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The combination of a robust US dollar and a sluggish Chinese economy led to a decline in growth for the cloud infrastructure market. Down to 21% from the previous year’s 36%. Despite the slowdown, Synergy Research reports that the market still surpassed $61 billion for the quarter, with 12-month trailing revenues exceeding $212 billion, which is quite impressive.

A noteworthy observation is that although the “Big Three” (Amazon, Microsoft, and Google) experienced slower growth in the fourth quarter of 2022, Microsoft managed to make headway by gaining market share.

Microsoft’s share increased from 23% to 24%, while Amazon’s share fell from 34% to 33%, and Google’s remained constant at 11%.

The three major cloud providers get 66% of global cloud revenue

The big three also collect most of the cloud revenue, 66% to be precise. That adds up to approximately $20 billion for Amazon, $14 billion for Microsoft, and $7 billion for Google. This data only includes Infrastructure-as-a-Service (IaaS), Platform-as-a-Service (PaaS), and hosted private cloud services and doesn’t include Software-as-a-Service (SaaS), which is calculated separately.

Amazon, being the first to market, has had a head start, but the slowdown in growth is providing Microsoft with an opportunity to catch up. Very slowly, but it’s gaining.

Amazon’s cloud revenue only grew 20% over the prior year, and the company admitted during an earnings call that growth dropped to the mid-teens in the first month of the year. Meanwhile, Microsoft’s cloud growth was 22%, down from 24% the previous quarter, and Google’s cloud revenue grew 32%, down from 38% the previous quarter.

What caused the dip?

John Dinsdale, the Chief Analyst at Synergy, highlights three key reasons for this quarter’s dip in growth, which he believes are temporary and remains optimistic about the future.

The strong US dollar, the pandemic’s impact on the large Chinese market, and the weakened economy are the main factors that caused some enterprises to re-evaluate their spending on cloud services. However, Dinsdale believes these factors are only temporary and that growth rates will remain strong in the coming years.

It will be intriguing to see how the macroeconomic environment affects the market’s revenue in 2023 and if the slower growth will continue to benefit Amazon’s competitors by enabling them to gain more market share.