Cloud Service Spending to Grow by 19 Percent in 2025

In the fourth quarter of 2024, global cloud infrastructure services spending rose by 20% to $86 billion, according to Canalys. For the full-year 2024, spending also grew 20%, up from $267.7 billion in 2023 to $321.3 billion in 2024.

The key driver behind this growth was the expansion of AI models, which significantly accelerated cloud adoption. By the second half of 2024, the top cloud vendors all reported positive returns on AI investments, with AI applications having a notable impact on their overall cloud business performance. As AI market competition intensifies, cloud hyperscalers plan to expand investments in cloud and AI infrastructure in 2025 to keep pace with rising demand. Canalys forecasts global cloud infrastructure services spending will grow 19% in 2025.

In 4Q24, the ranking of the top three cloud providers, AWS, Microsoft Azure, and Google Cloud, remained unchanged from the previous quarter, with their combined market share accounting for 64% of global cloud spending. Collectively, their total spending grew 25% year on year. AWS, the market leader, maintained a 19% annual growth rate, consistent with the previous quarter. Meanwhile, Microsoft Azure and Google Cloud suffered a slight decline in their growth rates compared with the previous quarter. This slowdown was primarily due to strong AI-driven demand outpacing supply, as the leading cloud providers reported that growth remained constrained by limited capacity, creating a tight supply-demand balance.

As AI becomes more efficient and widely adopted, demand is expected to grow exponentially. In response, cloud hyperscalers are making significant investments to grow AI model training, deployment, and cloud-based applications globally. AWS’ capital expenditure hit $26.3 billion in Q4, with total spending projected to exceed $100 billion in 2025. Microsoft’s Q4 expenditure reached $22.6 billion, and it plans to invest around $80 billion in data centers over the fiscal year. Google announced in its Q4 earnings call that it expects its capital expenditure to reach approximately $75 billion in 2025. “Cloud hyperscalers are investing at an unprecedented rate,” said Yi Zhang, Analyst at Canalys. “The race is no longer just about offering the best AI services – it’s about growing fast while ensuring financial sustainability and long-term competitiveness.”

The AI race remains fiercely competitive, with hyperscalers advancing their proprietary models while rapidly adapting to new market entrants. In January 2025, the Chinese AI startup DeepSeek introduced DeepSeek R1, a model widely regarded as a game-changer for its benchmark performance and cost efficiency. DeepSeek gained global recognition for achieving GPT-4o-level performance at a fraction of the cost. Leading cloud providers responded swiftly, integrating DeepSeek R1 into their platforms almost immediately. “The rapid adoption of DeepSeek R1 by leading cloud providers highlights its disruptive impact, challenging industry norms with its cost efficiency and high performance,” said Rachel Brindley, Senior Director at Canalys. “As AI evolves, new models will continue to emerge, driving innovation and competition across the ecosystem. Vendors are responding swiftly, ensuring seamless access for customers to explore and integrate the best options.”