- Lowest-ever quarterly growth recorded in this quarter
- The top three providers—Amazon Web Services (AWS), Microsoft Azure and Google Cloud—grabbed 63% of global spend
As per the recent trend reports, global cloud infrastructure services expenditure witnessed a lower-than-expected hike of 28% year-on-year (YoY) in Q3 2022. It reached US$63.1 billion, up from US$13.8 billion in Q3 last year. The latest report by Canalys explained that the rising energy prices amid tight geopolitics are making companies spend less, which may hit demand for cloud services in the short term. With such market uncertainty and the strong US dollar, the annual growth rate fell below 30% for the first time. The top three providers—Amazon Web Services (AWS), Microsoft Azure and Google Cloud—grew by 33%, thus grabbing 63% of global spending in 3Q22.
The report pointed out that long-term demand for enterprise digitalization remains strong, as the move to the cloud remains the best way for today’s businesses to do more with less. But the cloud services market was evidently hit by inflation and recession because almost all the major cloud vendors missed revenue targets in the quarter.
Canalys Research Analyst Yi Zhang commented: “Hyperscalers are continuing to roll out new infrastructure to reach new customers globally. At the same time, they are trying to find the next products and technology advances that will drive business growth. The increased adoption of cloud services has stimulated thoughts about the value that can be extracted from data in the cloud. Both Google and Microsoft emphasized their development of products around data and AI. The future cloud service market is expected to achieve value creation with the introduction of data and AI.”
“Under economic pressure, enterprise customers are choosing to reduce operational risks by lowering their IT budgets. Despite winning large deals and having a backlog of contracts to fulfil, the growth of cloud vendors will be constrained because of inevitable project delays as some customers get skittish about the economic outlook. Hyperscalers will face a period of rising costs and lower revenue growth, which may lead to more conservative planning in 2023. We predict the hyperscalers will need to increase their prices in Europe by 30% to account for rising energy costs,” stated Canalys VP Alex Smith.
Hyperscaling refers to an agile method of processing data, which can quickly scale up or down in case of fluctuating demand/data traffic. Companies like Alibaba, Amazon Web Services, Equinix, IBM, Oracle, QTS, SAP, Microsoft, Scaleway and Google are ‘hyperscalers’ as they build data centres for hyperscale computing.
Canalys defines cloud infrastructure services as those 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.
