market share drop to 31% despite maintaining double-digit solid growth rates. The three leaders accounted for 67% of the worldwide market.
Among the tier-two cloud providers with the highest year-on-year growth rates include Huawei, China Telecom, Snowflake, MongoDB, Oracle, and VMware.
Cloud services gains
Now that most major cloud providers have released their fourth-quarter earnings, Synergy estimates that quarterly cloud infrastructure service revenues (including IaaS, PaaS, and hosted private cloud services) were $73.7 billion, with full-year 2023 revenues reaching $270 billion.
During the fourth quarter, Public IaaS and PaaS services accounted for the bulk of the market and those grew by 21%
From a geographic perspective, the cloud market continues to grow strongly in all world regions. The Asia Pacific region led the charge and had the most robust growth, with India, China, Australia, and Japan growing by 20% yearly. The US remains the most significant cloud market, surpassing the APAC region's scale. The US market grew by 16% in Q4.
Given improving market conditions and huge excitement around generative AI, the research firm had forecast an uptick in cloud growth rate for the fourth quarter. However, the actual growth was even higher than expected.
“Cloud is now a massive market, and it takes a lot to move the needle, but AI has done just that,” Synergy Research said.
Looking forward, Synergy forecasts that cloud growth rates will stabilize, driving ongoing cloud spending increases. Synergy expects the annual market to reach the $500 billion mark soon.
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