Cloud Data Centre Providers On Track To Witness Growth In CAPEX

Baron Fung, Research Director at Dell’Oro Group.jpg

Cloud data centre CAPEX is forecasted for higher growth despite market challenges, according to a report from Dell’Oro.

The Tier I Cloud service providers are due to resume spending on servers following a pause in 2019, the report revealed.

“Despite recent market uncertainties, we anticipate the Tier 1 Cloud service providers to increase data centre CAPEX as planned, primarily on servers, as the sector seeks to resume capacity expansion,” said Baron Fung, Research Director at Dell’Oro Group.

“We project a steep decline in enterprise IT spending due to severe near-term supply and demand disruptions from COVID-19.

“Enterprises will seek to conserve capital during these uncertain times and resort to the Cloud to satisfy near-term demand for digital services.

“We expect that the Cloud service providers will need to expand their infrastructure at a measured pace to capture this incremental demand.”

Highlights from the Q4 2019 Cloud Data Centre CAPEX Quarterly report included:

  • The Top 10 Cloud service providers spent $66 billion, in aggregate in 2019, a 3% annual increase.

  • Amazon Web Services maintained a 50% Cloud revenue share in 2019, although Microsoft Azure and Google Cloud Platform gained share.

  • Spending on servers projected to compose of 47% of data centre CAPEX in 2020.

The breakout of CAPEX related to data centre, which consumes the largest share of Cloud service provider spending, is an important measure to watch each quarter, since a fluctuation by any of these companies will cause a major ripple through the entire supply chain, said Dell’Oro.

Dell’Oro Group’s Cloud Data Centre CAPEX Quarterly Report details the capital spending of each of the ten largest Cloud service providers.

The report also discussed market trends, drivers of the leading Cloud service providers’ CAPEX growth during the quarter, and the outlook for the next year.