Amazon Web Services (AWS), Microsoft Azure, and Google Cloud Platform (GCP) remain the world’s dominant cloud providers, which is an increasingly nice position to be in as market revenues continue to surge.

Synergy Research Group (SRG) reports that AWS maintained its sizeable advantage over Microsoft and GCP during the third quarter, holding 31% market share compared to 20% for Microsoft and 13% for GCP. All three were noted to have witnessed increased growth rates over the past year, “with particularly strong improvements at Amazon and Google.”

Those growth rates come as overall enterprise spend on cloud infrastructure surged 23% year over year during Q3, hitting $84 billion for the quarter. This includes spending on infrastructure-as-a-service (IaaS), platform-as-a-service (PaaS), and hosted private cloud services.

Other vendors taking a piece of that pie include Oracle, Huawei, Snowflake, and Cloudflare.

SRG pinned the surge in cloud revenues on increased investment in artificial intelligence (AI) and its generative AI (genAI) appendage, which have overcome lingering “economic, currency, and political headwinds.”

“While some market headwinds have diminished, it is undoubtedly AI that is a prime factor behind this increased growth rate,” SRG Chief Analyst John Dinsdale explained. “New AI-oriented services and technology are helping the major cloud providers to ride a wave – new capabilities lead to increased demand, which leads to increased revenues, which then enables more investment in underlying technologies.”

The cloud giants have been investing in that opportunity, with a previous SRG report finding AWS, Microsoft, and GCP were in the midst of a data center expansion spree that will see them control nearly two-thirds of all data center capacity worldwide by the end of this decade, which is eight-times the capacity they controlled in 2017.

ABI Research noted in a report that this AI-fueled investment spree will also angle toward “large and mega-sized colocation facilities.” The firm noted that 28% of total worldwide data centers currently fit this size definition, but that “number will grow to 43% by 2030 as companies build larger data centers that can accommodate AI/generative AI workloads and other data-hungry applications.”

Managing cloud investment costs However, those hyperscalers are also attempting to manage that data center investment.

“We are – and we’ve talked about now for quite a few quarters – we are constrained on AI capacity,” Microsoft CFO Amy Hood said during Microsoft’s Q2 earnings call. “And because of that … we’ve … signed up with third parties to help us as we are behind with some leases on AI capacity. We’ve done that with partners who are happy to help us extend the Azure platform, to be able to serve this Azure AI demand. And you do see us investing quite a bit as we’ve talked about in builds so that we can get back in a more balanced place.”

AWS CEO Andy Jassy during the company’s latest earnings call said its data center investment plans include having to work through logistical challenges.

“If you think about, we have 35 or so regions around the world, which is an area of the world where we have multiple data centers, and then probably about 130 availability zone through data centers, and then we have thousands of SKUs we have to land in all those facilities,” Jassy said. “And if you land too little of them, you end up with shortages, which end up in outages for customers. So most don't end up with too little, they end up with too much. And if you end up with too much, the economics are woefully inefficient.”

Ongoing cloud infrastructure demand will mean that sort of planning will have to continue for the foreseeable future.

IDC predicts spending on cloud infrastructure will increase at an 18.1% compound annual growth rate (CAGR) through 2028, hitting $253 billion and accounting for more than three-quarters of total compute and storage infrastructure spend. Most of that will be spent by service providers on shared cloud infrastructure.

“Hyperscalers, digital service providers, and major cloud service providers are the ones that keep pushing the growth and that will continue to have a positive impact on the market during 2024 and 2025,” Juan Pablo Seminara, research director for IDC’s Worldwide Enterprise Infrastructure Trackers, explained. “And the improved economic prospects will help to extend the positive mood even further.”