Canalys: Cloud services continued to grow through Q3
There’s been demand for AI-fuelled growth and investment from the three main hyperscalers over the most recent quarter
The word “challenging” has been frequently used to describe this year, but those operating in security and cloud have been protected from the worst impacts of customer budget cuts.
Adding to the sense that spending has not slowed in cloud services is the analysis of Q3 global spending from Canalys, which tracked a 21% year-on-year increase.
The analyst reported that customer investments in hyperscalers’ artificial intelligence (AI) offerings was largely responsible for that growth, and there were no signs that momentum was going to slow as the year closed out.
The growth in interest in AI meant more options were developed and made available from market leaders Amazon Web Services (AWS), Microsoft Azure and Google Cloud.
Customer demand for AI services has seen investments by cloud service providers continue, and those leading the market have made it a priority to invest in large-scale investments in next-generation infrastructure. The top three providers accounted for 64% of total expenditure, with spending with the three cloud giants increasing by 26% year on year.
The challenge for hyperscalers is to balance investments and keep AI innovations coming without undermining other parts of balance sheet.
“Continued substantial expenditure will present new challenges, requiring cloud vendors to carefully balance their investments in AI with the cost discipline needed to fund these initiatives,” said Rachel Brindley, senior director at Canalys. “While companies should invest sufficiently in AI to capitalise on technological growth, they must also exercise caution to avoid overspending or inefficient resource allocation. Ensuring the sustainability of these investments over time will be vital to maintaining long-term financial health and competitive advantage.”
Established programmes
All three leading cloud service providers have established channel programmes and rely on partners to add value to their marketplace offerings.
The expectation from Canalys is that the investments in AI from the hyperscalers will continue to define the market going into 2025.
“The three leading cloud providers are also expediting the update and iteration of their AI foundational models, continuously expanding their associated product portfolios,” said Yi Zhang, analyst at Canalys.
“As these AI foundational models mature, cloud providers are focused on leveraging their enhanced capabilities to empower a broader range of core products and services,” she added. “By integrating these advanced models into their existing offerings, they aim to enhance functionality, improve performance and increase user engagement across their platforms, thereby unlocking new revenue streams.”
In terms of the top three, AWS remained out in front, gaining 19% year-on-year revenue growth in Q3; Microsoft Azure was ahead of its rival with annual growth of 33%; and in third place in terms of market share, Google Cloud saw growth of 36%.
AWS reported a triple-digit year-on-year increase in AI-related revenue. Microsoft has indicated that over the past six months, use of Azure OpenAI has more than doubled.
