Global spending on cloud infrastructure services reached US$73.5 billion in Q3 2023, a 16% year-on-year increase.
Q3 growth remained consistent with the previous quarter, showing we are entering a stable phase.
The impact of enterprise IT spending cuts on the cloud services market is slowly easing.
In Q3 2023, the top three cloud providers – AWS, Microsoft Azure and Google Cloud – jointly grew by 20%, slightly outpacing the overall market and accounting for 65% of total spending.
AWS mirrored its performance in the previous quarter, while Microsoft saw an uptick in its growth rate. Google Cloud, however, saw a drop in its rate in Q3 2023.
Cloud market showing signs of resilience – helped by growing interest in AI
Despite enterprises continuing to optimize overall IT spending, the cloud market is beginning to show signs of resilience, helped in part by a growing interest in AI. While the broader market continues to grapple with the repercussions of cost-cutting behavior, the performance of the leading cloud vendors hints at a shift in the market dynamic. Growing demand for AI solutions is gradually offsetting the impact of reduced IT spending as enterprises begin to invest in cloud computing to support AI strategies.
Top three vendors launch AI-focused partner programs
Microsoft’s efforts to commercialize its AI products are gaining momentum, with the recent introduction of Copilot driving significant customer and partner interest. Looking ahead to next year and beyond, discussions around GenAI will take center stage, and it will become a key growth driver for the channel. Following AWS’ and Microsoft’s recent AI-focused partner program launches, Google Cloud introduced the Generative AI Partner Initiative in Q3, as it seeks to work with partners to drive enterprise adoption of its AI solutions, including Duet AI.
“Generative AI unlocks a wealth of opportunities for channel partners to venture into new areas of business growth,” said Alex Smith, VP at Canalys. “The big cloud players and their partners can seize this exponential growth opportunity by identifying customers with an appetite for AI solutions, while simultaneously strengthening their AI capabilities and offering comprehensive portfolios of AI-related products and services to address these evolving needs.”
“Apart from capitalizing on new business opportunities arising from GenAI, channel partners can incorporate GenAI internally to boost productivity,” said Yi Zhang, Analyst at Canalys. “To succeed in this rapidly evolving landscape, channel partners must stay ahead of the game by establishing robust AI strategies and investing in strategic AI partnerships.”
AWS continues to reign supreme with 31% market share
Amazon Web Services (AWS) continued to dominate the cloud infrastructure services market in Q3 2023, with a stable market share of 31%. Year-on-year growth of 12% was in line with the previous quarter but still below the overall market’s growth rate. The company’s efforts to cut costs and enhance efficiency resulted in substantial profit improvements in Q3 2023. AWS unveiled plans to open new data centers in South Korea and Malaysia, responding to the increasing demand for cloud computing in these regions. It also enhanced its cloud marketplace, as growing numbers of ISVs are seeing transactions accelerate via AWS Marketplace. AWS has committed to improving the AWS Marketplace and Partner Central in the coming months, aiming to empower partners to use AWS Marketplace to accelerate sales.
Microsoft Azure bounces back with 25% market share and rising growth rate
Microsoft Azure held second place in the cloud infrastructure services market in Q3 with a 25% market share. Following seven consecutive quarters of slowing year-on-year growth, it saw an uptick in its growth rate, which was up 29% compared with Q3 last year. The impact of the AI surge is palpable – marked by increased demand for cloud following the launch of Microsoft Copilot for Windows in September. Business performance is expected to remain steady, given the 18% increase in its cloud order backlog, which reached US$212 billion in Q3 2023. Since August, partners have had access to the new Microsoft AI Cloud Partner Program, designed to support partners in harnessing the advantages of incorporating AI capabilities into their organizations and capitalizing on the business opportunities presented by Microsoft AI-related products and Microsoft Azure.
Google Cloud takes 10% market share with growth below expectations
Google Cloud reached a market share of 10% in Q3 2023 after growing 24% year on year, securing third place in the cloud infrastructure services market. Growth was below expectations, and this was the first time that Google Cloud’s growth rate dipped below that of Microsoft Azure’s in the last three years. The dip was primarily due to the delayed impact of enterprises’ IT cost-cutting measures. Emphasizing its partner-first vision, Google Cloud is highlighting the Google Cloud partner ecosystem, particularly in the context of AI. It also committed to an open approach to GenAI development, facilitating the integration of partner-developed AI models into the Google Cloud Platform.
Canalys defines cloud infrastructure services as those services that provide infrastructure-as-a-service and platform-as-a-service, either on dedicated hosted private infrastructure or shared public infrastructure. This excludes software-as-a-service expenditure directly but includes revenue generated from the infrastructure services being consumed to host and operate them.
