Even as cloud infrastructure market growth slows, Microsoft continues to win against Amazon • businessupdates.org

by Ana Lopez

It was a tough quarter for the cloud infrastructure market as companies looked for ways to reduce spending in an uncertain economy. When you combine that with the strong dollar and a weak Chinese market, the market slowed to 21% growth, a steep decline from the 36% growth we had seen the year before.

While we don’t see the ostentatious growth of recent years, Synergy Research still found the market crossed $61 billion for the quarter with the 12-month trailing revenue of over $212 billion, a hefty amount by any measure, even with the slowdown.

Also notable was that while each of The Big Three saw slow growth in Q4 2022 compared to the previous quarter, Microsoft still managed to gain market share on Amazon. Microsoft increased its share from 23%, up from 21% in the previous quarter, while Amazon fell from 34% to 33% and Google held steady at 11%. The Big Three cloud providers accounted for 66% of global cloud revenue.

That equates to about $20 billion for Amazon, $14 billion for Microsoft, and $7 billion for Google. As usual, this looks at IaaS, PaaS, and hosted private cloud services. It does not include SaaS, which is metered separately.

Market share chart for Q4 2022 from Synergy Research.

Image Credits: Synergy research

Amazon’s cloud revenue grew a modest 20% year-over-year, and the company acknowledged in its earnings call that growth fell even further into the mid-teens in the first month of the year. Meanwhile, Microsoft reported cloud growth of 22%, down from 24% in the previous quarter and Google Cloud revenue grew 32%, down from 38% growth in the previous quarter.

Amazon was the first to enter the market and has had a long lead, but it seems that after years of steady growth, the market is slowing down, giving its main competitor, Microsoft, a bit of an opening to gain on them. It could be at least partly due to the fact that Amazon’s market maturity is finally catching up, and that Microsoft is able to gain some advantage despite the overall slowdown in spending.

John Dinsdale, chief analyst at Synergy, says there were three main reasons for this quarter’s decline, which he believes are short-term issues, and he remains optimistic for the future. “There are three main factors. The stronger US dollar is reducing the apparent growth rate of many non-US markets; the large Chinese market remains constrained by pandemic issues and local policies; and the deteriorating economy has led some companies to take a closer look at spending on cloud services. These factors should be primarily short-term in nature and Synergy forecasts that growth rates will remain strong in the coming years,” he said in a statement.

It will be interesting to watch the market in 2023 and see how the macroeconomic environment affects revenue, and whether the slower growth we’ve seen continues to work in favor of Amazon’s competitors by allowing them to to gain more ground.

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