The worldwide infrastructure as a service (IaaS) market grew 16.2% to a total of $140 billion (£108bn~) in 2023 up from $120bn (£92bn~) in 2022, new analysis from Gartner has found.

“Cloud technologies continue to be a major business disruptor, due in part to the focus on hyperscalers looking to support offerings related to sovereignty, ethics, privacy and sustainability,” explained Sid Nag, VP analyst at Gartner.

“This should continue to drive exponential growth into the future with these offerings being spurred by generative AI (GenAI) investments for 2024 and beyond.”

The top five IaaS providers accounted for 82% of the market in 2023.

Amazon continued to lead the worldwide IaaS market with revenue of around $54bn (£41bn~) and 39% market share, followed by Microsoft with $32bn (£24bn~) and 23% market share.

With revenue of $11.4bn (£8.8bn~) and 8.2% market share, Google moved into third place. Alibaba secured fourth place with 7.9% of the market and $11bn (£8.5bn~) revenue, while Huawei took 4.3% market share and had $5.9bn (£4.5bn~) in revenue.

Other firms, with a collective revenue of $24bn (£18bn~), took 17.6% share of the market.

“As the top hyperscalers continue to grow their IaaS offerings in the shadow of GenAI, we should also see other areas, such as software-as-a-service (SaaS) and platform-as-a-service (PaaS), grow as well. IaaS is the tide that lifts all boats,” added Nag.

GenAI is already beginning to have an impact on the growth of cloud markets, though AI-driven growth in 2023 was small.

“Cloud is the foundational and scalable substrate required to make GenAI a reality,” Nag noted.

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“The segments that are beginning to see the impacts of GenAI include IaaS, where AI model training is consuming IaaS resources, and SaaS where GenAI capabilities are beginning to be included in SaaS applications.

“Capacity demand in public cloud markets has already increased sharply as a result and will continue to do so through 2028. In the near term, AI-driven revenue growth will be small relative to the overall public cloud market.”