The latest quarterly market data from Synergy Research Group (Reno, Nevada) found Q4 enterprise spending on cloud infrastructure services nearing $74 billion worldwide -- up by over $12 billion from the fourth quarter of 2022.
The researcher found the year-on-year growth rate for enterprise cloud spending was 20% in Q4, markedly higher than the previous three quarters.
Notably, Synergy found that the market grew by $5.6 billion from Q3 -- by far the largest quarter-on-quarter increase ever achieved, the researcher noted.
For the year as a whole, the latest data confirmed that the cloud spending market grew 19% from 2022.
"While economic, currency and political headwinds have diminished somewhat, it is clear that generative AI technology and services have had a major impact, helping to further boost cloud spending," wrote Synergy Research.
Given improving market conditions and huge excitement around generative AI, Synergy noted it had originally forecast an uptick in cloud growth rate for the fourth quarter.
The analyst said the market's 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," stated the researcher.
Looking ahead, the analyst posits that "the law of large numbers means that the cloud market will never return to the growth rates seen prior to 2022."
Synergy Research does however forecast that growth rates in the market should now stabilize, "resulting in huge ongoing annual increases in cloud spending."
The analyst expects the annual cloud market to soon reach the $500 billion mark.
IaaS, PaaS Jump Amid Strong Global Cloud Growth
With most of the major cloud providers having now released their earnings data for Q4, Synergy Research further estimated that quarterly cloud infrastructure service revenues -- including IaaS, PaaS and hosted private cloud services -- were $73.7 billion in Q4, with full-year 2023 revenues reaching $270 billion.
The analyst noted that public IaaS and PaaS services account for the bulk of the market, and that those grew by 21% in Q4.
The dominance of the major cloud providers is even more pronounced in public cloud, where the top three account for 73% of the market, according to the data.
Geographically, Synergy found that the cloud market continues to grow strongly in all regions of the world.
When measured in local currencies, the data showed the APAC region had the strongest growth in Q4, with India, China, Australia and Japan all growing by 20% or more year over year.
The US remains by far the largest cloud market, with its scale surpassing the whole APAC region; the US market grew by 16% in Q4, added Synergy Research.
Discerning Competitive Postioning Among Major Cloud Providers
In terms of competitive positioning, among the largest cloud providers, Synergy Research said that Google and Microsoft had the stronger year-on-year growth numbers, with Microsoft increasing its worldwide market share by almost two percentage points from the fourth quarter of last year.
Google’s share also increased. Google and Microsoft's Q4 worldwide market shares were 24% and 11% respectively.
Meanwhile, market leader Amazon saw its worldwide market share drop to 31%, despite maintaining strong double-digit growth rates. In aggregate, Synergy Research found the three cloud leaders accounted for 67% of the worldwide market in Q4.
Among tier two cloud providers, the data found those with the highest year-on-year growth rates included Huawei, China Telecom, Snowflake, MongoDB, Oracle and VMware.
On its related industry beat, CRN's Mark Haranas here breaks down the exact revenue figures, sales growth, cloud market share, operating income and parent company financial results of cloud computing leaders AWS, Microsoft and Google Cloud in Q4 2023.
Cloud Giants' Digital Infrastructure Investment Charts Apace
On an intertwined industry vector, as noted this month in CoStar News, Newmark's U.S. data center market overview report, published in January, found the largest U.S. cloud service providers -- Google, Meta, Amazon, Microsoft and Oracle -- collectively spent close to $160 billion in 2022 to raise their cloud computing capabilities -- up an average of 30% over the past five years.
Because of the accelerating pace of AI breakthroughs, that spending trajectory seems likely to continue as an ongoing indicator of data center demand, reckoned CoStar's Candace Carlisle and Nicole Shih.
Individual Q4 earnings calls only confirmed the obvious: hyperscale operators are making massive investments in digital infrastructure for AI and cloud.
For example, as tangentially recorded this month by Datacenter Dynamics, Meta alone said it is planning up to $37 billion of digital infrastructure investment in 2024, as Facebook's parent company anticipates high levels of spending to meet surging demand for AI.
Meta's Chief Financial Officer, Susan Li, commented:
"We anticipate our full-year 2024 capital expenditures will be in the range of $30-37 billion, a $2 billion increase of the high end of our prior range. We expect growth will be driven by investments in servers, including both AI and non-AI hardware, and data centers as we ramp up construction on sites with our previously announced new data center architecture.
Our updated outlook reflects our evolving understanding of our artificial intelligence (AI) capacity demands as we anticipate what we may need for the next generations of foundational research and product development. While we are not providing guidance for years beyond 2024, we expect our ambitious long-term AI research and product development efforts will require growing infrastructure investments beyond this year."
As quoted in the CoStar News article, Bo Bond, a Dallas-based executive managing director in brokerage Cushman & Wakefield's global data center advisory group, cautioned:
"Right now, the demand is much greater than the developers can build, and the driving component is the utility or the power that needs to be brought in. The utility is the driving force behind the lack of supply."
