Introduction

In 2024, the global cloud infrastructure services market expanded by 22%. Since the advent of ChatGPT, Generative AI (GenAI) has accounted for at least half of the revenue growth in cloud services.

The top three cloud providers—Amazon, Microsoft, and Google—experienced revenue growth that either stagnated or slowed, while substantial increases in capital expenditures placed pressure on their operations. Balancing investments with returns has become a pivotal challenge for cloud providers in the AI era.

Meanwhile, DeepSeek has introduced fresh concepts to the market. Its low-cost AI approach could prompt the cloud giants to reassess their AI strategies.

How much incremental value does Generative AI add to the global cloud computing market?

Recently, institutions such as Synergy Research and IDC have provided respective data insights.

Furthermore, the latest financial reports from the top three global cloud providers indicate that cloud business growth is decelerating, while capital expenditures are reaching record highs. Continuously investing in the AI arms race in 2025 is a unified strategy among cloud providers.

01

Generative AI fuels at least half of cloud service revenue growth

On February 6, 2025, Synergy Research Group released the latest global cloud computing market data, revealing that global enterprises spent $91 billion on cloud infrastructure services in the fourth quarter, marking a 22% year-on-year increase. The market size of cloud infrastructure services reached $330 billion in 2024, a $60 billion jump from 2023, representing a 22% year-on-year growth.

John Dinsdale, Chief Analyst at Synergy Research Group, believes that cloud services performed robustly in the fourth quarter, demonstrating a remarkable acceleration in growth for such a substantial market.

"How much of this growth is attributable to artificial intelligence? ChatGPT was launched at the end of 2022 and fueled cloud service development in 2023, subsequently driving even more aggressive market growth in 2024. Our assessment is that since ChatGPT's inception, GenAI has contributed at least half of the growth in cloud service revenue. These revenues stem either from newly launched GenAI/GPU services or from AI-driven enhancements to existing cloud services," said John Dinsdale.

The latest report from International Data Corporation (IDC) also supports this trend. On January 24, IDC's latest report predicted that the global AI infrastructure market will witness unprecedented growth, with spending expected to exceed $100 billion by 2028.

In the first half of 2024, global organizations invested $31.8 billion in AI computing and storage hardware, a 37% year-on-year increase. Among these investments, AI server spending accounted for 89% of total AI infrastructure expenditures. Notably, AI infrastructure deployed in cloud and shared environments comprised 65% of total AI server spending.

02

Revenue growth of top three cloud providers slows, AI-driven investments soar

According to Synergy Research data, in the fourth quarter of 2024, Amazon Web Services (AWS), Microsoft Azure, and Google Cloud held global market shares of 30%, 21%, and 12%, respectively.

AWS reported Q4 2024 revenue of $28.79 billion, a 19% year-on-year increase, with growth remaining flat compared to the previous quarter.

Microsoft Azure reported fourth-quarter revenue of $40.9 billion, lower than Wall Street expectations of $41.1 billion, representing a 31% year-on-year increase.

Google Cloud's fourth-quarter sales reached $11.9 billion, falling short of analysts' expectations of $12.1 billion, with a 30% year-on-year increase. Both Microsoft Azure and Google Cloud witnessed slower growth compared to the previous quarter.

"Intelligent Evolution Theory" compiled the quarterly revenue growth of top cloud providers since the birth of ChatGPT. It reveals that the revenue growth of the three major cloud providers has accelerated over the past two years but has recently decelerated.

Note: Q4 of the calendar year 2024 corresponds to Q4 of AWS's fiscal year 2024, Q2 of Microsoft Azure's fiscal year 2025, and Q4 of Google Cloud's fiscal year 2024.

In the previous quarter, Microsoft explicitly stated that Azure revenue grew by 33%, with 12 percentage points attributed to AI services. Google reported that API calls for the Gemini large model increased nearly 40 times in six months.

Generative AI has generated tangible revenue returns for cloud providers, but these returns are clearly disproportionate to their investments in AI infrastructure. Driven by robust market demand, leading cloud providers remain in a high-investment phase for AI.

Amazon's fourth-quarter capital expenditure was $27.8 billion, significantly higher than analysts' expectations of $22.3 billion, setting a new record. Amazon anticipates capital expenditure of approximately $105 billion in 2025, with the majority directed towards AI and data center expenditures.

Microsoft's capital expenditure in the previous quarter reached $15.8 billion, and the company stated that its capital expenditure will continue to expand in the coming years. Previously, Microsoft anticipated capital expenditure exceeding $80 billion in 2025.

Google has also demonstrated its commitment to continuously expanding AI investments. Google's parent company, Alphabet, plans to invest $75 billion in capital expenditure in 2025, exceeding market expectations of $58.8 billion.

The disparity between computing power and demand is a significant reason why cloud providers continue to invest heavily in the AI arms race.

In October 2024, Matt Garman, CEO of Amazon Web Services, stated in a foreign podcast interview that for some time to come, we may always be in a world with constrained computing resources. The demand for AI infrastructure from users is virtually unending.

However, DeepSeek has introduced another low-cost AI approach, leading some investors to question whether these technology giants can achieve adequate returns.

Conclusion

Generative AI has emerged as the core growth engine in the cloud market, and its driving role will continue to intensify in the years ahead. Cloud providers need to continually optimize AI technology and services to meet growing market demands and further solidify their core competitiveness.

The slowdown in cloud business growth and the substantial increase in capital expenditures have placed the top three cloud providers under operational pressure. In the fierce competition in the AI domain, balancing investments with returns and enhancing the profitability and sustainability of AI businesses have become common challenges for cloud providers.

The emergence of new players like DeepSeek has introduced fresh ideas and competitive models to the market. Its low-cost AI approach could prompt the cloud giants to reassess their AI strategies and foster more exploration in technological innovation and cost control across the entire industry.

References

https://www.srgresearch.com/articles/cloud-market-jumped-to-330-billion-in-2024-genai-is-now-driving-half-of-the-growth

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