The cloud infrastructure market has had another big quarter, firmly overcoming the downturn in 2023. Revenues continue to grow at a rapid pace, driven by interest in AI: Synergy Research reported quarterly revenues totaled $79 billion, up $14.1 billion, or 22%, from the prior year.
Synergy said this marks its third consecutive quarter of year-over-year growth of more than 20%, with AI driving a big part of that growth.
The bottom line is that the cloud shows few signs of slowing down, despite its troubles last year. Despite some elements of political and economic uncertainty, Synergy principal analyst John Dinsdale sees the market continuing to grow, and his firm expects it to double again within four years. It took 13 quarters to double from $40 billion to nearly $80 billion (soon to exceed that).
One of the surprises this quarter was that Microsoft Intelligent Cloud, which includes Azure, fell short of analysts' expectations. The company reported $28.52 billion in revenue, compared with analysts' expectations of $28.68 billion, according to CNBC. It wasn't all bad news, however, as Azure still grew 30%, according to Jamin Ball, a partner at Altimeter.
But Dinsdale says it's important not to get too hung up on this surprise: “Microsoft's intelligent cloud quarterly revenue was within the range of the guidance Microsoft provided three months ago. Growing a $28.5 billion business at 19% annually is no mean feat. Azure is the largest part of the intelligent cloud, and it grew 29%. [for the quarter]”This is actually pretty impressive,” he told TechCrunch.
Amazon reported quarterly revenue of $26.3 billion, up 19% year over year, a growth rate that appears to have settled into for the time being after dipping into the 12% to 13% range in early 2023.
Chart provided by Jamin Ball, partner at Altimeter Capital.
Ball said Google Cloud had a strong quarter, surpassing $10 billion for the first time and up 29% year over year, but it's important to note that his numbers include Google Workspace and infrastructure services. Perhaps more importantly, Synergy said it grew its market share by 1 percentage point, although its numbers don't include Workspace.
Overall market share was Amazon with 32% (about $25 billion), Microsoft with 23% (about $18 billion), and Google with 12% (about $9.5 billion). It's worth noting that Microsoft's market share declined by about 2 percentage points compared to the previous quarter, according to Synergy, but it's still growing fast. Dinsdale confirmed this, attributing the decline to the seasonality of the Azure sales cycle.
“Azure's numbers are seasonal, and they often see slower sequential growth in the April-June quarter after strong growth in the previous quarter. That's what happened this time around,” he said. “Azure didn't grow compared to the first quarter, while Amazon and Google both grew and both improved their market share. If you remove seasonality and look at annual growth rates, Azure is actually growing more than Google and Amazon. Azure is hardly in the trough.”
In the next tier of companies, Oracle has risen to 3%, overtaking IBM and tying with Salesforce for fifth place overall. This sounds good, but with the Big 3 controlling over 73% of the market, even 3% is enough for over $2 billion in revenue.
It's confusing to see how different companies, and the companies that monitor them, count cloud numbers: Ball looks at publicly available information; Synergy looks at IaaS, PaaS, and hosted private cloud services; it doesn't count SaaS and includes its own market analysis in its numbers.