World spending more on cloud infrastructure than ever before

No wonder AWS isn't being shy spending capex on buildouts

Enterprises are still splashing the cash on cloud infrastructure services with market revenues leaping by a third in Q2 – unlike other parts of the industry that boomed in the pandemic but are now running out of steam.

A whopping $62.3 billion was lavished on Infrastructure-as-a-Service (IaaS) in the three months ended June, up 33 percent year-on-year, says Canalys. This is $6 billion more than Q1 and $15 billion more than the corresponding quarter a year ago.

The major use cases for customers spending more on online infrastructure services include data analytics, machine learning, datacenter consolidation, application migration and cloud-native dev work.

Amazon Web Services, Microsoft and Google accounted for 63 percent of market revenues: collectively the giants grew 42 percent. This is despite inflation, rising interest rates and growing fears of an economic downturn.

"Cloud remains the strong growth segment in tech," said Canalys vice president Alex Smith. "While opportunities abound for providers large and small, the interesting battle remains right at the top between AWS and Microsoft. The race to invest in infrastructure to keep pace with demand will be intense and test the nerves of the companies' CFOs as both inflation and rising interest rates create cost headwinds."

Amazon Web Services, Microsoft and Google accounted for 63 percent of market revenues: collectively the giants grew 42 percent. This is despite inflation, rising interest rates and growing fears of an economic downturn

AWS grew IaaS 33 percent to $19.3 billion in calendar Q2, taking its market share of cloud infrastructure spending to 31 percent. New customers in the quarter include BT, Delta Airlines and investment bank Jefferies. AWS said last week it is not slowing down on capex investments and has 24 more availability zones in the offing including in Canada, Spain and Australia.

CFO Brian Olsavsky said last week that it is "prepared to help customers optimize their costs and will help any who are scaling down. But we'll also, again, continue to find new customers and new industries including government agencies."

Microsoft captured a 24 percent share of revenue in Q2, Canalys stats indicate, growing 40 percent on a year ago to $14.95 billion. On an earnings call last week, Microsoft boss Satya Nadella said it had won a "record number of $100 million-plus and $1 billion-plus deals this quarter."

"It's clear there is a real opportunity to help organizations in every industry to use digital technology to overcome today's challenges."

He said Microsoft is planning to launch 10 regions over the following year, and CFO Amy Hood pointed out that Microsoft is extending the life of its servers from four to six years through software – efficiency gains will be a key battleground in the cloud wars.

Google and AWS previously talked of their infrastrucrture efficiency improvements in February.

As for Google's latest quarterly outing, Canalys says it grew 45 percent to $4.98 billion, meaning it is still playing catchup with the more dominant duo. It signed Target in North America, H&M in Europe, Banco BV in Latin America and BioPharma in Asia.

However, although the cloud keeps growing, Microsoft and Google have slowed hiring, with Microsoft closing previous job openings unfilled. This came after Redmond pulled back on hiring in several important units, including Windows, Office, and Teams, in the year to July, in addition to layoffs affecting less than 1 percent of its workforce.

Meanwhile, Google told its staffers that "scarcity breeds clarity" after it said it would be slowing the pace of hiring for the rest of the year.

All three companies talked last week in their earnings conference calls about how cloud adoption is still in its relative infancy, and they discussed ways to save customers money, which plays to any concerns about wobbles in the wider economy.

IaaS took off during the pandemic as companies sought to digitally transform more of their workflows. Where PC shipments are now declining, the public cloud has a lot more runway left. ®

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