Global cloud spending is expected to increase 20% in 2024, according to new research from Canalys.
The consulting firm's analysis points to an optimistic outlook in the industry for next year thanks to a 19% year-on-year (year-over-year) growth rate recorded in the fourth quarter of 2023, with total spending reaching $78.1 billion.
Canalys said this marked an increase of $12.3 billion, with a total 2023 cumulative annual increase of $290.4 billion, up from $247.1 billion in 2022.
A key factor in the increase, according to Canalys, is that the “influence of enterprise IT optimization” is fading. As a result of this, more customers are expanding their commitments to hyperscalers in anticipation of increased consumption requirements over the coming year.
Cloud migration projects are also accelerating alongside a growing rise in artificial intelligence (AI) adoption, Canalys said.
Hyperscalers in particular are focusing on investing in generative AI with the expectation that it will improve cloud computing capabilities.
Cloud Spending Shows 'Slowdown' Might Be Over
Canalys' latest analysis points to more optimistic prospects for next year for both companies and suppliers.
In January 2023, industry analysts warned of a potentially disastrous “cloud slowdown” as companies cut spending on cloud services due to budget tightening and increased economic uncertainty.
But Gartner research from late 2023 found that while budgets were still tight, many Organizations saw proactive investment in the cloud as a means to address troubling economic conditions. and prepare for future success.
The consultancy predicted a similar spending increase of 20% in 2024 and beyond.
Sid Nag, vice president analyst at Gartner, said ITPro at a time when the cloud has become “essentially indispensable”, adding that many companies have come to accept that neglecting investment in this business area could create long-term challenges and affect their ability to compete.
How hyperscalers are performing
Amazon Web Services (AWS), Google Cloud Platform (GCP), and Microsoft Azure experienced varying degrees of growth due to increased cloud spending, according to Canalys.
Although it represents the least amount of growth in 2023, AWS still leads the pack in cloud infrastructure, dominating the market and accounting for 31% of total market spending.
After a few quarters of slowing growth, AWS also saw a small upward trajectory in 2023 with a 13% revenue increase. Its future committed customer spending now stands at $155.7 billion, up about $45 billion year-over-year.
“AWS has been slower than its key competitors to make advances in AI, which may explain why its growth is not accelerating as quickly as that of Azure and GCP,” said Canalys analyst Yi Zhang.
Microsoft Azure is second in terms of size and now claims an improved market share of 26% in Q4 2023. This compares to 23% in Q4 2022.
This can be attributed in part to a higher level of AI adoption, according to Canalys, as Azure has expanded to support the entire suite of OpenAI large language models (LLMs).
GCP, on the other hand, grew to represent 10% of the market, accumulating $74.1 billion in backlogged revenue through December 2023. This is up from $64.3 billion at the end of 2022, a significant sum for the comparatively smaller cloud computing service provider. .
Google has also maintained its focus on expanding channel partnerships to drive growth, tripling the number of its “co-selling deals” from 2022.
