New data from Synergy Research Group shows that Q3 enterprise spending on cloud infrastructure services was over $68 billion worldwide, up by $10.5 billion from the third quarter of last year. That is the fifth successive quarter in which the cloud market grew by $10-11 billion from the previous year. The year-on-year growth rate was 18% in Q3, broadly in line with the previous two quarters. The current economic and political climate has crimped some growth in cloud spending, but there is clear evidence that generative AI technology and services are starting to help overcome those barriers. Q3 spending was up by 5% from Q2, substantially higher than the quarter-on-quarter growth rate seen in the previous two quarters. Excluding the seasonal peaks always seen in Q4, the sequential growth in cloud spending was the highest it has been since 2021. Among the largest cloud providers Google and Microsoft had the stronger year-on-year growth numbers, with Microsoft increasing its worldwide market share by almost two percentage points from the third quarter of last year. Their Q3 worldwide market shares were 23% and 11% respectively. Meanwhile market leader Amazon stayed within its long-standing market share band of 32-34%, though towards the bottom end of that range. In aggregate the three leaders accounted for 66% of the worldwide market. Among the tier two cloud providers, those with the highest year-on-year growth rates include Oracle, Snowflake, MongoDB, VMware, Huawei and China Telecom.
With most of the major cloud providers having now released their earnings data for Q3, Synergy estimates that quarterly cloud infrastructure service revenues (including IaaS, PaaS and hosted private cloud services) were $68.1 billion, with trailing twelve-month revenues reaching $257 billion. Public IaaS and PaaS services account for the bulk of the market and those grew by 19% in Q3. The dominance of the major cloud providers is even more pronounced in public cloud, where the top three control 72% of the market. Geographically, the cloud market continues to grow strongly in all regions of the world. When measured in local currencies the APAC region had the strongest growth, with India, China, Australia and Japan all growing by 20% or more year over year.
While the law of large numbers continues to exert downward pressure on cloud market growth rates, AI is giving the market an added boost. Helped by AI, there are signs that many enterprises are through their period of belt tightening and of optimizing rather than growing their cloud operations. AI is helping to open up a wide range of new cloud workloads. The large Chinese market is also gradually nudging back towards a more normal growth pattern, after a long period of constrained cloud operations. Synergy fully expects future cloud growth rates to remain buoyant over the coming years.