AWS retains heavyweight title in cloud infrastructure

Dive Brief:

• AWS retained its dominant position in infrastructure services last year, according to Gartner’s analysis of global cloud revenue. Amazon’s cloud division captured 39% of the $140 billion IaaS market, the analyst firm said in a report last week.
• Microsoft, the second largest hyperscaler by market share, had $32 billion in cloud infrastructure revenues, compared to AWS’s nearly $55 billion, according to Gartner. 
• Google surpassed Alibaba for the first time to move into third place with over $11 billion in revenue — a total that was still less than half of the $23 billion gap separating AWS from Microsoft.

Dive Insight:

As enterprises double down on modernization and onboard compute-hungry AI applications, they need more cloud. 

Infrastructure spend increased 16.2% year over year in 2023, according to the report. Gartner expects consumption to accelerate, boosting IaaS revenue to $180 billion this year and more than $232 billion in 2025, increases of 26% and close to 30%, respectively.

Cloud heavyweights have ramped up infrastructure investments to satisfy growing enterprise demand.

AWS alone committed more than $50 billion to data center buildouts and new construction during the first half of the year as chipmaker Nvidia saw revenues soar. 

Microsoft and Google Cloud also redoubled infrastructure investments earlier in the year to accommodate surges in enterprise demand, reporting $19 billion and $13 billion in capital expenditures, respectively.

“Their calculation is that the risk of not having AI infrastructure available when they need it is greater than the risk of building it now and not having to use it later,” Sid Nag, VP analyst at Gartner, said.

AWS’s substantial lead over its cloud rivals in infrastructure is rooted in its origin story as the compute strata on which Amazon grew its other businesses, Nag said. Microsoft, which captured 23% of IaaS revenues last year, built its Azure cloud empire on a very different foundation — software.

“Microsoft has a SaaS-down strategy,” Nag said. “Amazon has always been an IaaS-up strategy.”

While software services is the largest category of cloud spend, reaping more than $200 billion in revenues last year, it has a lower year-over-year growth trajectory. SaaS spend is expected to grow roughly 20% this year and next, according to Gartner.

“The database PaaS market is one of the largest growing markets in the industry,” Nag said.

AWS also had an edge over competitors in database platform services last year, with 43% of global revenue, according to Nag. Microsoft was second with an 18% share, he said.

Cloud-based AI services like Amazon Bedrock and Azure OpenAI contribute to PaaS revenue, too. But everything in cloud ties back to the data center and a massive wave of ongoing hypserscaler investment.

“Infrastructure is the tide that lifts all boats,” Nag said.