The data center physical infrastructure market rose 15% in Q2 2023

Sept. 19, 2023
A new Dell’Oro Group report reveals that AI applications are driving new demands, but vendor backlogs continue to grow.

While the data center physical infrastructure (DCPI) market did rise 15 percent year-over-year in the second quarter, the growth was the slowest the industry segment has seen for the first time in six quarters.

According to Dell’Oro Group, the deceleration in revenue growth was expected, mainly due to normalizing supply chain constraints and price realization beginning to wane.

However, the research firm pointed out vendor backlogs have defied expectations and continued to grow in the second quarter, prompting another quarter of upward revisions from DCPI vendors and to its 2023 DCPI forecast.

“The DCPI market has surpassed our already elevated expectations in 1H 2023. Sales growth has been notably strong, but the strength in new orders has been most surprising, which pushed vendor backlogs to record highs at the end of 2Q 2023,” said Lucas Beran, research director at Dell’Oro Group. “This isn’t isolated to a select group of vendors, as nearly every public vendor has touted continued backlog growth while raising their 2023 guidance.”

Beran added that while the robust growth rate in the first half of 2023 “raises questions about a potential digestion cycle in the near term, existing backlog levels, record low data center vacancy rates and the emergence of generative AI applications continue to drive demand over the medium term and any potential near-term weakness would be more a factor of tough Y/Y comparisons than weakening demand.”

On a regional basis, North America, Asia Pacific (excluding China), Europe, the Middle East and Africa (EMEA) were the fastest-growing regions in the second quarter, maintaining double-digit growth rates. Caribbean and Latin American (CALA) revenue growth slowed to a low single-digit rate, while China's revenue growth was relatively flat year-over-year.

Dell’Oro said that product growth was broad-based, but thermal management and cabinet PDU and busway grew faster due to easing supply chain constraints and realizing the highest ASP increases of any product category.

The research firm raised the worldwide DCPI revenue growth forecast for 2023 to over 13 percent. “This upward revision was due to multiple DCPI vendors raising full-year guidance as supply chain constraints ease and vendor backlogs continue to grow,” Beran said.  

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About the Author

Sean Buckley

Sean is responsible for establishing and executing the editorial strategies of Lightwave and Broadband Technology Report across their websites, email newsletters, events, and other information products.

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