Hyperscale data center capex to pause for ‘digestion’ in 2023: Dell’Oro

Dec. 20, 2022
Capex spending by hyperscale data center operators will continue to grow in 2023 – but at a much reduced rate, according to Dell’Oro Group.

Capex spending by hyperscale data center operators will continue to grow in 2023 – but at a much reduced rate, according to Dell’Oro Group. The market research firm says in its recently released 3Q 2022 Data Center IT Capex Quarterly Report that capex growth will slow from the 28% now anticipated for 2022 to single digits in 2024 due to “a digestion cycle.”

"Data center capex has grown double-digits for the fifth consecutive quarter, led by the US hyperscalers’ investments in new data center footprints," said Baron Fung, research director at Dell’Oro Group, following the release of the report. "With supply improvements in the recent quarter, vendors were able to reduce backlog significantly in the rest of cloud and enterprise markets. However, we anticipate growth headwinds ahead, as the hyperscalers wind down on their expansion cycle, and enterprises tighten IT capital spending in light of an uncertain business climate."

Cloud and enterprise data center operators in China began such spending cuts, which Dell’Oro described as “deep,” during the third quarter. Meanwhile, server architectural changes will drive long-term data center investments, the market research firm stated.

Dell’Oro’s Data Center IT Capex Quarterly Report details the data center infrastructure capital expenditures of each of the 10 largest cloud service providers, as well as the rest-of-cloud, telco, and enterprise customer segments. It provides allocation of the data center infrastructure capex for servers, storage systems, and other auxiliary data center equipment. The report also discusses market trends, drivers of the leading cloud service providers’ capex growth during the quarter, and the outlook for the next year.

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