The cloud services market is a "strategically vital" driver of fundamental changes in the IT ecosystem, but that doesn't prevent the market's performance from being "a bit repetitive," Synergy Research Group (SRG)'s John Dinsdale told SDxCentral.

For the third consecutive quarter, SRG's analysis reported the market grew by $10 billion year over year. And despite that consistent growth, the law of large numbers is taking effect as the market's growth percentage rate drops. "As an ever-larger market keeps on adding $10 billion, the year-on-year growth rate almost inevitably declines, from 20% in Q4 2022, to 19% in Q1 2023, to 18% in Q2 2023," Dinsdale explained.

Certain tailwinds, however, could alter that pattern – like the Chinese cloud market's potential to return to "something closer to normalcy;" the slow upturn in macroeconomic environments; or the fact that "many enterprises have now reviewed and optimized their historic cloud usage and are returning to generating new workloads, including generative AI [artificial intelligence] tasks," he said.

Amazon CEO Andy Jassy noted during the company's second-quarter earnings call that while Amazon Web Services (AWS) customers continue optimizing their cloud usage to save costs, the bigger customer trend is a focus on "driving innovation and bringing new workloads to the cloud," he said.

"As a result, we've seen AWS' revenue growth rate stabilize during Q2" at 12% year over year, and "you have to be adding a lot of new customers and a lot of new workloads just to grow double digits," Jassy pointed out.

According to SRG, AWS held onto its 32-34% share of the cloud market in Q2. Rival cloud providers Google Cloud and Microsoft held 22% and 11% of the market, respectively. Combined, the three providers represent 65% of the entire market worldwide.

AWS remains proud of its market leadership, and executives contribute that status to the company's "array of storage, database, analytics and data management services" as they relate to the hyperscaler's ability to grow AI workloads. "Remember, the core of AI is data," Jassy said. "People want to bring generative AI models to the data, not the other way around," he added.

AI's day of peak adoption remains in the distance, however. "When you're talking about the big potential explosion in generative AI – which everybody is excited about, including us – I think we're in the very early stages," Jassy said. "We're a few steps into a marathon. ... It's going to be transformative, and I think it's going to transform virtually every customer experience that we know, but I think it's really early," he cautioned.

Google and Microsoft both reported continued growth of their cloud businesses in the second quarter, with Google Cloud revenue up 28% year over year and Microsoft Azure and cloud services revenue up 26%.

Microsoft CFO Amy Hood attributed 1% of that growth to the hyperscaler's AI services. As high-performance computing demand increases, "the real focus here is being able to be aggressive in meeting the demand curve and focusing on the transition and growth," she told investors. To that point, Microsoft plans to address "overall commercial cloud demand" while building out its infrastructure and associated AI capacity.

Google CEO Sundar Pichai similarly shared insight to the company's cloud pipeline, noting "there is definitely a lot of interest from customers on AI," which makes for "an exciting moment overall in cloud."

Pichai  said he expects AI will become a significant revenue driver alongside Google's existing cloud services. "When I think about it long term, I view the AI opportunity as expanding our total addressable market and allow[ing] us to win new customers," Pichai said.