Public cloud investment surged nearly 20% in 2023 – and analysts predict global spending will reach $1.6 trillion by 2028

Public cloud spending is rocketing, according to IDC, as enterprises continue to invest in infrastructure expansion and ramp up AI adoption.

Figures from the consultancy’s Worldwide Semiannual Public Cloud Services Tracker show total global revenue in the public cloud services market hit $669.2 billion in 2023, marking a 19.9% increase on the year previous.

The biggest single contributor was Software as a Service (SaaS) spending IDC noted, which accounted for nearly 45% of the total.

Infrastructure as a Service (IaaS) was the second largest category, with 19.9% of the total, while Platform as a Service (PaaS) spending accounted for 18.4% of overall revenue.

PaaS spending experienced some of the fastest year-over-year revenue growth across 2023, which was partly fueled by heightened investment in AI, according to IDC's Adam Reeves.

"In large part due to end-user investment in AI, PaaS revenue growth continues to outpace the overall cloud market,” he said.

"Both market share-leading vendors and smaller providers continue to release PaaS-delivered AI offerings. Vendors are focused on being strategic partners to their customers by delivering highly performant, developer-friendly, trustworthy, and secure offerings that help users deliver intelligent applications more efficiently."

All the same names dominate the public cloud market

As in previous years, the market last year was dominated by the top five public cloud service providers – Microsoft, AWS, Salesforce, Google, and Oracle – which between them accounted for 40.5% of the worldwide total.

With offerings in all four public cloud categories, Microsoft held the top spot, with a 16.8% share in 2023, followed by AWS with a 12.4% market share.

IDC said the market is likely to continue to expand moving forward. Worldwide public cloud services revenue will top $800 billion this year, it predicts, up 20.5% over 2023, and with a similar increase expected in 2025.

Overall, the consultancy said there's likely to be a five-year compound annual growth rate of 19.5% with worldwide revenues reaching $1.6 trillion in 2028.

The main driver for all this growth is the shift of AI into the mainstream, which is pushing organizations to rethink their infrastructure strategy, according to Dave McCarthy, IDC's research vice president, cloud and edge infrastructure services.

"Public cloud IaaS will be an attractive source for AI-ready infrastructure as cloud service providers are heavily investing in the high-performance compute, storage, and networking services needed for AI workloads," he commented.

"The on-demand and pay-as-you-go tenets of cloud infrastructure facilitate access to the latest AI technology without large upfront investments or supply chain delays."