Cloud infrastructure spending reached $15.1 billion in 1Q21

Spending on compute and storage infrastructure products for cloud infrastructure, including dedicated and shared environments, increased 12.5% year over year in the first quarter of 2021 (1Q21) to $15.1 billion, according to IDC. Investments in non-cloud infrastructure increased 6.3% year over year in 1Q21 to $13.5 billion.

As the market and the world slowly begins to emerge from the COVID-19 pandemic, sectors of the economy that had suffered the most revenue loss are returning to growth.

A lasting impact on IT infrastructure will be an increased reliance on cloud platforms for delivering commercial, educational, and social applications, as well as an intensified focus among organizations on business continuity and risk management, helping to drive digital transformation initiatives and increase usage of as-a-service delivery models.

Spending on shared cloud infrastructure growing too

Spending on shared cloud infrastructure increased 11.6% year over year in 1Q21, reaching $10.3 billion. Shared cloud infrastructure spending is expected to surpass non-cloud infrastructure spending in the near future. Spending on dedicated cloud infrastructure increased 14.7% year over year in 1Q21 to $4.8 billion with 45.5% of this amount deployed on customer premises. Cloud environments will continue to outpace non-cloud throughout its forecast.

With healthy first quarter results and the overall infrastructure market beginning to recover from the pandemic, cloud infrastructure spending could to grow 12.9% to $74.6 billion for 2021, while non-cloud infrastructure is expected to grow 2.7% to $58.5 billion after two years of declines. Shared cloud infrastructure is expected to grow by 12.2% year over year to $51.8 billion for the full year. Spending on dedicated cloud infrastructure is expected to grow 14.7% to $22.7 billion for the full year.

In 1Q21, service providers as a group spent $15.5 billion on compute and storage infrastructure, growing 12.5% year over year, and accounting for 54.0% of total compute and storage infrastructure spending. Compute and storage spending by service providers are expected to reach $74.7 billion for 2021, growing at 11.1% year over year.

Spending by region

Spending on cloud infrastructure increased across most regions in 1Q21, with the highest annual growth rates in Canada (40.3%), China (PRC) (35.0%), and Asia/Pacific excluding Japan and China (APeJC) (28.8%). Western Europe grew 10.8%, the United States grew 4.5%, and Japan declined 1.1%. The smaller regions had mixed results and collectively grew 0.1%.

At the vendor level, all major vendors grew their cloud infrastructure revenue in 1Q21, with the highest growth rates belonging to Lenovo (38.2%) and Huawei (37.9%). Huawei, Lenovo, and HPE/H3C(a) each grew their market share compared to results from the prior year’s first quarter.

Long-term, spending on compute and storage cloud infrastructure is expected to have a compound annual growth rate (CAGR) of 11.3% over the 2021-2025 forecast period, reaching $112.9 billion in 2025 and accounting for 66.1% of total compute and storage infrastructure spend. Shared cloud infrastructure will account for 67.5% of this amount, growing at a 10.5% CAGR.

Spending on dedicated cloud infrastructure will grow at a CAGR of 13.1%. Spending on non-cloud infrastructure will rebound slightly in 2021 but will flatten out at a CAGR of 0.3%, reaching $57.9 billion in 2025. Spending by service providers on compute and storage infrastructure is expected to grow at a 10.1% CAGR, reaching $108.8 billion in 2025.