GenAI to drive public cloud spending hike to $675 billion this year

That figure represents a significant 20.4% growth rate on last year, Gartner's data shows, when overall spending came in at $561 billion.

And this sizeable growth trajectory shows no sign of abating. By 2025 we could be looking at worldwide public cloud spending of almost $825 billion (see chart below), with another major milestone to follow in short order: "Because of this continued growth, we expect public cloud end-user spending to eclipse the one trillion dollar mark before the end of this decade," said Sid Nag, Vice President Analyst at Gartner.

"The continued growth we expect to see in public cloud spending can be largely attributed to GenAI due to the continued creation of general-purpose foundation models and the ramp up to delivering GenAI-enabled applications at scale," Nag said.

The infrastructure-as-a-service (IaaS) segment is forecast to experience the highest end-user spending growth this year and next, again linked to what Gartner terms the ongoing GenAI revolution; the analyst firm highlights the need for infrastructure to undertake AI model training, inferencing and fine tuning, something that will "continue to grow exponentially" and will have a direct impact on IaaS consumption.

The growth of cloud infrastructure services spending has been a hot topic for Canalys in recent days too.

Late last week the analyst firm shared figures that show worldwide cloud infrastructure services – that's IaaS and platform-as-a-service (PaaS) – expenditure increased by 21% year-on-year in the first quarter of this year to reach $79.8 billion.

The big three – AWS, Microsoft Azure and Google Cloud – together outpaced total market growth at 24%, accounting for two thirds of total spending, but there were stark differences between them. While Microsoft turned in a hefty 31% on-year growth rate in Q1, AWS recorded an increase of just 17%.

While AWS could expect to post lower growth than its rivals to an extent, given that it is starting from a larger base, Canalys points to "increasing competition from its fast-growing competitors" and reminds us that just last week AWS chief executive Adam Selipsky announced his departure, a move that "suggests the company is looking for fresh energy to combat market share erosion."

AWS is still top of the pile though, with a 31% share of the global cloud services market, according to Canalys, and a growth rate that puts it on track to generate an annualized revenue of $100 billion.

Like Gartner, Canalys is looking closely at the impact of AI on cloud services revenues.

As a result of the possibilities associated with AI integration, enterprises are shifting their focus from optimising cloud budgets towards investment, Canalys says, pointing out that Amazon, Microsoft and Google have all seen an increase in multi-year commitments from enterprise customers, suggesting that many businesses are gearing up for a long-term increase in cloud usage.

"There is significant variation in the strategies of the top three hyperscalers, reflected in their differing growth rates," said Yi Zhang, Analyst at Canalys. "Microsoft's end-to-end portfolio is proving to be a strong competitive moat, while Google's strength in AI is giving it a strong tailwind. However, AWS' recent US$4 billion investment in Anthropic for generative AI and its ongoing AI integration in its cloud services underscores a determination to stay ahead of the pack as business priorities shift to AI."