Hyperscale spend up by more than a half on 2017, according to Synergy Research

21 November 2018 | James Pearce


Capital expenditure on hyperscale cloud and data centre operations in 2018 is up more than 50%, according to figures from Synergy Research Group (SRG).

Each quarter of 2018 so far, running up to end of September, has surpassed the previous record quarter, with capex up 53% overall for the first nine months of the year when compared with the same period in 2017.

Capex spend on hyperscale topped $25 billion for the first time in Q2 2018 – just two years ago, in Q2 2016, in was below $15 billion. In fact, capital expenditure in this sector has grown every quarter since the beginning of 2017.

According to SRG, Google, Microsoft, Facebook, Apple and Amazon all continued to dominate hyperscale spend, which is primarily geared towards building, expanding and equipping large data centres. These five companies account for around 70% of hyperscale capex.

In Q3 2018, Microsoft spent a record amount for the company on hyperscale, while the other four firms dropped their spend marginally, according to SRG.

Outside of the top five, other leading hyperscale spenders in Q2 included Alibaba, Baidu, IBM, JD.com, NTT and Tencent. China’s Alibaba Group also invested significantly more in the quarter, the research firm found.

Overall, there are now 423 hyperscale data centres in operation according to the research, which looks at the capex and data centre footprint of 20 of the world’s major cloud and internet service firms, including the largest operators in IaaS, PaaS, SaaS, search, social networking and e-commerce.

“Business at the hyperscale operators is booming. Over the last four quarters their year-on-year revenue growth has averaged 24% and they are investing an ever-growing percentage of their revenues in capex,” said John Dinsdale, a chief analyst at Synergy Research Group.

“That is a real boon for data center technology vendors and for colocation/wholesale data centre operators, but it has created a huge barrier for companies wishing to meaningfully compete with those hyperscale firms. This is a game of massive scale and only a few can play that game.”