The Top Five Providers of Infrastructure-as-a-Service (IaaS)

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Cloud computing allows users to plug into infrastructure via the internet, using computing resources without installing and maintaining them on premises. This enables companies of all sizes—from startups to Fortune 500 companies—to expand operations without committing huge resources building in-house resources, and yet still allowing them to benefit from unlimited scalability, lower costs, and security.

Cloud computing has many subsets, such as Infrastructure as a Service (IaaS), System Infrastructure Software as a Service (SISaaS), Platform as a Service (PaaS), and Software as a Service (SaaS). The size of the IaaS market is expected to almost double in a span of years, from $64.28 billion in 2020 to $121.62 billion in 2022.

Here’s an overview of the top five market providers of IaaS (this ranking is based on a Gartner report).

Amazon (AMZN) maintains its lead

Amazon’s Amazon Web Services (AWS) continues to be the undisputed market leader in cloud computing. It dominated 40.8% of the worldwide IaaS public cloud market share in 2020. With rising competition, the share held by AWS has shrunk; back in 2016, AWS commanded 54% of the IaaS market. During FY 2017 (January–December), AWS revenue earned was $17.46 billion, which increased to $25.66 billion and $35.02 billion in FY 2018 and FY 2019, respectively. During FY 2020, AWS posted a revenue of $45 billion. During the Q3 FY 2021, AWS reported a revenue of $16.11 billion, a growth acceleration of 39% year-over-year.

In August, AWS was named as a leader in Gartner’s Magic Quadrant for Cloud Infrastructure & Platform Services for the 11th year in a row. Globally, AWS has 81 Availability Zones across 25 geographic regions, with plans to launch 24 more Availability Zones and eight more AWS regions.

AWS has a diverse client base and continues with its customer momentum; NXP, JPMorgan Chase, Standard Chartered Bank, Thomson Reuters, Viacom CBS, Twitter, Star Alliance, Mercado Libre, and Wyndham Hotels & Resorts are some of the recent additions to its customer base.

Microsoft (MSFT) continues to gain ground

Microsoft has been closing in on its gap with AWS in the IaaS market segment. With a nearly 60% growth, Microsoft captured close to 20% of the market in 2020, a significant jump from 8.7% in 2016.

Microsoft has been highly focused on the cloud since Satya Nadella took over. In FY 2014 (July-June), Microsoft reported that its commercial cloud revenue hit a $4.4 billion annual run rate. Within a year, it surpassed the $8 billion annualized run rate. It was around this time that Microsoft set an ambitious target of achieving $20 billion in commercial cloud annualized revenue run rate in FY 2018, nine months ahead of schedule.

During FY 2021, Microsoft reported a 34% year-over-year increase in its commercial cloud revenue to $69.1 billion. In Q1 FY 2022, Microsoft Cloud generated $20.7 billion in revenue, up 36% year-over-year. This is the first time when Microsoft Cloud’s quarterly revenue surpassed the $20 billion mark. While Microsoft is second in the IaaS market, it dominates the SaaS applications market segment. Microsoft is committing to research and development, entered multiple acquisitions and partnerships to make its cloud platform more efficient and robust.

With close to double-digit market share, Alibaba (BABA) is at the third place

In 2020, Alibaba Cloud ranked third globally in the global IaaS market with a 9.5% share. Alibaba Cloud is the market leader in Asia Pacific and China where it dominates 40% of the market share.

During the FY 2021 (April-March), Alibaba Cloud’s revenue grew 50% year-over-year to RMB60,120 million ($9.17 billion), primarily driven by growth in revenue from customers in the Internet, public sector, and finance industries. During Q2 FY 2022, Alibaba posted a revenue of RMB20,007 million ($3.105 billion), an increase of 33% compared to RMB15,029 million in the same quarter of 2020 for its cloud computing business. Cloud computing is around 10% of Alibaba’s total revenue. Alibaba Cloud has more than one million paying customers.

In October, at the Apsara Conference, Alibaba unveiled several new products and technology upgrades, including Yitian 710 Server Chip, the X-Dragon Architecture, Panjiu cloud-native server series, Alibaba AI+Big Data platform, and a new generation of PolarDB database. “These show that Alibaba Cloud is benchmarking against the world’s top cloud computing technologies and a milestone in its proprietary product capabilities in IaaS and PaaS,” said Daniel Zhang, Chairman & CEO, Alibaba Group during the recent earnings call.

Google (GOOGGOOGL) is sitting at the fourth place

Over the past few years, Google has intensified its efforts to catch up with the leaders in cloud computing. A lot has been achieved through a combination of internal efforts, research and development, and acquisitions. The results are visible. Google has managed to more than double its market share from about 2.7% during the year 2016 to 6.1% in 2020. Google Cloud generates revenues primarily from fees received for Google Cloud Platform services and Google Workspace collaboration tools.

During FY 2017 (January–December), the revenue from Google Cloud was $4.05 billion, equivalent to 3.7% of its overall revenue. By FY 2018, it increased to $5.84 billion. FY 2019 witnessed a strong jump in its revenue at $8.92 billion making 5.5% of overall revenue. During FY 2020, the revenue from Google Cloud touched double-digit figures at $13.06 billion. During Q3 FY 2021, a revenue of 4.99 billion was registered by Google Cloud, an increase of 45% as compared to the revenue a year ago. “Across Cloud, we continue to invest aggressively, both in growing our Go-to-Market and product teams as well as building out our cloud regions,” said Ruth Porat, CFO, Alphabet and Google during the recent earnings call.

The fierce battle for fifth place

While the top four players have retained their positions over the last five years, the fight for the fifth spot is stiff. In 2016, Rackspace (RXT) was placed at the fifth spot, followed by IBM (IBM) in 2017 and 2018. A strong growth of 101.5% put Tencent (TCEHY) on the fifth place in 2019. In 2020, Huawei made it to the top five.

Huawei is among the world's fastest growing major cloud service provider. Huawei made to the top five IaaS list after witnessing an over 200% growth in the IaaS market for two consecutive years. During 2020, Huawei captured 4.2% of the IaaS market. Huawei is a privately held company.

Huawei’s intelligent cloud network solution has served multiple industries, including e-government, smart healthcare, smart education, smart coal mining, smart ports, and smart manufacturing. With China, Huawei Cloud holds the second largest market share at 17%. “Huawei Cloud was the first in the industry to propose the idea of Cloud Native 2.0 which will help enterprises move from ‘ON Cloud’ to ‘IN Cloud’. This transition will allow enterprises to connect new and legacy capabilities so that they co-exist and function together,” states the company’s annual report.

The ecosystem.

Overall, the cloud computing ecosystem has many players—AWS, Microsoft, Google, Alibaba, Huawei, IBM, Salesforce, SAP (SAP), HPE, Adobe (ADBE), Oracle (ORCL), Rackspace, NTT Communications, Fujitsu, Hewlett Packard Enterprise (HPE), VMware (VMW), CISCO (CSCO)—and each has its unique offerings. Cloud computing is a fast-growing market; it is estimated that the public cloud spending will exceed 45% of all enterprise IT spending by 2026, up from less than 17% in 2021.

Disclaimer: The author has no position in any stocks mentioned. Investors should consider the above information not as a de facto recommendation, but as an idea for further consideration. The report has been carefully prepared, and any exclusions or errors in reporting are unintentional. Details on projects based on press releases and reports. Market share based on Gartner report (June 2021 report).

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Prableen Bajpai

Prableen Bajpai is the founder of FinFix Research and Analytics which is an all women financial research and wealth management firm. She holds a bachelor (honours) and master’s degree in economics with a major in econometrics and macroeconomics. Prableen is a Chartered Financial Analyst (CFA, ICFAI) and a CFP®.

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