Hybrid cloud strategies continued to trend in 2025, leading to a rise in interest around specialized AI cloud or neocloud providers that can support the growth of AI workloads.
Neocloud revenues grew 205% year-over-year in Q2 2025 and were on track to exceed $23 billion for the full year, according to an October report from Synergy Research Group. The market researcher predicted that neocloud providers will reach almost $180 billion in revenue by 2030 and will grow an average 69% annually.
The segment of specialized AI cloud providers faces fierce market competition in 2026, needing to double down on their entry into the realm of enterprise buyers — a group that’s also increasingly interested in what neoclouds have to offer. More than 80% of enterprise cloud buyers want to modernize their cloud strategies, according to the International Data Corporation’s Cloud Pulse survey released in February 2025.
Neoclouds can undercut hyperscalers with aggressive pricing and simplified services, providing an attractive alternative for enterprise cloud buyers, said Dave McCarthy, research vice president at IDC.
Additionally, enterprises are becoming more comfortable with picking the right cloud for the job and understanding that each provider has strengths and weaknesses, McCarthy said. The strategy shift gives emerging providers an opening.
“These neoclouds, as long as they can continue to provide some differentiated services, will find a piece of the business they can keep long term,” McCarthy said.
AI adoption accelerated compute demand
Neoclouds began as independent GPU-as-a-service providers, coming into force in the last two years when there was a “real scarcity of GPU resources,” said Pankaj Sachdeva, a senior partner at McKinsey & Company.
“There is a meaningful amount of upfront capital that’s needed in ownership of GPUs,” Sachdeva said. “Many enterprises didn’t really have a clear roadmap and predictive model of how the usage of AI compute scaled, so leasing was a better option than buying at that point.”
As agentic and advanced reasoning AI model adoption accelerated demand for compute, neocloud providers stepped in to fill a supply gap. The neocloud industry has evolved in terms of offers, customers, contract duration and the overall market structure, Sachdeva said.
While neocloud providers might have started by simply leasing GPUs, their offerings and capabilities became more relevant to enterprises, especially with CIOs working on AI-related pilot projects, Sachdeva said.
Scaling AI is “quite nascent,” with only one to three projects out of five to 20 reaching deployment for the average enterprise, Sachdeva said.
“It’s at that inflection point of going from pilots to really scale up that they’re having to think, ‘Now I have to think strategically about my AI workloads,’ and they’re evaluating all kinds of options,” Sachdeva said.
Options could include continuing to grow with a public cloud provider or adopting a hybrid approach to keep some AI workloads on premises and some in the cloud, Sachdeva said. Or a company might want to consider working with a new cloud provider.
“With neoclouds having a value proposition — sometimes price — that is also coming up as an attractive alternative for enterprises,” Sachdeva said.
The next wave
CoreWeave is the top hyperscaler competitor among neoclouds, according to Synergy’s market analysis.
However, it has a ways to go toward greater enterprise adoption, as its top customers currently include companies like Microsoft and OpenAI. Microsoft has spent billions for access to CoreWeave’s compute, while OpenAI entered into a more than $22 billion contract for the neocloud’s services.
CoreWeave and other neocloud providers such as Vultr, FluidStack and DataCrunch are feeding a need for AI infrastructure that will continue gaining momentum in 2026, McCarthy said.
“These types of companies represent the next wave of cloud providers that are capturing attention,” McCarthy said. “This is a different approach than perhaps the original clouds that were very general purpose in nature.”
CoreWeave’s focus is on providing and supporting AI capabilities, said Corey Sanders, SVP of product management at CoreWeave. While the company serves AI researchers and developers, Sanders said interest from enterprises and financial services has been slowly growing.
“Customers who are doing AI-focused efforts — training, research, inferencing — both the importance to their business and the cost to their business in doing that work is very high,” Sanders said, adding that they’re willing to look beyond their existing cloud providers for other options.
The downside to neoclouds is overspecialization, McCarthy said. Some neoclouds lack the breadth for enterprise needs. However, neocloud providers such as Vultr ride the line between being general purpose cloud and AI specific, resulting in a more diverse customer base.
The neocloud market faces an “existential question” heading into 2026, Sachdeva said.
Neocloud providers can maintain market growth by continuing to build their business around one or two large customers such as hyperscalers or AI labs, Sachdeva said. However, future growth and success will be rooted in enterprises.
While the value proposition of neoclouds exists for enterprises, the industry will need to overcome barriers to greater adoption, including adjusting their go-to-market and distribution strategies, creating more out-of-the-box functionalities for enterprises and tailoring service level agreements for business critical applications, Sachdeva said.
“In the end, the long-term sustainability of the neocloud model is actually premised in some sort of enterprise adoption,” he said.
