Q1 cloud spending tops $76 billion after the big three report big numbers

The analyst firm said it marks the second consecutive quarter in which growth has markedly improved following abnormally low rates in 2022-23, and that worldwide spending came in at "well over" $76 billion.

"We forecast that growth rates would bounce back and that is what we are now seeing," said Synergy chief analyst John Dinsdale.

Unsurprisingly, the hyperscale public cloud providers – Amazon Web Services (AWS), Microsoft, and Google – snaffled the lion's share of the market in Q1, accounting for 72% of spending on infrastructure-as-a-service (IaaS) and platform-as-a-service (PaaS).

All three cited the performance of their respective cloud businesses in their first quarter financials.

AWS reported a 17% year-on-year increase in sales, which weighed in at an impressive $25 billion. Operating income surged to $9.4 billion from $5.1 billion.

Similarly, cloud revenue at Microsoft grew 23% to $35 billion. CEO Satya Nadella said on the earnings call that the number of deals won by Azure that were worth $100 million or more grew by 80% on Q1 2023. "The number of 10 million dollar-plus deals more than doubled," he said.

While not quite as big as the other two, Google Cloud nonetheless also enjoyed a strong quarter. Turnover grew to $9.6 billion from $7.5 billion, while operating income rocketed to $900 million from $191 million.

According to Synergy, AWS, Microsoft and Google's global market shares stood at 31%, 25%, and 11% respectively at the end of Q1.

On a geographic basis, cloud is in high demand in all regions, with Asia Pacific (APAC) enjoying the strongest growth. Synergy said India, Japan, Australia, and South Korea all grew by at least 25 percent in Q1.

It's noteworthy that both AWS and Microsoft have announced major investments in Japan this year, and the latter has just revealed plans to establish a new data centre region in Thailand.

The US is still by far the world's biggest cloud market though, its scale surpassing that of the entire APAC region, according to Synergy. What's more, it is still showing double-digit growth, with spending up 20% on Q1 last year.

Synergy noted that the cloud market still faces some economic, foreign exchange, and political headwinds, but the underlying strength of the market – fuelled in no small part by AI hype – is more than compensating for these constraints.

Indeed, last week Synergy published figures showing that hyperscale data centre capacity has doubled over the last four years and is expected to double again over the next four.

"In terms of annualised run rate we now have a $300 billion market which is growing at 21 percent per year," said Dinsdale. "We will not return to the growth rates seen prior to 2022, as the market has become too massive to grow that rapidly, but we will see the market continue to expand substantially."