- Cloud revenue growth has finally returned to healthy levels after suffering declines in 2022 and much of 2023 thanks to a boost from AI
- Google Cloud and AWS saw the biggest growth rate gains
- Tier-2 providers and GPU specialists are also reaping the rewards of AI's rise
The third quarter of 2024 proved to be a return to form for hyperscale revenue growth, as enterprise interest in artificial intelligence (AI) translated into big buckets of green for the cloud giants.
Amazon Web Services (AWS), Google and Microsoft all saw a year on year uptick in revenue growth, with AWS and Google making the biggest gains. AWS’ growth rate increased from 12% in Q3 2023 to 19.1% in the recent quarter, while Google’s jumped from 22% to a whopping 35%.
Amazon executives said on an earnings call that AWS now has an annualized run rate of $110 billion. Google Cloud, meanwhile, posted a massive 7x increase in its operating income, which climbed to nearly $2 billion.
“It is not like the market was in trouble in late 2022 and most of 2023, as a $60 billion plus market was growing at around 18%, which was quite impressive growth for such a large market,” Synergy Research Group Chief Analyst John Dinsdale said in an email, referencing a recent slump in growth rates. “But it has now gone to another level with accelerated growth rates pushing the market to $84 billion in Q3. AI is clearly a big factor behind that growth surge.”
And it’s not just hyperscalers benefitting – though their numbers are front and center. Synergy said that among tier-two providers, Oracle, Huawei, Snowflake and Cloudflare had the highest year-on-year growth rates.
The demand is actually coming so fast and furious that even hyperscalers are having trouble keeping up. During its earnings call, Amazon CEO Andy Jassy noted that uptake of the company’s in-house AI chip Trainium has been so strong that “we’ve gone back to our manufacturing partners multiple times to produce much more than we'd originally planned.” Execs said the company expects to spend $75 billion on capex in 2024, the majority of which is going toward technology infrastructure to support AI demand.
Meanwhile, The Information reported that Microsoft is spending $10 billion on AI capacity from GPU-specialist cloud CoreWeave.
All told, Synergy noted in a press release the cloud market has grown by $16 billion over the past year. That compares to $10 billion in the four quarters from Q3 2022 to Q3 2023.