A new Canalys report showed that global spending on cloud infrastructure services reached $73.5 billion in Q3 2023, a 16% year-over-year increase. That growth was consistent with second-quarter growth, which indicates the market is stabilizing and enterprise IT spending cuts on the cloud services market are slowly easing, helped, in part, by a focus on AI.
In Q3 2023, the top three cloud providers – Amazon Web Services (AWS), Microsoft Azure and Google Cloud – jointly grew by 20%, slightly outpacing the overall market and accounting for 65% of total spending, according to the report. AWS mirrored its performance in the previous quarter, while Microsoft saw an uptick in its growth rate. Google Cloud, however, saw a drop in its rate in Q3 2023.
Despite enterprises continuing to optimize overall IT spending, the cloud market is beginning to show signs of resilience, at least partially because of the growing interest in AI. While the broader market continues to experience cost-cutting, growing demand for AI solutions is gradually offsetting the impact of reduced IT spending as enterprises begin to invest in cloud computing to support AI strategies, the Canalys report found.
Top Three Vendors Launch AI-Focused Partner Programs
Microsoft’s efforts to commercialize its AI products are gaining momentum, with the recent introduction of Copilot driving significant customer and partner interest, according to the report, and generative AI is poised to become a key driver of channel growth. Following AWS’ and Microsoft’s recent AI-focused partner program launches, Google Cloud introduced the Generative AI Partner Initiative in Q3 to work with partners to drive enterprise adoption of its AI solutions, including Duet AI.
“Generative AI unlocks a wealth of opportunities for channel partners to venture into new areas of business growth,” said Alex Smith, VP at Canalys. “The big cloud players and their partners can seize this exponential growth opportunity by identifying customers with an appetite for AI solutions while simultaneously strengthening their AI capabilities and offering comprehensive portfolios of AI-related products and services to address these evolving needs.”
“Apart from capitalizing on new business opportunities arising from GenAI, channel partners can incorporate GenAI internally to boost productivity,” said Yi Zhang, Analyst at Canalys. “To succeed in this rapidly evolving landscape, channel partners must stay ahead of the game by establishing robust AI strategies and investing in strategic AI partnerships.”
AWS Reigns Supreme With 31% Market Share
While AWS continued to dominate the cloud infrastructure services market in Q3 2023 with 31% market share, its year-over-year growth of 12% was still below the overall market’s growth rate. The Canalys report noted that the company’s efforts to cut costs and enhance efficiency resulted in higher Q3 2023 profits and AWS also unveiled plans to open new data centers in South Korea and Malaysia to meet increased regional demand. It also enhanced its cloud marketplace, as growing numbers of ISVs are seeing transactions accelerate via AWS Marketplace and plans to improve the AWS Marketplace and Partner Central to empower partners to use AWS Marketplace to accelerate sales, according to the report.
Microsoft Azure held a 25% market share in Q3 2023, Canalys found. After seven consecutive quarters of slowing year-over-year growth, its growth rate was up 29% compared with Q3 2022. Following the launch of Microsoft Copilot for Windows in September, this was likely due to increased demand for cloud services to support AI initiatives. Since August 2023, partners have had access to the new Microsoft AI Cloud Partner Program, designed to support partners in harnessing the advantages of incorporating AI capabilities into their organizations and capitalizing on the business opportunities presented by Microsoft AI-related products and Microsoft Azure, Canalys said.
Google Cloud's market share was 10% in Q3 2023 after growing 24% year-over-year, with lower-than-expected growth. Canalys said this was the first time that Google Cloud’s growth rate dipped below that of Microsoft Azure’s in the last three years. The dip was primarily due to the delayed impact of enterprises’ IT cost-cutting measures. Google Cloud is highlighting the Google Cloud partner ecosystem, particularly in the context of AI to emphasize its partner-first mindset. It also committed to an open approach to generative AI development, facilitating the integration of partner-developed AI models into the Google Cloud Platform, the report said.
Canalys defines cloud infrastructure services as those services 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.
