Canalys: Global Cloud Spending Rises 16% in Q3, Stabilizing Growth Rate

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In Q3 2023, global expenditure on cloud infrastructure services amounted to US$73.5 billion, a 16% rise from the previous year, according to a recent study published by Canalys. Growth in the third quarter was in line with the previous quarter, indicating that we are moving into a steady period, according to the independent analyst company.

The market for cloud services is gradually recovering from the effects of business IT budget reductions. Together, the top three cloud service providers – AWS, Microsoft Azure, and Google Cloud – grew by 20% in Q3 2023, somewhat exceeding the industry as a whole and taking up 65% of all expenditure. AWS’s performance was consistent with the prior quarter, while Microsoft’s growth rate increased. However, in Q3 2023, Google Cloud saw a decline in its pace.

Cloud Market Resiliency Aided by Interest in AI

The cloud industry is starting to show indications of resiliency despite businesses continuing to optimize their total IT expenditure, partly due to increased interest in artificial intelligence. The market as a whole is still suffering from the effects of cost-cutting, but there may be a change in the way things work in the main cloud suppliers’ spaces. As businesses start to engage in cloud computing to support AI plans, the effect of declining IT investment is gradually being countered by growing demand for AI solutions.

Microsoft is making significant progress in commercializing its AI technology, and partners and customers are showing a great deal of interest in the Copilot launch. Looking forward to 2019 and beyond, there will be more conversations about GenAI, and it will be crucial to the channel’s growth, stated Canalys. Following the recent announcements from AWS and Microsoft about their AI-focused partner programs, Google Cloud established the Generative AI Partner Initiative in Q3 of this year in an attempt to work with partners to boost corporate adoption of its AI products, including Duet AI.

According to Alex Smith, Vice President of Canalys, “Generative AI unlocks a wealth of opportunities for channel partners to venture into new areas of business growth. The major cloud players and their partners can take advantage of this opportunity for exponential growth by identifying customers who are willing to pay for AI solutions, strengthening their own AI capabilities, and providing broad portfolios of AI-related products and services to meet these changing needs.”

Yi Zhang, Analyst at Canalys, said that “Channel partners can incorporate GenAI internally to boost productivity, in addition to capitalizing on new business opportunities arising from the technology. Channel partners must stay ahead of the game by establishing strong AI strategies and investing in strategic AI partnerships in order to succeed in this rapidly evolving landscape.”

AWS vs. Microsoft Azure

In Q3 2023, AWS maintained its dominant market share of 31% in the cloud infrastructure services sector. Although the 12% year-over-year rise was consistent with the previous quarter, it was still less than the growth rate of the whole market. In Q3 2023, the company’s efforts to reduce expenses and increase efficiency produced significant gains in profits. AWS announced intentions to establish additional data centers in Malaysia and South Korea in response to the rising demand for cloud computing in these areas. Additionally, it improved its cloud marketplace, as more and more ISVs are seeing faster transaction times via the AWS Marketplace. In order to enable partners to use the AWS Marketplace to boost sales, AWS has promised to enhance Partner Central and the AWS Marketplace in the next months.

With a 25% market share, Microsoft Azure ranked second in the market for cloud infrastructure services in Q3, stated Canalys. After growing at a slower rate year over year for seven quarters in a row, its growth rate increased to 29% in Q3 of this year. The demand for cloud services has surged since the September release of Microsoft Copilot for Windows, indicating the tangible effects of the AI boom. Given the 18% rise in its cloud order backlog, which reached US$212 billion in Q3 2023, business performance is predicted to be stable. The Microsoft AI Cloud Partner Program, which was created to assist partners in realizing the benefits of integrating AI capabilities into their businesses and taking advantage of the commercial opportunities provided by Microsoft AI-related products and Microsoft Azure, has been available to partners since August.

Google Cloud

Google Cloud secured third position in the market for cloud infrastructure services in Q3 2023 with a market share of 10%, having grown 24% year over year. The growth rate fell short of projections, marking the first time in the previous three years that Google Cloud’s growth rate has lagged behind Microsoft Azure’s. The main cause of the decline was the delayed effects of businesses’ IT cost-cutting initiatives.

Google Cloud is showcasing its partner ecosystem, especially in relation to AI, as part of its partner-first agenda. Additionally, it pledged to take an open approach to the development of GenAI, making it easier for partner-developed AI models to be integrated into the Google Cloud Platform.

Services that provide Platform-as-a-Service (PaaS) and Infrastructure-as-a-Service (IaaS) on either shared public infrastructure or dedicated hosted private infrastructure are referred to as cloud infrastructure services by Canalys. While income from the infrastructure services used to host and run them is included, direct software-as-a-service expenses are not included.