Dive Brief:
- Amazon Web Services, Microsoft Azure and Google Cloud captured 76% of the U.S. cloud market in the three-month period ending Sept. 30, according to a Tuesday report from Synergy Research Group.
- While macroeconomic factors depressed quarterly revenue growth for the three hyperscalers, enterprise spending on cloud held firm nationally, increasing 30% year over year, a level that is consistent with rates for the last 14 quarters, the analyst firm said.
- The U.S. cloud infrastructure market remains strong as compared to the rest of the world, where inflation, the effects of a strong dollar and other macroeconomic pressures have taken a heavier toll on enterprise spending. Global cloud spending only grew by 24% year over year, according to a Thursday report by Synergy.
Dive Insight:
It was a bittersweet quarter for the big three cloud service providers, but there was one significant upside.
Amazon, Microsoft and Google reported slower revenue growth in their cloud divisions last week, while maintaining or increasing their generous portion of a cloud market that topped $57 billion, up more than $11 billion year over year, the reports said.
Together, the hyperscalers secured two-thirds of global spending on cloud, up from 61% last year.
Perennial behemoth AWS captured 34% of the market, followed by Microsoft Azure at 21% and Google Cloud at 11%, according to John Dinsdale, chief analyst at Synergy Research Group.
Hyperscaler market dominance was even more pronounced in the U.S., which has been spared the worst impacts of inflation and global macroeconomic contraction.
The primary macro drag on U.S. revenues was the strength of the dollar. A favorable exchange rate cuts into the overseas revenues of companies that report financials in U.S. currency, a dynamic that should rebalance before too long.
“When the dollar starts to weaken, the headwind becomes a tailwind and growth rates are pushed upwards,” Dinsdale said. “Even if the dollar stays strong for a long time, the basis for year-on-year growth rate calculation changes, nudging the annual growth rate upwards.”
Synergy estimates global spending on cloud would have maintained a growth rate above 30% if exchange rates had remained constant over the last year.
Challenges remain for the hyperscalers, as inflation takes its bite out of enterprise IT budgets and pushes companies to trim spending.
Pay-as-you-go cloud purchasing gives enterprises the option of cutting back on “as a Service” infrastructure and software usage, and some companies may delay cloud deployments in the short term to reduce budget.
“There is going to be some of that happening in the market due to economic pressures,” Dinsdale said. “But those pressures will be pushing others in the opposite direction as they look to shave CapEx investments and replace them with more variable expenses.”
In other words, the OpEx model for cloud gives companies the option of reducing spend, but its inherent flexibility is one of cloud’s big selling points — especially in a souring economy.
