Cloud Market Crosses $7B in Quarterly Revenues

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The cloud computing market continues to climb higher.

Yesterday, Amazon reported that its cloud division had generated sales of $2.56 billion in the first quarter (Q1) of 2016, a 64 percent year-over-year increase. The ecommerce giant’s fast-growing Amazon Web Services (AWS) division helped it post a profit of over a half-billion dollars, or $1.07 per share, on revenues of $29.1 billion. Wall Street analysts had expected 58 cents a share.

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With all the major cloud providers accounted for in Q1, Synergy Research crunched the numbers and found that in aggregate, the cloud infrastructure services market has surpassed the $7 billion per quarter milestone.

Among the top providers, AWS is comfortably in the lead, according to Synergy chief analyst and research director, John Dinsdale. “Amazon/AWS remains in a league of its own with a worldwide market share of 31 percent, but Microsoft and Google both have tremendous triple-digit growth rates and are at least narrowing the gap a little,” he remarked in a research note sent to Datamation.

By comparison, Microsoft, IBM and Google combined account for 22 percent of the market. Microsoft and Google are quickly gaining ground, with annual growth rates of over 100 percent each, according to Synergy’s data.

cloud computing

The next 20 cloud providers in the rankings — a group that includes Oracle, Rackspace, Salesforce and VMware — accounts for 27 percent of the cloud computing market and is growing at an average 41 percent a year. Considering that the market is expanding at a rate of over 50 percent per year, Synergy concludes that most of them are shedding market share.

Proving the truism that one must spend money to make money, the top four’s (Amazon, Microsoft, IBM and Google) out-sized cloud data center investments appear to be placing the smaller players at a disadvantage.

With its feature-packed, globe-spanning cloud, Amazon has been successful in attracting a big customer base, including several major enterprises. “AWS started with developers and startups, and now is used by more than a million customers from organizations of every size across nearly every industry – companies like Pinterest, Airbnb, GE, Enel, Capital One, Intuit, Johnson & Johnson, Philips, Hess, Adobe, McDonald’s, and Time Inc.,” wrote Jeff Bezos, founder and CEO of Amazon, in an April 5 letter to shareholders.

Competing against Amazon and its high-flying peers may seem like a daunting challenge for smaller cloud providers. For these hopefuls, Dinsdale suggests that the road the cloud success may be paved with specialized or region-specific offerings.

“One of the bigger questions is what does this mean for the rest of the cloud providers? Clearly most cannot effectively compete head-to-head with the hyperscale cloud leaders as they invest billions of dollars in their data center footprints, so the smaller players need to focus on something a little different,” said Dinsdale.

Pedro Hernandez is a contributing editor at Datamation. Follow him on Twitter @ecoINSITE.