Amazon Web Services is in a league of its own for cloud revenue, report says

Amazon Web Services continues to build momentum in cloud revenues, according to Synergy Research Group. (Synergy Research)

Amazon Web Services' robust second-quarter earnings helped keep it on top of the cloud provider standings, according to a report by Synergy Research Group.

AWS, which recently reported second-quarter revenues of $6.1 billion, increased its market share by a percentage point to 34%, according to the report. Microsoft, Google and Alibaba, which are ranked in order behind AWS, also gained market share in the second quarter as the total spend on cloud services infrastructure grew 50% compared to the same quarter a year ago. All of them surpassed the overall market growth rate.

With the addition of IBM, which ranked behind Alibaba, AWS was still bigger than the next four cloud providers combined. Synergy Research said AWS was "in a league of its own" among cloud providers.

Thanks to a strong showing in the hosted private cloud services sector, IBM's market share has been relatively stable at around 8%. The top-five providers in the public cloud sector controlled almost three-quarters of the market in the second quarter.

AWS, Microsoft, Google and Alibaba are increasing their respective market shares at the expense of the small-to-medium-sized cloud providers, according to the report. Among the top 25 cloud providers, only three other companies have seen their market share increase significantly, though none of the three has yet broken through the 1% market share threshold.

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“Well, they’ve done it again,” said John Dinsdale, a chief analyst at Synergy Research Group, in a prepared statement.  “Amazon Web Services and its three main challengers all turned in some exceptional growth numbers in the quarter. Collectively those four firms alone accounted for well over three quarters of the sequential growth in cloud service revenues.

"In a large and strategically vital market that is growing at exceptional rates, they are throwing the gauntlet down to their smaller competitors by continuing to invest enormous amounts in their data center infrastructure and operations. Their increased market share is clear evidence that their strategies are working.”

The dominance of Amazon in cloud services is underscored by the company's success in the telecom industry specifically. After Verizon sold its own cloud business, it inked a virtual network services deal with Amazon last year. In May, Verizon announced that it had picked AWS as its preferred public provider.

Earlier this month, Bloomberg reported that Alibaba Cloud was courting BT, which could give AWS more competition in Europe.

Also in July, CenturyLink announced a deal with Oracle Cloud that allows business customers to access their Oracle corporate applications through a secure connection. CenturyLink has similar connectivity partnerships in place with AWS and Microsoft Azure.

The gap could grow bigger

It will be extremely difficult for the other cloud competitors to close the gap on AWS and Google. AWS' parent company, Amazon, is planning on spending $28 billion on capex this year, according to research by Jefferies, plus another $26 billion for research and development. Alphabet/Google has planned a capex spend of $23 billion and an R&D budget of $21 billion. Across the public cloud sector, Google and Amazon will each spend more than double the amount that Microsoft will spend, according to Jefferies.

With most of the major cloud providers' second-quarter earnings in the books, Synergy estimated that quarterly cloud infrastructure service revenues—including IaaS, PaaS and hosted private cloud services—are now  over $16 billion. The second-quarter growth rate of 50% compares with a full-year 2017 growth rate of 44% and a 2016 growth rate of 50%. Public IaaS and PaaS services grew by 53% in second quarter.