The public cloud market will need to work harder than ever to continue its decades-long history of 30% and up growth, according to Forrester Principal Analyst Lee Sustar. And growth will be hard, he said, regardless of an economic recession.

He explained as the main public cloud providers' competition intensifies, "they are compelled to make massive investments in analytics, AI [artificial intelligence]/ML [machine learning], and other differentiated premium services to stay in the top tier," but they're also "burdened by the costs of increasingly commodified infrastructure," Sustar explained.

But tougher competition on its own doesn't necessarily point to decreased market growth. Sustar expects the public cloud market will maintain a "similar 20%-plus rate" of growth, and the market should reach $1 trillion by 2026, up from $446.4 billion in 2022.

Although analysts predict the public cloud market will soon graze $1 trillion, that high-stakes competition will ensure a bumpy road ahead, Sustar noted. "Add geopolitical tensions, war, and economic challenges to the mix, and the future appears rather fraught, ... [and] getting there will be quite a ride," he remarked.

In its 2022-2026 public cloud market outlook, Forrester noted that the major cloud players like Amazon Web Services (AWS), Google Cloud, and Microsoft Azure are just maintaining appearances at this point. For example, hyperscalers' "poor decisions" and "suboptimal execution" can make a significant difference in their parent companies' revenues, but that's not always clear.

AWS has been responsible for keeping e-commerce giant Amazon in the black in recent quarters. Google Cloud, on the other hand, is piling up hundreds of millions in operating losses for Alphabet every quarter in an effort to grow cloud revenue. And Microsoft chooses to keep Azure revenue together with the rest of its revenue, leaving outsiders with no way to "know whether [Azure] is profitable in any conventional sense, even as Azure very slowly closes the distance with AWS for market share," Sustar explained.

Speaking of the competition between these cloud service providers, Forrester noted that the most significant area of competition in terms of impacting revenue and market share growth is data and analytics. These are "big-ticket services" cloud providers offer in the hopes they'll gain a following beyond the tradition IT operations crowd that includes data scientists and analysts, for example.

But that's still a tall order, Sustar said, as hyperscalers are also busy "breaking ground, pouring concrete, and stacking racks in data centers worldwide to absorb the workloads that have yet to come toward cloud," he added.

Those "enormous capital investments" mean just four companies remain in the mix – Alibaba, AWS, Google, and Microsoft – and the rest have abandoned efforts to catch up "even if their marketing messages claim otherwise," Sustar said, highlighting cloud infrastructure designed for security or AI/ML as an important area of differentiation.

Core cloud infrastructure, however, is essentially standardized via the massively popular Kubernetes open source project, and this is driving hyperscalers to innovate higher up the stack. Sustar expects core infrastructure will continue to represent a major portion of cloud revenue. However, efforts be aimed less at gathering profit and more at gathering customers to hopefully sell them more expensive services, he added.