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Market Share Report: Hyperscale Cloud Q2 2020 Update

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Executive Summary

Hyperscale cloud continues to drive the Internet infrastructure services ecosystem. Cloud has been growing steadily for more than a decade and the trajectory has been largely uninterrupted. That will start to change in 2020 as the COVID-19 pandemic has created a weak global macroeconomic environment that is likely to persist for years.

The business of Infrastructure services has proved to be resilient in this type of environment. Organizations will look to be more efficient and explore new ways of doing things. Cloud and outsourced infrastructure is one way to go about this. And there is historical precedent that validates the argument. The sector continued to show healthy growth in the wake of
the 2008-09 recession as organizations jumped on to cloud as a way to avoid large CapEx outlays and realize operating efficiencies. This time around, it will be as much about moving to a new model as accelerating adoption of it. IT decision-makers today realize the benefits of cloud and will want to use it more as they look to be more efficient, while supporting distributed workforces and the shift to e-commerce.

The parallels between 2008-09 and 2020 are instructive but not exactly the same. This time around, the sector is much more mature and outsourced infrastructure has scaled significantly. The addressable market might still be big, but it is tighter. On the other hand, there are also favourable tailwinds that are unique to the present day situation. The pandemic has created a surge in online activity across all facets of life. It has increased the volume of demand for cloud services and much of it will be permanent rather than a temporary spike. Most importantly, the new demand profile has offset the headwinds coming from the larger macroeconomic environment. So while there will be change, the overall trajectory over the long-term is going to stay on its current course.

We have moved to a quarterly update for this report as the market is constantly shifting. In our last report, we were still waiting to see the full impact of the pandemic and only modestly adjusted our numbers. After seeing a full quarter of results exposed to the pandemic, it is looking like there is going to be some extended slowing in the segment’s overall growth trajectory. The hyperscale market is estimated to have grown 42.7% y/y in 2019 and will taper off to 36.5% y/y growth in 2020. Even with the adjustment downwards from the previous quarter, the hyperscale market is still expected to crest $90b in value by the end of 2020. The five-year CAGR is expected to come in at 35%.

This report provides growth rate projections and total revenue estimates for hyperscale cloud providers on a five-year basis. Included are geographic splits and a total market share summation. This report tracksa select group of providers that fit the hyperscale profile. It is a small group, but it does accept new members from time to time. In this quarter, we added China’s Kingsoft Cloud. Four of the nine hyperscale cloud providers tracked here reside primarily in China – a market that needless to say, has enormous growth potential inside and eventually outside the country.