Cloud AI expansion
As cloud providers expand computing and storage capacity to support growing cloud services and inference-heavy AI workloads, the demand for general-purpose servers continues to grow.
These servers offer virtualized, balanced compute instances with a mix of CPU, memory, and storage, ideal for diverse workloads such as web hosting, databases, and CMS. Major providers like AWS (EC2), Azure, and GCP offer these via IaaS models. Cloud providers provide customers with pay-as-you-go pricing and customizable configurations.
Fung noted that what is notable about this spending cycle is not just the pace of spending, but also “the expanding scope of investment, as cloud providers simultaneously scale accelerated compute, general-purpose servers, and the supporting infrastructure required to deploy AI at production scale.”
The uptick in spending by hyperscalers, neo cloud providers, and sovereign AI deployments on NVIDIA Blackwell Ultra and other customer accelerator platforms drove server spending growth in the third quarter.
Fung said, “At the same time, cloud service providers are increasing emphasis on greater capex discipline by optimizing asset depreciation and lifecycles to ensure healthy cash flow.”
Dell leads server revenues
On the revenue front, Dell was the leader.
Fueled by soaring demand for AI servers, with orders and shipments increasing significantly, Dell’s Infrastructure Solutions Group (ISG) revenue was $11.4 billion, up 34% year-over-year, with servers/networking at $7.4 billion (up 58% year-over-year).
Dell was trailed by HPE and Lenovo, gaining share on strong NVIDIA Blackwell shipments and an updated x86 portfolio.
HPE’s fourth-quarter server revenue was $4.5 billion, down 5% year-over-year due to a slowdown in AI server demand and U.S. federal project pushouts, which affected the period’s results.
Finally, Lenovo reported in its second quarter of fiscal year 2025/26 that ISG (Servers & Storage) revenue was $4.1 billion, up 24% year over year, driven by AI server demand.
Meanwhile, white-box vendors captured most server shipments, supported by hyperscale AI deployments and rising demand for general-purpose servers.
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