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Generative AI ignites cloud spending: Global market set to jump 20%, Microsoft chases AWS

cloud provider growth q4 2023

The analyst firm Canalys has forecasted that global cloud spending will increase by 20% this year thanks to hyperscalers pouring more money into generative AI. If this increase comes to fruition, it will be larger than the increase seen in 2023 which stood at 18%.

For the full year of 2022, global cloud spending reached $247.1 billion and in 2023 it increased 18% to $290.4 billion. A 20% increase on that could mean 2024 spending will reach $348.4 billion.

In the most recent quarter, Q4 2023, the biggest cloud providers were AWS, Microsoft Azure, and Google Cloud. Canalys said that they grew jointly by 21% and together accounted for 66% of the total global cloud spend.

Microsoft saw 30% revenue growth in the fourth quarter which was well above the rest of the market and meant that it closed the gap on AWS, though Amazon is still the market leader. AWS saw a year-on-year increase of just 13% which is an improvement for the company but still behind the trajectory that Microsoft Azure and Google Cloud are on.

Commenting on these three companies, Yi Zhang, an analyst at Canalys, said:

“AWS has been slower than its key competitors to make AI advances, which may explain why its growth is not accelerating as rapidly as that of Azure and GCP. The integration of generative AI into mainstream software products is accelerating, potentially leading to quicker commercialization of generative AI applications. Google recently introduced its rebranded Gemini large language model into Workspace applications, such as Gmail and Docs. At the same time, Microsoft launched Copilot for Microsoft 365 last November, embedding its generative AI platform into Word, Excel and other office applications.”

While AWS might be struggling against Microsoft and Google a bit in terms of growth trajectory, this could just be temporary because AWS does allow for AI integrations via Amazon Bedrock. In fact, customers may ultimately prefer Amazon’s offering because rather than being limited to a handful of models like Microsoft and Google customers, Amazon Bedrock supports foundation models from AI21 Labs, Anthropic, Cohere, Meta, Mistral AI, Stability AI, and Amazon - this gives users more choice.

Source: Canalys

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