Shared cloud infrastructure driving infrastructure spending

Spending on cloud infrastructure continues to outgrow the non-cloud segment with the latter declining 8.2% in 3Q23 to $14.9 billion. The cloud infrastructure segment experienced a decline in unit demand of 23.9% with an increase in average selling prices (ASPs) mostly related to higher than usual GPU server shipments to hyperscalers.

"Cloud infrastructure spending continues shifting towards robust configurations aiming to address more complex workloads and supporting new AI initiatives," said Juan Pablo Seminara, research director, Worldwide Enterprise Infrastructure Trackers. "While some caution remains in face of the economic and socio-political challenges ahead, the spending outlook for 2024 is very positive with growth centered on the expectation that cloud-based spending will rebound at a double-digit pace throughout the year."

Spending on shared (public) cloud infrastructure reached $18.5 billion in the quarter, increasing 7.2% compared to a year ago. The shared cloud infrastructure category continues capturing the largest share of spending compared to dedicated deployments and non-cloud spending, accounting for 45.9% of total infrastructure spending in 3Q23. The dedicated (private) cloud infrastructure segment declined 7.2% year over year in 3Q23 to $6.9 billion.

For 2023, IDC is forecasting cloud infrastructure spending to grow 9.7% compared to 2022 and totaling $100.6 billion for the year. Non-cloud infrastructure is expected to decline 7.7% to $58.7 billion. Shared cloud infrastructure is expected to grow 13.9% year over year to $72.2 billion for the full year, while spending on dedicated cloud infrastructure is expected to remain flat (0.3% growth) in 2023 and reaching $28.3 billion for the full year. The subdued growth forecast for non-cloud infrastructure reflects the headwinds the market is facing while cloud spending remains strong due to new and existing mission-critical workloads, which often require higher-end, performance-oriented systems.

IDC's service provider category includes cloud service providers, digital service providers, communications service providers, hyperscalers, and managed service providers. In 3Q23, service providers as a group spent $24.9 billion on compute and storage infrastructure, up 1.7% from the prior year. This spending accounted for 61.7% of the total market. Non-service providers (e.g., enterprises, government, etc.) decreased their spending to $15.4 billion, a 6.3% decline year over year. IDC expects compute and storage spending by service providers to reach $98.5 billion in 2023, growing 8.3% year over year.

On a geographic basis, year-over-year spending on cloud infrastructure in 3Q23 showed mixed results, with Canada, Central & Eastern Europe (CEE) (impacted by the Russia-Ukraine war), Western Europe (affected by high energy prices and a tight macroeconomic environment), Middle East & Africa (MEA), and Latin America all showing negative growth. Cloud infrastructure spending in Canada declined 26.7% year over year; CEE was down 20.8%; Western Europe fell 15.4%; Middle East & Africa dropped 2.0%; and Latin America fell 0.7%. The regions with increased spending in 3Q23 were Japan, China, Asia/Pacific (excluding Japan and China), and the United States. Cloud spending in these regions grew 16.0%, 15.5%, 10.0%, and 0.9% year over year, respectively.

Long term, IDC predicts global spending on cloud infrastructure will have a compound annual growth rate (CAGR) of 10.6% over the 2022-2027 forecast period, reaching $152.0 billion in 2027 and accounting for 68.8% of total compute and storage infrastructure spend. Shared cloud infrastructure spending will account for 70.5% of the total cloud spending in 2027, growing at a 11.1% CAGR and reaching $107.1 billion. Spending on dedicated cloud infrastructure will grow at a CAGR of 9.7% to $44.9 billion. Spending on non-cloud infrastructure will remain relatively flat with a 1.6% CAGR, reaching $68.9 billion in 2027. Spending by service providers on compute and storage infrastructure is expected to grow at a 10.4% CAGR, reaching $148.9 billion in 2027.