Cloud infrastructure is back to healthy growth levels
The cloud infrastructure market grew 21% in Q1, 2024 from Q1, 2023, mostly driven by the accelerated adoption of generative AI, which increases demand for computing power. The numbers are still far from previous growth, but the cloud market is poised to double in size in the next four years.
After a brief hiatus during 2023, the cloud infrastructure market grew 21% in Q1, 2024 from Q1, 2023. This amounts to a healthy $13.5 billion, to close the market at $76 billion. The colossal amount of computing power required to process the equally massive quantities of data that drive the growth of generative AI. Expectedly, Microsoft, Google, and Amazon are the main culprits of the swift adoption of generative AI, thus, it is no surprise that the growth of AI makes cloud infrastructure providers more valuable. As we have seen for some time now, enterprises are increasing the demand for the automation and optimization capabilities unlocked by generative AI.
However, none of those capabilities would be possible without sufficient computing resources to power them, thus placing scalable computing vendors at the forefront of the market: not only do they have the resources, but they can sell exactly as much as any customer needs and adapt to their growth over time. The scalability of their services is desirable for startups, who, having built on top of these third-party platforms, end up depending on their services, thus essentially guaranteeing revenue streams over time. This dependence has also become the main motivator for major cloud providers to invest in AI-optimized infrastructure, especially seeing that smaller providers advertise their specialization in AI-optimized infrastructure as a key differentiator from legacy cloud providers.
After a period of growth as low as 12% (Q2-Q4, 2023), Amazon started 2024 on the right foot, claiming a $100 billion run rate, equivalent to a 31% market share. Azure follows closely, with 25% of the market share, or a $76 billion run rate, up an astonishing 31% from last year. Finally, Google took hold of 11% of the market, growing 28%. In total, the Big 3 cloud providers dominate over 60% of the market, and show no signs of stopping, even if their growth levels are still nowhere near the ones experienced in 2021 and 2022. According to Synergy’s chief analyst John Dinsdale, cloud infrastructure is now a $300 billion market with a 21% yearly growth rate. Moreover, Synergy forecasts that the cloud infrastructure market will double over the next four years.
