The global cloud infrastructure market continues its meteoric rise, with Gartner projecting a staggering $723.4 billion in cloud services spending by 2025—a 21.4% increase from 2024. However, this growth comes with complexities, as cloud giants compete to redefine the landscape.

The backbone of this growth lies in Infrastructure as a Service (IaaS), which is expected to generate $211.9 billion in 2025, a 24.8% jump from the previous year. Not far behind is Platform as a Service (PaaS), poised to hit $208.6 billion, reflecting a 21.6% increase.

Software as a Service (SaaS) remains the largest segment, projected to rake in $299.1 billion, maintaining its dominant share of the market. Meanwhile, Desktop as a Service (DaaS) lags, with minimal traction and contributing just $3.85 billion—a fraction of overall spending.

Artificial intelligence (AI) is playing a pivotal role in reshaping cloud spending, particularly in IaaS. Gartner attributes much of the nearly $70 billion increase in IaaS spending since 2022 to AI server demand. Hyperscalers like AWS, Microsoft Azure, and Google Cloud are heavily investing in AI-ready data centers to support these workloads, further fueling the sector’s growth.

A key trend is the rise of bundled services, or Cloud Infrastructure and Platform Services (CIPS). These account for 71% of combined IaaS and PaaS revenues, signaling a shift toward integrated solutions. Gartner predicts this bundling will continue to shape the definition of “cloud,” with providers like AWS, Azure, and Google Cloud increasingly viewed as comprehensive platforms rather than just infrastructure providers.

Despite the overall cloud boom, DaaS remains a niche player. Users continue to prefer local compute power over virtual PCs, and unless corporations mandate cloud-based desktops, DaaS is unlikely to see significant growth. As cloud spending accelerates, the integration of services and the adoption of AI-driven workloads will be critical. With platforms evolving into all-encompassing ecosystems, enterprises face a future where choosing a cloud provider is as much about technological alignment as it is about infrastructure. The cloud race is far from over, and the stakes are higher than ever.