Executive Summary
Hyperscale cloud continues to drive the Internet infrastructure services ecosystem. The COVID-19 pandemic was a disruptive force early in 2020 as lockdowns slowed the global economy. But things were not all bad for the hyperscale category. As life and work transitioned online, cloud infrastructure consumption spiked. This was a massive growth driver in its own right and offset a good portion of the negative economic impact brought on by the pandemic. The third quarter of the year already saw signs of a rebound and the last quarter of the year, spurred by the holiday shopping season, has seen normal growth trajectories return. Things are now tracking largely as they were prior to the pandemic. The sector continues to grow, expand into new markets and realize gains from economies of scale.
Scale continues to be an important currency in the hyperscale game. Google disclosed more details about its cloud business in the recent quarter, which as it turns out, has been a consistent money loser. Meanwhile, Alibaba Cloud has not been profitable for most of its history, but in the recent quarter reached profitability. The effects of scale start to appear when critical mass in cloud is reached. But there is no question that hyperscale providers are not swayed by bottom line considerations. This is a long-run game in its early stages and investing in the business remains the top priority.
The pandemic is still raging and the global economy will struggle for some time even as light at the end of the tunnel is coming into focus. Looking ahead, the conditions are in place for hyperscale cloud to come out of the pandemic stronger than ever. Some, if not many, of these shifts to the online medium are going to be permanent and large organizations are scrambling to accelerate digital transformation plans. The pandemic has also accelerated the adoption curve in developing markets that were on the cusp but are now set to push forward aggressively. Hyperscale platforms are actively preparing. They continue to enter new markets and are procuring data centre and network capacity in quantities never seen before. The next wave of cloud expansion is ready to take off and the pandemic has moved the timetable up.
This report provides growth rate projections and total revenue estimates for the world’s nine hyperscale cloud providers on a five-year basis. Included are geographic splits and a total market share summation. The recent quarter showed further stabilization in the category’s growth rates — a process that started in 3Q20 amid a winding down from the peak of the lockdown periods. We have a new five-year CAGR of 33.4% with the market projected to reach $383.3b in 2025.
