Tech giants' clouds drive market growth of 37%
The value of the global cloud market increased 37% in Q3 compared to the same quarter last year, reaching values of US$45.4 billion.
The analysis, released this week by Synergy Research Group, attributed the trend to the continued growth in cloud adoption – and not just by the major players. Other cloud providers generated $17 billion over the quarter, a 27% increase on last year.
Synergy calculated that quarterly cloud infrastructure service revenues – inclusive of IaaS, PaaS and hosted private cloud services – stood at $45.4 billion, with trailing 12-month revenues reaching $164 billion.
Public IaaS and PaaS accounted for the bulk of the market, growing 39% in Q3. The dominance of the major cloud providers "is even more pronounced in public cloud" Synergy said, where the top three players controlled 70% of the market.
Geographically, Synergy said "the cloud market continues to grow strongly in all regions of the world".
Chief analyst John Dinsdale said: “Given their scale, ever-expanding worldwide presence and impressive revenue growth rates, it is understandable that Amazon, Microsoft and Google grab the most attention for their cloud activities. However, that makes it easy to overlook the fact that other cloud providers generated $17 billion in the quarter, a figure which grew by 27% from last year.
“By any standards a $17 billion market growing at such a rate is an attractive proposition for many service providers and their suppliers. Clearly there are challenges with the big three companies lurking in the background, so the name of the game is not competing with them head on. Providing companies are smart about targeting the right applications and customer groups, cloud can provide a broad and exciting range of growth opportunities for them,” Dinsdale continued.
On market share, Amazon, Microsoft and Google continue to attract more than half of worldwide cloud spending, with Q3 market shares of 33%, 20% and 10% respectively (see diagram).
The next 10 largest cloud providers achieved 28% year-on-year revenue growth, while the long tail of medium-to-small cloud providers grew by 25%.
Despite the market strength the figures demonstrate, backlash is building against the dominance of the major cloud players. This week, trade body Cloud Infrastructure Services Providers in Europe (CISPE) urged EU regulators to shift the focus of their anti-competition investigations to cloud.
Releasing its financial results on Tuesday, Microsoft saw a 22% increase in total revenue over the quarter, reaching $45.3 billion. Microsoft Cloud quarterly revenue surpassed $20 billion for the first time, up 36% year over year and server products and cloud services revenue increased 35% (up 33% in constant currency) driven by Azure and other cloud services revenue growth of 50% (up 48% in constant currency). Windows Commercial products and cloud services increased 12% year on year.
EVP and CFO Amy Hood Added: “The Microsoft Cloud delivers the end-to-end platforms and tools organisations need to navigate this time of transition and change. We delivered a strong start to the fiscal year with our Microsoft Cloud generating $20.7 billion in revenue for the quarter, up 36% year over year.”
Similar trends were recorded in the previous quarterly results, which saw revenue in the company's Intelligent Cloud segment increase 30% to reach $17.4 billion for the quarter.
Also publishing its results Tuesday, Alphabet confirmed total quarterly revenues of $65.1 billion.
Google Cloud – inclusive of infrastructure and data analytics platforms, collaboration tools, and other enterprise services – saw revenues increase 45%, reaching $4.99 billion, compared to $3.44 billion in Q3 2020.
Sundar Pichai, CEO of Alphabet and Google, said: “Five years ago, I laid out our vision to become an AI-first company. This quarter’s results show how our investments there are enabling us to build more helpful products for people and our partners. Ongoing improvements to Search, and the new Pixel 6, are great examples. And as the digital transformation and shift to hybrid work continue, our Cloud services are helping organisations collaborate and stay secure.
The last of the three to release its results, Amazon's AWS noted "significant customer momentum" in its results published Thursday.
AWS posted growth of 39% in Q3 compared to Q3 of last year, with revenues reaching $16.1 billion compared to $11.6 billion. The results drove Amazon's overall performance as CEO Andy Jassy warned of additional costs in Q4.
“We’ve always said that when confronted with the choice between optimising for short-term profits versus what’s best for customers over the long term, we will choose the latter—and you can see that during every phase of this pandemic,” said Jassy in a statement.
“In the first several months of Covid-19, Amazonians played an essential role to help people secure the requisite PPE, food, and other in-demand items needed, and we worked closely with businesses and governments to leverage AWS to maintain business continuity as they responded to the pandemic. Customers have appreciated this commitment, which is part of what’s driving this past quarter’s AWS growth acceleration to 39% year over year; but, it’s also driven extraordinary investments across our businesses to satisfy customer needs—just one example is that we’ve nearly doubled the size of our fulfilment network since the pandemic began."
Looking ahead, Jassy added: "In the fourth quarter, we expect to incur several billion dollars of additional costs in our Consumer business as we manage through labour supply shortages, increased wage costs, global supply chain issues, and increased freight and shipping costs—all while doing whatever it takes to minimize the impact on customers and selling partners this holiday season. It’ll be expensive for us in the short term, but it’s the right prioritisation for our customers and partners.”
At present AWS has 81 availability zones across 25 geographic regions, with plans to launch 24 more availability zones and eight more AWS regions.