In the second quarter of 2023, spending on compute and storage infrastructure products for cloud deployments, including dedicated and shared IT environments, increased 7.9% year over year to $24.6 billion, according to the International Data Corporation (IDC) Worldwide Quarterly Enterprise Infrastructure Tracker: Buyer and Cloud Deployment. Spending on cloud infrastructure continues to outgrow the non-cloud segment with the latter declining 8.3% in 2Q23 to $14.4 billion.
The cloud infrastructure market had a 23.2% decrease in unit demand and a rise in average selling prices (ASPs) mostly as a result of hyperscalers receiving larger-than-normal shipments of GPU servers.
“Investment in cloud infrastructure is moving toward more robust configurations for new AI initiatives and more complex workloads,” said Juan Pablo Seminara, Research Director of IDC‘s Worldwide Enterprise Infrastructure Tracker. “The spending outlook for 2023 remains positive, with growth focused on the expectation that higher ASPs will remain for the remainder of the year, despite the sharp decline in system unit demand for the first half of the year.”
In the quarter, spending on shared cloud infrastructure was $17.9 billion, up 13.7% from the same period the previous year. In the first half of 2023, shared cloud infrastructure exceeded non-cloud investment, accounting for 45.8% of all infrastructure spending. At $6.7 billion in Q2 2023, the dedicated cloud infrastructure category had a 4.9% year-over-year dip. During the quarter, 43.9% of the whole dedicated cloud infrastructure was set up on client property.
IDC predicts that cloud infrastructure investment will increase by 10.6% in 2023 to $101.4 billion, up from a previous prediction of 7.3% growth in 2022. Infrastructure that isn’t in the cloud is predicted to drop 7.9% to $58.5 billion. Dedicated cloud infrastructure investment is predicted to increase 4.1% to $29.4 billion over the course of the year, while shared cloud infrastructure spending is predicted to increase 13.5% year over year to $72.0 billion.
Shared and Dedicated Cloud
The industry is expected to encounter challenges, as seen by the muted growth prediction for non-cloud infrastructure. However, cloud expenditure is expected to stay positive because mission-critical workloads, which often call for more advanced, performance-oriented systems, will continue to drive the market.
Cloud service providers, digital service providers, communications service providers, hyperscalers, and managed service providers are all included in IDC’s service provider category.
Service providers together invested $24.1 billion in computing and storage infrastructure in 2Q23, a 7.1% increase over the previous year. This amount spent made up 61.9% of the market. Spending by non-service providers (businesses, the government, etc.) fell 6.9% annually. According to IDC, service providers will spend $99.1 billion on compute and storage in 2023, an increase of 9.0% over the previous year.
Geographically speaking, all regions saw an increase in cloud infrastructure spending in Q2 2023 year over year, with the exception of Canada, Central and Eastern Europe (CEE), which was negatively impacted by the conflict between Russia and Ukraine, and Western Europe, where client spending decisions are primarily driven by high energy costs and a tight macroeconomic environment.
Over the course of the year, cloud infrastructure investment fell 15.2% in CEE, 36.4% in Canada, and 3.5% in Western Europe. Spending on cloud infrastructure increased by 15.8%, 14.1%, 9.2%, 8.3%, and 2.8% annually in the USA, Japan, Middle East & Africa, Latin America, and Asia/Pacific (apart from China and Japan) (APeJC). China’s year-over-year increase at the conclusion of the quarter was 0.1%.
With the exception of CEE and Canada, all areas foresee a growth in cloud infrastructure investment by 2023, with Latin America projected to have the largest growth at 18.4%. The 0–13% annual growth range is predicted for all other areas (APeJC, Canada, China, Japan, Latin America, USA, and Western Europe).
IDC projects that throughout the 2022-2027 projection period, cloud infrastructure investment will expand at a compound annual growth rate (CAGR) of 11.3%, reaching $156.7 billion in 2027 and making up 69.4% of all compute and storage infrastructure spending. Spending on shared cloud infrastructure will make up 70.0% of the total amount spent on clouds; it will increase at an 11.6% CAGR to reach $109.7 billion by 2027.
Dedicated cloud infrastructure spending will reach $47.0 billion at a compound annual growth rate of 10.7%, according to IDC. Infrastructure spending outside of the cloud is expected to increase at a 1.7% CAGR to $69.1 billion by 2027. It is anticipated that service providers would spend $152.6 billion on compute and storage infrastructure by 2027, growing at a 10.9% CAGR.