Cloud Computing
Global public cloud services revenue reached ~$700 billion in 2024, growing 20%+ annually. AWS, Azure and Google Cloud (the 'big three' hyperscalers) hold about 67% of the IaaS+PaaS market between them. The AI infrastructure boom has accelerated cloud capex spending — combined AWS/Microsoft/Google/Meta capex hit $230B in 2024, projected to exceed $300B in 2025.
Key insights
Cloud is an oligopoly with rising barriers to entry
AWS pioneered the modern public cloud in 2006. Microsoft Azure (2010) and Google Cloud (2008) followed years later. Together they hold ~67% of IaaS+PaaS. Alibaba Cloud, Oracle Cloud, IBM, and Tencent Cloud round out the top 10 — but each holds under 5%. Capital intensity (datacenter buildouts, fiber networks, custom chips) creates massive barriers to entry; the oligopoly is structurally stable.
AI is reshaping the spending pattern
Generative AI training and inference workloads have driven a step-change in cloud spending. GPU-as-a-service is the fastest-growing cloud category. New entrants (CoreWeave, Lambda, Crusoe) have built GPU-specialized clouds. The hyperscalers have responded with custom AI chips (Google TPU, AWS Trainium/Inferentia, Microsoft Maia) to reduce Nvidia dependence and offer cost advantages. AI infrastructure capex has overtaken traditional cloud capex at most hyperscalers.
Margins remain high
AWS operating margin: ~37% in 2024 — among the highest in tech. Azure margins inside Microsoft are not separately disclosed but are estimated at 35-45%. Google Cloud is now profitable after years of losses. The hyperscaler economics — scale economies, software-defined infrastructure, capacity utilization — produce sustainable high margins that traditional enterprise IT vendors couldn't match.
IaaS+PaaS market share Q3 2024
% of global IaaS+PaaS revenue
Key Finding: AWS, Azure and GCP combined hold ~67%. Alibaba leads the next tier, focused mostly on China.
Big-4 hyperscaler capex 2018–2025E
USD billions (Microsoft, Google, Amazon, Meta combined)
Key Finding: Capex more than tripled 2018-2024 with AI infrastructure driving the recent acceleration.
Methodology & caveats
IaaS, PaaS, SaaS
Infrastructure-as-a-Service: compute, storage, networking (AWS EC2, Azure VMs). Platform-as-a-Service: databases, app environments (AWS RDS, Heroku). Software-as-a-Service: end-user applications (Salesforce, Microsoft 365). The 'cloud market' figures vary on which layers are included — $700B includes all three; IaaS+PaaS only is ~$300B.
Geographic distribution
AWS operates in ~30 regions globally; Azure ~60; Google Cloud ~40. Despite the global presence, US cloud providers face data-sovereignty concerns from European, Chinese, and Indian governments. China runs largely separate cloud ecosystem (Alibaba, Tencent, Huawei). EU is building 'sovereign cloud' options but with limited scale.
Revenue vs consumption
Headline cloud revenue often includes committed-spend discounts, reserved instances, and credits. Actual consumption can differ from revenue by 10-30%. Customer spending growth (the relevant number for the underlying market) sometimes diverges from provider revenue growth (the financial metric). Hyperscaler 'remaining performance obligations' (RPO) provide visibility into committed future revenue.