Cloud spending growth reached a new record high in the fourth quarter, with Amazon Web Services (AWS) continuing its dominance as the market leader and runner-up Microsoft gaining share.
Spending on cloud infrastructure services increased by US$2.8 billion in the last three months of 2019 from the previous quarter – the largest quarterly increment for IaaS, PaaS and hosted private cloud services – according to a quarterly market snapshot released yesterday by Synergy Research Group. Synergy estimates spending eclipsed US$27 billion for the quarter – with public IaaS and PaaS services accounting for the bulk of the market with 38 percent growth – and US$96 billion for all of 2019.
“The sequential quarterly growth in absolute dollar terms was by far the highest ever achieved,” Synergy Group chief analyst and research director John Dinsdale said. “At 37 percent, the year-on-year growth rate is slowly trending down, but this is due to the massive scale of the market, which forces growth rates to moderate. The 2019 market was over twice the size of the 2017 market.”
AWS maintained its cloud industry lead with an estimated 33 percent market share in the fourth quarter, while Microsoft saw its share move to 18 percent from 16 percent in the prior quarter, according to Synergy, whose research has Google Cloud maintaining its 8 percent share.
IBM follows in the No. 4 spot with a 6 percent share, and Alibaba Cloud finishes at fifth with a 5 percent share. Both posted the same numbers in the third quarter. Salesforce came in with 3 percent of the market, while Oracle, Tencent and Rackspace each had 2 percent shares, according to Synergy.
“The year ended with a bang as both Amazon and Microsoft posted some really strong quarterly cloud numbers,” Dinsdale said. “Amazon remains far ahead of Microsoft, though Microsoft did once again narrow the gap in market shares. Behind these two market leaders, Google, Alibaba and Tencent are substantially outpacing overall market growth and are gaining market share. All three saw revenues increase by 50 percent or more year on year.”
IBM, Salesforce, Oracle and Rackspace have a more focused approach as niche players and typically have lower growth rates, according to Dinsdale.
Amazon last week reported that AWS was nearing a US$40 billion annual revenue run rate. AWS generated US$9.95 billion in revenue – 34 percent year-over-year growth – in the fourth quarter, beating average analyst estimates of US$9.81 billion.
No. 2 Microsoft’s cloud market share has increased nearly three percentage points since the fourth quarter of 2018. Last week, Microsoft said its intelligent cloud division, which includes Microsoft Azure, grew 27 percent to US$11.9 billion in the last quarter, with 62 percent revenue growth for Azure alone.
“Microsoft’s growth rate is higher, but Amazon is a long way ahead and, in absolute dollar terms, it continues to have larger increments in revenue numbers,” Dinsdale said. “This is a very tough gap to close and could not happen any time soon.”
Revenue for Google Cloud, which includes Google Cloud Platform (GCP) and the G Suite collaboration and productivity tools, increased 53 percent to US$2.614 billion in the last quarter compared to the same period in 2018. Chief financial officer Ruth Porat said GCP’s growth rate was “meaningfully higher than that of cloud overall.”
“Google is doing fine relative to where it is starting out from,” Dinsdale said. “Its main issue is that it started out late in getting really serious about public cloud services. Amazon had several years of runway over Google and Microsoft to put the ‘pedal to the metal’ much sooner.”