Cloud Services Experience Record Revenue, Slowing Growth

According to Canalys, by the end of Q1 2020, companies spent a record $31 billion on cloud infrastructure, 34.5 percent growth from $23.1 billion for Q1 2019. Despite increased spending, however, the growth trajectory is slowing: Q1 2019 showed a 39.3 percent year-on-year (YoY) increase and Q4 2019 a 37.2 percent year-on-year increase. Cloud spending therefore grew only 2.6 percent or $800 million quarter-on-quarter by end of March 2020. Canalys attributes growth to the shift to remote working during the pandemic.

VentureBeat notes, however, that “much of the global workforce didn’t begin working from home until March” although it adds that “China — the second biggest cloud services market after the U.S. — embraced remote working earlier as it was first to feel the effects of the pandemic.”

Cloud usage has surged for platforms and services from Netflix and Microsoft Teams to Zoom and Google Meet, but that’s meant that, “large enterprise projects such as SAP migrations, hybrid cloud deployments, and ‘other transformational projects’ have been put on the back burner.”

Despite the uptake of cloud services, “some of the industries hit worst by the global pandemic — such as hospitality, tourism, and construction — have cut or delayed planned cloud spending.” Canalys chief analyst Matthew Ball said that, although “we saw an unprecedented surge in demand and use of cloud-based applications primarily driven by remote working … on the reverse, we saw an immediate slowdown of large enterprise consultative-led projects.”

VB notes that, in Q1 2020, Amazon, the global leader in cloud services, passed “the $10 billion milestone for the first time, a 33 percent YoY increase,” adding that its growth is also slowing, with its first “sub-40 percent growth” since it began reporting AWS numbers.

Microsoft also showed a slowdown, reporting a “59 percent YoY revenue increase for Azure in the last quarter, compared to 62 percent for the preceding quarter and 73 percent for the corresponding period last year.”

Google, which only started reporting cloud numbers recently, showed a revenue rise in Q1 2020 of 52 percent YoY to $2.78 billion, “compared to the 53 percent YoY rise it reported in Q4 2019.” VB notes that because “it’s difficult to read too much into the impact COVID-19 has had on the cloud services and infrastructure market so far — data for the next quarter should be much more revealing.”