The world’s leading hyperscalers like Amazon Web Services (AWS), Microsoft Azure, and Google Cloud Platform (GCP) will see explosive growth from their marketplace initiatives over the next several years, which will further boost what has been strong overall cloud market growth and ongoing data center expansion through the first half of this year.

Analyst firm Canalys predicts leading cloud giants will generate $85 billion in enterprise sales from their respective marketplace efforts, dwarfing the $16 billion in sales that flowed through that channel last year. This growth is expected to come from “digital-first buyers [that] are reshaping enterprise customer procurement behavior, vendor sales strategies, and channel models.”

The new shape will see enterprise sales move from the current direct model with cloud giants toward sales that flow through marketplace channels. This despite margin concerns that will see both hyperscalers and vendors participating through cloud marketplaces needing to adjust return expectations.

“The channel has concerns about the rise of marketplaces, but both hyperscalers and vendors acknowledge the vital role of channel partners in driving customer adoption and growth,” Canalys chief analyst Alastair Edwards wrote. “Customers often prefer buying through trusted partners for help with managing cloud commitments and accessing professional services and technical expertise when sourcing complex technologies from multiple marketplaces.”

Canalys pointed to CrowdStrike and Snowflake as some of the first vendors to crow about generating more than $1 billion in sales through marketplace deals with hyperscalers. This has led others, such as Cisco, IBM, Broadcom, and Salesforce to further push their marketplace efforts.

Cloud hyperscalers surging on AI demand This new marketplace opportunity comes as cloud hyperscalers continue to see robust demand.

Canalys found that global spending on cloud infrastructure services surged 19% year over year during the second quarter, hitting more than $78 billion in sales during the quarter. AWS, Microsoft, and GCP continued to dominate the market, collectively pocketing 63% of that total quarterly spend.

Among the three, AWS posted a 19% sequential increase in revenues, Microsoft a more robust 29% surge, and Google a trio-leading 30% increase in revenues compared to the first quarter of this year. Canalys noted that the world’s remaining hyperscalers control the other third of the market, “but the market is shifting toward the top hyperscalers, which are capturing an increasing share of the market.”

That share increase could be further fueled by the surge in artificial intelligence (AI) use. Canalys noted that all three cloud giant’s reported “a significant surge in the number of customers using AI.”

Research firm ISG noted in a recent report that the average large enterprise is planning to nearly double their number of AI-enabled applications by the end of this year. This will see that average grow from 250 applications that were AI-enabled at the end of 2023, to 488 AI-enabled applications by the end of 2024.

“Commercialization of new technologies doesn’t happen overnight,” Canalys VP Alex Smith wrote. “The future of cloud computing remains promising. In the face of transformative tools like AI, the main providers will invest for fear of missing out. AI relies on large-scale computing power and storage, and the hyperscalers hope that AI-powered services become the next compelling reason for customers to transition to the cloud.”

The cloud giants are confronting this AI-generated demand by rapidly expanding their data center capacity.

Synergy Research Group (SRG) recently reported that hyperscalers now control more than 1,000 total large data centers around the globe, which accounts for 41% of the worldwide capacity of all data centers. Just over half of that hyperscaler capacity is from own-build, owned data centers with the remaining portion from leased facilities.

This expansion has allowed hyperscalers to now outpace worldwide on-premises data center capacity, which sits at 37% of the total. The analyst firm noted that was “in stark contrast” to six years ago when nearly 60% of data center capacity was in on-premises facilities.

That delta will continue to grow over the next several years, with SRG forecasting hyperscalers will control 60% of worldwide data center capacity by 2029, compared to just 20% for on-premises locations.

“In 2012, enterprises spent twelve-times as much on their data center hardware and software as they did on cloud infrastructure services, while today they spend three-times more on cloud services then they do on their own data center infrastructure,” SRG chief analyst John Dinsdale wrote. “Add to that the huge growth in [software-as-a-service] and consumer-oriented digital services such as social networking, e-commerce, and online gaming, and the result is the burgeoning growth in hyperscale data centers.”