Amazon Web Services’ (AWS) move last week to replace CEO Adam Selipsky with executive veteran Matt Garman could indicate a strategic shift for the public cloud giant, which has seen smaller rivals slowly start to eat into its long-standing leadership position thanks to more focused moves into the artificial intelligence (AI) arena.

The move itself will see Selipsky step down effective June 3, “to pursue other opportunities.” This will end Selipsky’s three-year tenure as head of AWS.

Garman will take over at that point, bringing his nearly two-decades of work at AWS, with Amazon CEO Andy Jassy specifically calling out Garman’s understanding of the AWS business and customer needs, along with his strong leadership and problem-solving skills.

These skills come at a critical time for AWS, which under Selipsky did hit significant financial highs along with the broader public cloud market but has more recently seen AWS’ overall market dinged by rivals like Microsoft Azure and Google Cloud.

Synergy Research Group (SRG) reported that AWS continued to be the biggest public cloud revenue hog, sucking up 31% of market revenues during the first quarter of this year. However, that share was down slightly from the 32% share AWS garnered for the first quarter of 2023.

Microsoft, in contrast, managed to grow its market share from 23% last year to 25% this year, while Google increased its share from 10% last year to 11% this year.

Forrester Research Principal Analyst Lee Sustar noted in a blog post that AWS’ slower growth “isn’t necessarily a Selipsky issue but rather a public cloud market issue.”

“All major cloud providers have seen slowed growth in the past 18 months,” Sustar wrote. “A tech recession shifted the frenzied ‘cloud-first’ mentality to a ‘cloud-as-necessary’ mindset. The result: slower cloud spending compared to the hyper growth of the previous five years. It’s also a sign of maturity in cloud usage, particularly among North American and European customers.”

That market maturity does have to be taken in context as SRG reported the broader cloud market, including infrastructure-as-a-service (IaaS), platform-as-a-service (PaaS) and hosted private cloud services grew 23% during Q1 to $76 billion in total revenues for the quarter.

But that does not discount Sustar’s note about the overall market hitting a growth plateau. “Cloud growth will eventually slow as adoption continues and there are fewer areas to conquer,” Sustar explained, adding that while new market areas will emerge to help overcome slowing demand in others, “hyperscalers must continue to make enormous investments in both look-alike compute, storage, and network services.”

Many predict artificial intelligence will be one of the market sectors that could propel future cloud revenues.

Gartner is predicting worldwide end-user spending on public cloud services will grow 20.4% to total $675.4 billion in 2024, up from $561 billion in 2023, with that growth “being driven by generative AI (genAI) and application modernization.”

“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,” Sid Nag, VP and analyst at Gartner, explained. “Because of this continued growth, we expect public cloud end-user spending to eclipse the $1-trillion dollar mark before the end of this decade.”

Analyst firm Canalys, which also cited Microsoft as outgrowing AWS during Q1, noted AWS’ leadership move indicates the cloud giant “is looking for fresh energy to combat market share erosion.” This includes recent moves to bolster its positioning in the artificial intelligence (AI) space.

“AWS ramped up its progress in genAI development during Q1 and launched the Generative AI Competency Program in March 2024 to recognize and promote partners with demonstrated AWS technical expertise and customer success,” Canalys noted in its report. “The certification requires partners to go through months of training, prove technical proficiency and provide four customer case studies. Additionally, AWS enhanced its AI foundation model offerings with Meta's Llama 3, Mistral's models and its self-developed Amazon Titan models.”

Forrester’s Sustar noted while AWS has indeed made some AI-centric moves, they have so far been siloed, which could risk the cloud giant ceding AI market share to direct and indirect rivals that have either already gained significant market and mind share or have taken more open approaches to the AI and genAI market.

“AWS’ differentiation historically has been in infrastructure,” Sustar wrote. “Rather than compete in areas like enterprise software suites, it can double down on custom silicon GPUs as an Nvidia alternative. AWS could bring its ‘go build it’ cloud strategy to genAI to help customers home in on use cases that matter most rather than pushing AI everywhere.”

That path selection will be important for AWS as it looks to carve out a niche in the rapidly expanding AI ecosystem.

“The responsibility for responding to these challenges now falls on Matt Garman,” Sustar concluded. “Where he comes down on these strategic decisions will shape AWS – and its customers – for years to come.”