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Cloud infrastructure demand down but revenues up, says IDC

Skyscrapers in the clouds

The analyst firm IDC has revealed that spending on cloud computing and storage infrastructure products was up by 14.9% year-over-year in the first quarter to $21.5 billion. This is despite the fact that cloud infrastructure unit demand was down by 11.4% during the period.

IDC explained that the incongruence between revenues and demand is due to inflation and a higher concentration of GPU-accelerated systems being deployed by providers. Despite the inflationary pressure on businesses, IDC expects to see strong demand for shared cloud infrastructure.

Commenting on the findings, IDC’s Kuba Stolarski said:

“Cloud infrastructure spending remains resilient in the face of macroeconomic challenges. However, the segment is grappling with substantial price hikes and Q1 marked the second consecutive quarter of declining system unit demand. Although the overall outlook for the year remains positive, its growth hinges on the expectation that volume will drive it. Prolonged stagnation in demand could pose a significant obstacle to growth for the remainder of this year.”

Unfortunately, IDC didn’t give a breakdown of cloud infrastructure providers that could have shown which ones have been doing well. However, it did mention the demand for GPU-accelerated systems. The bursting onto the scene of generative AI has greatly increased the demand for cloud computing powered by GPUs designed for AI tasks, such as those offered by CoreWeave.

In terms of geography, IDC reports that year-over-year spending on cloud infrastructure during the first quarter rose in all areas except Central & Eastern Europe, China, and Canada. The areas that saw the most growth were Latin America, the United States, and the Middle East & Africa.

From 2022 to 2027, IDC is expecting to see a compound annual growth rate (CAGR) of 11.2% with spending on cloud infrastructure reaching $153 billion in 2027. Spending by service providers on compute and storage infrastructure is predicted to grow at a 10.6% CAGR, reaching $148.2 billion in 2027.

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