Worldwide cloud infrastructure services expenditure increased 28% year on year to reach US$63.1 billion in Q3 2022, up US$13.8 billion on the same period a year ago, according to Canalys, an independent market researcher. With the negative impact of inflation and rising energy prices, companies are reducing their technology spend, which may hit demand for cloud services in the short term.
Coupled with the strong US dollar, the annual growth rate fell below 30% for the first time. Amazon Web Services (AWS), Microsoft Azure and Google Cloud remained the top three providers in Q3 2022, together accounting for 63% of global spend after growing 33%.
Long-term demand for enterprise digitalization remains strong, as the move to cloud remains the best way for today’s businesses to do more with less, according to Canalys. But the impact of inflation and recession on the cloud services market was evident, with most top cloud vendors missing revenue targets in the quarter.
“Under economic pressure, enterprise customers are choosing to reduce operational risks by lowering their IT budgets,” said Canalys VP Alex Smith. “Despite winning large deals and having a backlog of contracts to fulfill, the growth of cloud vendors will be constrained because of inevitable project delays as some customers get skittish about the economic outlook. Hyperscalers will face a period of rising costs and lower revenue growth, which may lead to more conservative planning in 2023.”
Canalys defines cloud infrastructure services as those that provide infrastructure-as-a-service and platform-as-a-service, either on dedicated hosted private infrastructure or shared public infrastructure. This excludes software-as-a-service expenditure directly but includes revenue generated from the infrastructure services being consumed to host and operate them.
Cloud services are still growing, but not as quickly; a trend that most channel partners need to watch.