Shared Cloud Infrastructure Spending Continues to Accelerate

According to a new study by IDC, spending on compute and storage infrastructure products for cloud deployments, including dedicated and shared IT environments, increased 36.9% year over year in the first quarter of 2024 to $33.0 billion. Spending on cloud infrastructure continues to outgrow the non-cloud segment with the latter growing by 5.7% in 1Q24 to $13.9 billion. The cloud infrastructure segment experienced slower growth in unit demand of 11.4%, due to the continued increase in average selling prices (ASPs) mostly related to higher-than-usual GPU server shipments.

"Cloud infrastructure spending growth continues being driven by the explosion of AI-related investments, which not only impact servers but also started to have a positive influence on enterprise storage as well," said Juan Pablo Seminara, research director for IDC's Worldwide Enterprise Infrastructure Tracker. "Even though some caution still remains on the socio-political side, it has become clear that AI investment plans are not slowing down in 2024 and will continue growing at a high rate this year and beyond. Additionally, the improvement in economic prospects contributes to a very positive spending outlook for 2024 and 2025 where cloud-based spending will increase at a double-digit pace."

Spending on shared (public) cloud infrastructure reached $26.3 billion in the quarter, increasing 43.9% compared to a year ago. The shared cloud infrastructure category continues to hold the largest share of spending compared to dedicated (private) cloud deployments and non-cloud spending. In 1Q24, shared cloud accounted for 56.1% of total infrastructure spending. The dedicated cloud infrastructure segment saw lower growth of 15.3% year over year in 1Q24 to $6.7 billion.

For 2024, IDC is forecasting cloud infrastructure spending will grow 26.1% compared to 2023 to $138.3 billion. Non-cloud infrastructure is forecast to grow 8.4% to $64.8 billion. Shared cloud infrastructure is expected to grow 30.4% year over year to $108.3 billion for the full year. Spending on dedicated cloud infrastructure is also expected to have double-digit growth in 2024 at 12.8% reaching $30.0 billion for the full year. The subdued growth forecast for non-cloud infrastructure at 8.4% in 2024 reflects that even though most of the growth will come from cloud spending, general non-cloud dedicated systems are set to recover this year.

In 1Q24, service providers as a group spent $32.2 billion on compute and storage infrastructure, up 37.9% from the prior year. This spending accounted for 68.7% of the total market. Non-service providers (e.g., enterprises, government, etc.) also increased their spending to $14.7 billion growing 5.8% year over year. IDC expects compute and storage spending by service providers to reach $132.2 billion in 2024, growing at 26.2% year over year.

On a geographic basis, year-over-year spending on cloud infrastructure in 1Q24 showed very positive results in general, where only Latin America presented a decline of 2.8% while Western Europe, and Middle East & Africa were the only regions that grew by single digits at 4.0% and 5.3% respectively. These results were largely affected by political tensions that delayed investment plans. The regions that showed solid double-digit growth were Asia/Pacific (excluding Japan and China), Japan, Central & Eastern Europe, USA, China (PRC), and Canada, where cloud spending grew at 85.4%, 53.1%, 42.6%, 37.0%, 33.7%, and 16.1% year over year, respectively. Most of the growth is related to large high-performance computing (HPC) and AI-based projects, some of which were delayed due to supply issues in the past.

In the long term, IDC predicts spending on cloud infrastructure will have a compound annual growth rate (CAGR) of 14.3% over the 2023-2028 forecast period, reaching $213.7 billion in 2028 and accounting for 75.0% of total compute and storage infrastructure spend. Shared cloud infrastructure spending will account for 77.5% of the total cloud spending in 2028, growing at a 14.8% CAGR and reaching $165.6 billion. Spending on dedicated cloud infrastructure will grow at a CAGR of 12.6% to $48.2 billion. Spending on non-cloud infrastructure will also rebound with a 3.6% CAGR, reaching $71.4 billion in 2028. Spending by service providers on compute and storage infrastructure is expected to grow at a 13.8% CAGR, reaching $199.9 billion in 2028.