Cloud Infrastructure Spending Jumps $10B in Q1, Showing Slower Growth

First-quarter enterprise spending on cloud infrastructure services surpassed outlay from the same period a year earlier by more than $10 billion. While that’s a big jump, the numbers did fall compared to previous three-month numbers as buyers struggled with ongoing economic challenges.

That’s the word from Synergy Research Group with the hyperscalers’ latest earnings numbers in the books.

All in all, organizations worldwide spent more than $63 billion on cloud infrastructure services from January to March. That represented a year-over-year growth rate of 20% and a rise of 4% over the fourth quarter of 2022.

And while that 20% marks a healthy figure, certainly nothing to sneeze at, it does indicate slowing demand. Consider that past quarters have seen Amazon Web Services, Microsoft Azure and Google Cloud report revenue increases of 30% and higher.

For now, those days appear to be over. Indeed, constant quarters of 30%-plus growth was going to be unsustainable anyway. Now, as organizations fight inflation, tighten their IT budgets and better control their cloud resources, AWS, Azure and Google (as well as their smaller peers) are seeing less demand. That is not to say, however, that said demand is not significant. It is. As Synergy Research analysts put it, even though the economy has “constrained some growth in cloud spending … the market continues to expand at a healthy rate despite those short-term challenges.”

Who’s Gaining on AWS?

Speaking of expansion, Azure and Google are making strong inroads against AWS, even as AWS remains the world’s largest cloud computing provider. However, the behemoth may have to start worrying about its rivals. Both Azure and Google boosted their global market share in the first quarter by one percentage point (reaching 23% and 10%, respectively) compared to a year prior. Meanwhile, AWS showed no new traction, staying within its zone of 32-34%, per Synergy.

Amazon’s Andy Jassy

On that note, Amazon CEO Andy Jassy remarked during the company’s earnings call on April 27 that customers are choosing to optimize existing environments rather than add to them. As such, AWS is experiencing an inherent revenue shift. In fact, when it comes to quarterly revenue increases, the cloud infrastructure services vendor recorded the smallest gains among the hyperscalers — 20%.

Even so, combined, AWS, Azure and Google hold 65% of the world’s cloud infrastructure services market share (the three dominate public cloud overall, to the tune of 72% market share). Among the Tier 2 cloud vendors, Oracle, Snowflake, MongoDB, Huawei and the three main telcos in China claim the next-largest amount of the market, Synergy Research found.

All told, the major providers’ cloud infrastructure services revenue reached $63.7 billion. Infrastructure and platform as a service both account for most of the market; those rose by 21% in the first quarter, Synergy said.

In terms of geography, all world regions are consuming cloud, per Synergy. Notably, though, North America, Asia-Pacific and EMEA all grew 20% year-over-year, analysts said.