Revenue from Cloud Infrastructure Nears $80 Billion Mark this Quarter

Shaking off the slow pace of 2023, the cloud infrastructure sector has bounced back with impressive quarterly earnings. The market’s revenue soared to $79 billion this quarter, achieving a notable 22% increase, which is $14.1 billion higher compared to the same period last year, driven largely by the burgeoning interest in artificial intelligence, as detailed in a report by Synergy Research.

For the third straight quarter, annual growth has surged beyond 20%, with AI playing a pivotal role in this upward trajectory, Synergy notes.

Despite the previous year’s challenges, the cloud sector exhibits no signs of decelerating. Amid potential geopolitical and economic volatility, Synergy’s lead analyst, John Dinsdale, forecasts sustained market expansion, anticipating it to double over the next four years. The leap from $40 billion to nearly $80 billion revenue took 13 quarters, a milestone the market is set to surpass shortly.

An unexpected turn this quarter was Microsoft Intelligent Cloud, which encompasses Azure, falling short of market expectations. According to CNBC, the division reported revenues of $28.52 billion, slightly below the predicted $28.68 billion. Nonetheless, Azure still achieved a 30% growth, indicating that the shortfall wasn’t severely detrimental, as per insights from Altimeter partner Jamin Ball.

Dinsdale emphasizes the importance of perspective regarding Microsoft’s slight shortfall. “Microsoft’s Intelligent Cloud’s reported earnings fell within the forecasted range set three months ago. To have a $28.5 billion segment grow by 19% annually is commendable. Notably, Azure, making up the lion’s share of Intelligent Cloud, expanded by 29% for the quarter, which is commendably robust,” he informed TechCrunch.

Amazon posted a quarterly revenue of $26.3 billion, a 19% increase from the previous year, stabilizing within this growth rate after earlier fluctuations to 12% and 13% in early 2023.

Google Cloud also had an impressive quarter, exceeding $10 billion in revenue for the first time, with a 29% growth year-over-year, according to Ball. This figure includes Google Workspace in addition to its infrastructure services. Significantly, the company also increased its market share by a full percentage point, as per Synergy’s analysis, which doesn’t account for Workspace revenue.

Market share figures currently stand at 32% for Amazon (approx. $25 billion), 23% for Microsoft (approx. $18 billion), and 12% for Google (around $9.5 billion). It’s highlighted that Microsoft saw a near two-point dip in market share from the previous quarter, a development that Synergy attributes to seasonal variations in Azure’s sales cycle, despite continuous robust growth, a point Dinsdale conceded.

“Azure’s performance typically sees a downtrend in the April-June quarter, following strong performances in preceding quarters, which we witnessed again,” he mentioned. “Despite a static performance compared to the first quarter, both Amazon and Google managed to increase their market shares. Excluding seasonal effects and focusing on an annualized growth comparison, Azure outpaced both Google and Amazon. Clearly, Azure is far from experiencing a decline.”

In the competition’s next rung, Oracle reached a 3% market share, overtaking IBM and equaling Salesforce to claim the fifth spot. While the Big 3 dominate with over 73% of the market, Oracle’s 3%, equating to more than $2 billion in revenue, still marks a significant achievement.

Assessing the cloud market’s figures can be complex due to varying methodologies employed by companies and analysts in reporting and analyzing data. Ball observes publicly disclosed data while Synergy evaluates Infrastructure as a Service, Platform as a Service, and hosted private cloud services, excluding SaaS from its analysis and incorporating some proprietary market insights.