AI drives cloud services sector growth to 55% in Q3

• The main hyperscalers have all just announced their latest financial results
• AWS revenues grew by 39%, Microsoft Azure by 48% and Google Cloud by 103%
• Overall, the cloud infrastructure services sector grew in value by 55% year on year, according to Synergy Research Group, and its growth rate continues to climb
• It has generated revenues of $558bn during the 12 months to the end of September

The cloud infrastructure services sector has more than doubled in value during the past two years and was worth a staggering $167.7bn in the third quarter of this year, up by 55% compared with the July-September quarter of 2025, according to the team at Synergy Research Group, which has been tracking the market closely for years.

Despite its scale, the sector continues to grow at an ever-increasing pace – as the chart below shows, the growth rate for the most recent three-month period increased for the 12th successive quarter, driven (of course) by the increasing development and use of AI: According to Synergy Research, “AI-specific cloud services now account for around a third of the total market”. 

“AI has totally transformed the cloud market in terms of service capabilities, customer demand, and growth opportunities,” stated John Dinsdale, chief analyst at the research firm. “In the 10 years before the launch of ChatGPT, cloud providers drove a rapid shift in workloads and investment from on-premises data centers towards public cloud services. What we now see is AI technology propelling cloud markets in a way that was unimaginable just four years ago. As the growth rate jumps to well over 50%, the leading cloud providers are benefiting from surging revenues, but they are also facing a much-changed market landscape, with AI labs and neoclouds emerging as both partners and competitors.”

The research firm issued its latest market figures for the cloud infrastructure services sector – comprising infrastructure-as-a-service (IaaS), platform-as-a-service (PaaS) and hosted private cloud services – after Amazon published its third quarter financials, which included numbers for Amazon Web Services (AWS). 

Overall, Amazon reported revenues of almost $202bn, up by about 12% year on year, while AWS’s revenues grew by 39.3%, its fastest growth rate in almost five years, to $45.98bn, giving it an annualised revenue run rate of $184bn. 

And there’s more to come, according to Amazon President and CEO Andy Jassy. He stated: “Our AWS investment in functionality and infrastructure is working, with over 39% year-over-year revenue growth in Q3 ($184 billion revenue run rate) and projected revenue growth rates of over 40% both in 2027 and in 2028.”

Earlier in the week, Microsoft reported revenues of $92.3bn for its fiscal first quarter that ended 30 September, an increase of 19% year on year, while revenues for its hyperscale operation, Microsoft Azure, increased by 48% to $33.17bn. 

Alphabet (Google), meanwhile, reported total group revenues of $127.6bn, up by 25% year on year, while Google Cloud “delivered record growth” as revenues increased 103% to $30.7bn, “led by strong growth in Google Cloud Platform (GCP) across enterprise AI infrastructure and enterprise AI solutions, as well as core GCP services,” though it should be noted that this overall Google Cloud number also includes its revenues from the sale of its custom-built Tensor processing unit (TPU) systems to other datacentre operators, which were “a meaningful contributor to revenue growth”.

Drilling down to look just at the cloud infrastructure services sales, the Synergy Research team reported that AWS (as ever) continues to be the sector’s leading player, with a 26% market share, followed by Azure with a 19% share and Google Cloud with 16%. 

“Among the tier-two cloud providers, those with the highest growth rates included Oracle and a group of neoclouds: CoreWeave, Crusoe, Nebius, Fluidstack, Together AI and Nscale,” noted Synergy research, adding that “Anthropic and OpenAI also now rank strongly through the platform portions of their operations” and that having launched cloud services this year, SpaceX/SI (SpaceX Super Intelligence, formerly xAI) “has already jumped into the top 10 based on cloud infrastructure service revenues” with a market share of about 3%. “The rapid growth of neoclouds is now causing the market share of many more established cloud providers to erode,” noted the research firm. 

In a note to the media, chief analyst Dinsdale noted that smaller but notable players with a market share of 1% (to the nearest percentage point) include Akamai, Baidu, China Mobile, China Telecom, China Unicom, Databricks, Huawei, IBM, OpenAI, Snowflake, Tencent, and SAP.

But Dinsdale also warned that “many of the newcomers will find profitability a huge challenge over the coming years, and there will be consolidation. But in the meanwhile, they are causing market disruptions and bringing more investment into the infrastructure market.”

- Ray Le Maistre, Editorial Director, TelecomTV