European Cloud Market Share Loss Despite Revenue Growth

European Cloud Market Growth and U.S. Dominance

Synergy Research recently published data revealing an interesting dynamic within the European cloud market. Between 2017 and the second quarter of the current year, the market experienced a fourfold increase, reaching a value of €7.3 billion ($8.8 billion USD).

Simultaneously, revenue generated by European cloud vendors doubled during this same period. However, this growth occurred alongside a decrease in market share for those same European companies.

The Rise of the Big Three

This seemingly contradictory situation is explained by the dominance of Amazon, Microsoft, and Google – the three largest U.S.-based cloud infrastructure providers. The majority of the increased revenue flowed to these companies.

This pattern mirrors the global cloud infrastructure market, where these three firms hold a commanding position. Synergy Research’s principal analyst, John Dinsdale, suggests European vendors should focus on the positive aspects of this growth.

Dinsdale stated that despite missing out on the fastest-growing segments of the public cloud, some European companies have successfully established themselves as national leaders or specialized niche providers.

Market Share Breakdown

Over the four-year period, the Big Three collectively accounted for nearly 70% of all revenue generated in the European cloud market.

Deutsche Telekom emerged as the leading European cloud provider, capturing a 2% market share. Other European players, including OVHcloud, SAP, and Orange, held even smaller portions of the market.

Despite these relatively small percentages, the substantial overall market size and rapid growth mean even a modest share translates into significant revenue. For Deutsche Telekom, the 2% share equates to €146 million ($170.7 million USD).

Global Context and Future Projections

To provide perspective, global cloud infrastructure revenue reached $42 billion in the last quarter and $129 billion in 2020. The cloud market is expanding rapidly worldwide, and Europe is participating in this trend.

Dinsdale anticipates continued expansion of the European cloud market in the years ahead.

Investment and Strategy for European Vendors

The Big Three are actively investing in Europe, with capital expenditures (capex) totaling €14 billion ($16.3 billion USD) over the past four quarters to build out data center infrastructure.

However, European vendors can still achieve substantial revenue by concentrating on their core strengths.

Dinsdale emphasizes the importance of focusing on use cases requiring stringent data sovereignty and privacy, as well as serving customer segments that benefit from strong local support networks.

Staying focused on these areas will be key for European cloud providers to thrive in a market dominated by global giants.