Unsurprisingly, companies continue to cut their cloud spending where possible, as technology budgets continue to come under careful scrutiny. That resulted in a quarter in which cloud grew 19%, $10 billion more than last year to $63 billion. That doesn’t sound so terrible, except when you compare the numbers to last year when the market grew 32%.
Clearly we’re still in a cost cutting cycle and it’s having an impact on cloud infrastructure revenue growth, but Synergy Research Reports that there are signs that we may be breaking out of the recent impasse. Synergy’s chief analyst, John Dinsdale, says that overall the market remains strong and we are starting to see a change in some of the trends that have contributed to downward growth.
“There has been some angst over declining cloud growth rates, but Q1 global market value grew by more than $10 billion compared to Q1 2022. Clearly, the relatively weak economy has It has caused some companies to take a closer look at spending on cloud services, but the market continues to grow despite these challenges,” Dinsdale wrote in a commentary to the press.
He notes that the Chinese market has returned to growth and exchange rate pressure has started to ease, contributing to growth in the EMEA and APAC regions. “The law of large numbers pretty much dictates that growth rates should slow, but in absolute terms, the market continues to grow at a healthy rate, driven by the fundamental benefits of cloud adoption,” Dinsdale said.
It’s fair to say that most industries would be happy with a growth rate of almost 20% in this economic climate, but cloud has been dealing with rates in the high 30s until recently, so it feels worse, and As we have learned, perception counts.
This is especially true of Amazon, where AWS has been the company’s growth engine for more than a decade and is suddenly facing a quarter in which growth plunged in its teens to 16%. Again, for a mature company, that doesn’t feel too bad, but cloud revenue numbers continue to trend lower from the 20% rate the company saw in the previous quarter.
Meanwhile, Azure’s growth also continued to decline. While Microsoft’s cloud arm grew at a higher rate than Amazon’s at 27%, that figure was down from 31% in the previous quarter. Google Cloud was up 27.5%, a slowdown from 32% in the previous quarter, but making a profit for the first time.
What impact does all that have on market share? Well, it turns out not so much. Amazon has owned a fairly stable third of the market for years, even as the pie has grown. Microsoft has been slowly but steadily gaining, and Google has hit 10% and is holding steady there so far. The big three account for 65% of total revenue.
For the quarter, AWS continues to have a 32% market share with over $20 billion in quarter, Microsoft was flat from the prior quarter at 23% with over $14 billion in revenue for the quarter and with 10% of Google Cloud. at more than $6 billion.
Synergy looks at infrastructure and platform-as-a-service as well as hosted private clouds to get their market numbers.
Nothing goes up forever, but there are signs on the horizon that perhaps the cloud infrastructure market is growing again. There is certainly still plenty of room, especially with these companies looking to add data-intensive AI workloads, and with that, the market should stabilize over time.
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