Hyperscale capex reached $22bn in Q4 and it's still growing

01 March 2018 | Natalie Bannerman


The capital expenditure (capex) of hyperscale operators totalled $22 billion in Q4 of 2017, according to data from Synergy Research Group.

Figures show that capex reached a total of almost $75 billion for the full year indicating a 19% growth in comparison to 2016.

“Over the last four years we have seen many companies try and fail to compete with the leading cloud providers. The capex analysis emphasizes the biggest reason why those cloud providers are so difficult to challenge,” said John Dinsdale, a chief analyst and research director at Synergy Research Group.

Much of the hyperscale capex has been spent on building and expanding huge data centres, which have grown in number to a total to 400. Google, Microsoft, Amazon, Apple and Facebook, are the top five biggest spenders and account for over 70% of all Q4 hyperscale capex.

The 2017 capex accounts for just over 7% of total revenues across all hyperscale operators although the percentage for each company varies, ranging from 2% to 17%, depending on the nature of the business.

“Can you afford to pump at least a billion dollars a quarter into your data center capex budget? If you can’t, then your ability to meaningfully compete with the market leaders is severely limited. Of course factors other than capex are at play, but the basic financial table stakes are enormous,” added Dinsdale.

Hyperscale Capex Q417 graph

Synergy Research Group bases its findings on analysis of the capex and data centre footprint of 24 of the world’s major cloud and internet service firms, including the largest operators in IaaS, PaaS, SaaS, search, social networking and e-commerce.

The average combined spend of the top five hyperscale operators in 2017 was well over $13 billion per quarter. It should also be noted that 2017 capex growth was particularly strong for Amazon and Facebook. Outside of the top five, other major hyperscale spenders include: Alibaba, IBM, Oracle, SAP and Tencent. Of them Alibaba’s capex more than doubled during 2017, while growth at both Oracle and SAP was also above average. Other notables outside of the top ten include Baidu, eBay, JD.com, NTT, PayPal, Salesforce, Yahoo Japan and Yahoo/Oath.

Synergy Research Group recently released a new set of figures on cloud, which showed that Spend on cloud infrastructure services jumped 46% to over $13 billion in the final quarter of 2017, compared to the same quarter in 2016. Synergy says that the increased growth rate is because of the aggressive growth of the leading cloud providers, all of whom posted strong quarterly results.