The fourth quarter of 2023 (4Q23) saw an 18.5% year-over-year increase in spending to $31.8 billion on compute and storage infrastructure products for cloud deployments, encompassing dedicated and shared IT environments, according to IDC. The non-cloud segment had 16.4% year-over-year growth in 4Q23 to $18.9 billion, but spending on cloud infrastructure is still expanding faster than ever.
Average selling prices (ASPs) increased throughout the quarter, mostly due to higher-than-normal shipments of GPU servers to hyperscalers, but unit shipments in the cloud infrastructure market fell by 22.8%.
“Cloud infrastructure spending continues to accelerate towards more robust configurations mainly fueled by the explosion of AI-related investments,” said Juan Pablo Seminara, Research Director, Worldwide Enterprise Infrastructure Trackers at IDC. “Even though some caution remains on the socio-political side, the improvement in economic prospects contribute to a very positive spending outlook for 2024 and 2025 where cloud-based spending is expected to rebound at double-digit growth rates.”
During the fourth quarter in 2023, spending on shared cloud infrastructure totaled $22.8 billion, up 27.0% from the same period last year. When compared to dedicated deployments and non-cloud investment, the shared cloud infrastructure category continues to hold the biggest share of spending. Shared cloud made up 44.9% of all infrastructure spending in 4Q23, while the dedicated cloud infrastructure category witnessed a little year-over-year gain of 1.4% to $9.0 billion.
Cloud Spending in 2024 and Long Term
IDC projects that spending on cloud infrastructure will reach $129.9 billion in 2024, an increase of 19.3% from 2023. It is anticipated that non-cloud infrastructure will drop 1.4% to $57.6 billion. While expenditure on dedicated cloud infrastructure is predicted to expand robustly by 13.3% in 2024 to $34.6 billion for the whole year, shared cloud infrastructure spending is predicted to grow by 21.6% year over year to $95.3 billion.
It is anticipated that non-cloud infrastructure will grow at a muted rate in 2024, falling 1.4% annually, reflecting the market’s ongoing difficulties. Because both new and current mission-critical workloads necessitate higher-end, performance-oriented equipment, cloud investment is expected to continue very positive.
During the 2023–2028 forecast period, IDC projects that expenditure on cloud infrastructure will expand at a compound annual growth rate (CAGR) of 12.8%. By 2028, this spending will have reached $199.1 billion, or 73.6% of all spending on compute and storage infrastructure. With a 12.8% compound annual growth rate and a $143.0 billion market capitalization, shared cloud infrastructure investment will represent 71.8% of all cloud spending in 2028. A 12.9% compound annual growth rate will see $56.1 billion in spending on dedicated cloud infrastructure. Up 4.1% CAGR, or $71.4 billion, will be spent on non-cloud infrastructure by 2028.
Cloud Service Providers
IDC’s service provider category includes cloud service providers (CSPs), digital service providers, communications service providers, hyperscalers, and managed service providers (MSPs).
IT Service providers collectively spent $30.0 billion on computing and storage infrastructure in 4Q23, a 19.6% increase over the same period the previous year. This spending accounted for 59.2% of the total market. Non-service providers (businesses, the government, etc.) had a 15.2% increase in spending to $20.7 billion. According to IDC, service providers will spend $124.3 billion on compute and storage in 2024, increasing by 21.8% annually.
IDC predicts that IT service providers’ cloud infrastructure spending will reach $188.5 billion in computing and storage infrastructure by 2028, rising at a 13.1% CAGR, during the 2023–2028 forecast period.
Worldwide Cloud Spending Slumps and Rises
Geographically, 4Q23’s year-over-year spending on cloud infrastructure revealed mixed results, with China, the Middle East, and Canada all exhibiting negative growth, led by China’s decrease of 31.1%, which was mostly due to the country’s still-troubled economy.
Spending in the Middle East and Africa fell by 12.2% as a result of challenging year-over-year comparisons brought on by significant projects completed at the end of the previous year. In Canada, spending fell 4.4% on an annual basis.
According to IDC, Asia/Pacific (apart from China and Japan), the US, Central and Eastern Europe, Japan, Western Europe, and Latin America saw higher spending in 4Q23 on cloud computing, with annual growth rates of 48.2%, 40.6%, 11.3%, 10.5%, 2.7%, and 1.5%, respectively. Large-scale high-performance computing and AI-based projects accounted for the majority of this expansion.
