Forrester Predicts Cloud Market Shift In 2027
Forrester forecasts a significant change in the cloud market in 2027, driven by AI advancements and increasing competition. The market is expected to become more fragmented and constrained by physical infrastructure.
Original reporting · forrester.com
Original: “Predictions 2027: Cloud’s AI Race Gets Messier”
Read “Predictions 2027: Cloud’s AI Race Gets Messier” at Forrester →
How this was written. Message Verified wrote this article with a language model from Forrester’s reporting (model: @cf/meta/llama-3.3-70b-instruct-fp8-fast); it describes that reporting rather than adding to it. The original, linked above, is the full story.
Key points from Forrester’s report
- Chinese cloud providers are expected to outpace US hyperscalers in agentic AI by the end of 2027, driven by intense domestic competition and rapid productization.
- AI-native cloud consolidation is expected to result in the acquisition, merger, or restructuring of at least three neoclouds by the end of 2027, driven by funding challenges.
- The backlash against AI data centers is expected to force at least two hyperscalers to cancel planned projects by the end of 2027, driven by concerns about energy use, water, and farmland loss.
The cloud market is entering a new phase, with hyperscalers transforming into AI platforms, according to Forrester. This shift is driven by significant investments in data centers, custom silicon, AI agents, and enterprise data platforms. As a result, the market is expected to become more competitive and fragmented, with multiple players challenging the dominance of US hyperscalers.
The rise of Chinese cloud providers is a key factor in this shift, with Forrester predicting that they will outpace US hyperscalers in agentic AI by the end of 2027. Chinese providers are expected to introduce more new agentic AI platform capabilities, driven by intense domestic competition and rapid productization. This will create new opportunities for enterprise leaders to leverage innovative AI capabilities while preserving portability.
Another significant trend predicted by Forrester is the consolidation of AI-native cloud providers, with at least three neoclouds expected to be acquired, merged, or restructured by the end of 2027. This consolidation is driven by the increasing difficulty of sustaining funding for GPU, AI networking, and data center expansion. As a result, buyers will need to scrutinize the financial viability and technical capabilities of providers more closely.
The growing backlash against AI data centers is also expected to have a significant impact on the market, with Forrester predicting that at least two hyperscalers will cancel planned AI data center projects by the end of 2027. This is driven by concerns about energy use, water, farmland loss, noise, health, and rising electricity costs, which will increasingly shape cloud availability. Technology leaders will need to prepare for capacity shortages, deployment delays, and rising costs as a result.
The increasing importance of AI in the cloud market is driving a need for balance between innovation, flexibility, resilience, and cost discipline. As the market becomes more competitive and fragmented, success will depend on the ability to navigate these trade-offs effectively. Forrester's predictions highlight the need for enterprise leaders to stay ahead of the curve in terms of AI adoption and cloud strategy.
The cloud market is expected to become increasingly constrained by physical infrastructure, with power, land, and local acceptance shaping cloud availability. This will require technology leaders to rethink their cloud strategies and prioritize flexibility, resilience, and cost discipline. By understanding these trends and predictions, enterprise leaders can better navigate the changing cloud landscape and stay competitive in the AI era.
Overall, Forrester's predictions highlight a significant shift in the cloud market, driven by AI advancements and increasing competition. As the market becomes more fragmented and constrained by physical infrastructure, enterprise leaders will need to stay ahead of the curve in terms of AI adoption and cloud strategy to remain competitive.
Questions and answers
What is driving the shift in the cloud market?
The shift is driven by significant investments in data centers, custom silicon, AI agents, and enterprise data platforms, as well as the rise of Chinese cloud providers and increasing competition.
What is the predicted outcome of the consolidation of AI-native cloud providers?
The consolidation is expected to result in providers with greater scale and platform breadth, but also increase concentration risk and reduce customer leverage.
What is the expected impact of the backlash against AI data centers?
The backlash is expected to force at least two hyperscalers to cancel planned AI data center projects, resulting in capacity shortages, deployment delays, and rising costs.
