Worldwide cloud service spending to grow by 20% in 2024.

Expenditure grew 19% year on year in Q4 2023 to reach US$78.1 billion, an increase of US$12.3 billion. For full-year 2023, total cloud infrastructure services spending grew 18% to US$290.4 billion, up from US$247.1 billion in 2022.

Customers are expanding their future commitments with hyperscalers (today at more than $300 billion) in anticipation of increased consumption requirements. Cloud migration efforts are picking up again, alongside a surge in new demand, particularly in the widespread adoption of AI applications.

Amazon Web Services (AWS), Microsoft Azure, and Google Cloud jointly grew by 21% and accounted for 66% of total spending. With 30% growth, Microsoft significantly outpaced the market and continues to close the gap on AWS who grew at 13% year on year.

Our great Canalys analyst team including Yi Zhang break down the numbers above.

Some other highlights:

Amazon Web Services (AWS) led the cloud infrastructure services market in Q4 2023, accounting for 31% of total spend. After several quarters of slowing growth, AWS saw a modest uptick in momentum, with revenue increasing by 13% year on year. As of Q4 2023, AWS’ backlog (future committed spending by customers) stood at US$155.7 billion, a year-on-year increase of over US$45 billion. The upward trajectory of AWS’ growth rate is expected to persist through 2024. It announced a reduction in AWS Marketplace listing fees for SaaS and data offerings from 13% to 3% in December 2023, which aligns with its competitors, Microsoft Azure and Google Cloud.

Microsoft Azure, as the second-largest cloud service provider, saw its market share increase to 26% in Q4 2023, against 23% in Q4 2022. The surge in AI adoption boosted Azure’s revenue by 30% compared with Q4 2022. Azure expanded its support for OpenAI’s latest models in Q4, including GPT-4 Turbo, GPT-4 with Vision and Dall-E 3, and now offers fine-tuning capabilities as well. It has secured 53,000 Azure AI customers, with over a third acquired in the past 12 months. With its AI advantage, Azure’s growth momentum is expected to continue.

Google Cloud was the third largest provider and grew 26% to account for 10% of the market in Q4 2024. Driven by demand for AI, Google Cloud began a new growth trajectory in Q4. As of 31 December 2023, Google Cloud accumulated US$74.1 billion in revenue backlog, up from US$64.3 billion at the end of 2022. Google hopes that its Gemini large language model will elevate it to the forefront of the artificial intelligence industry.