AI drove data center capex up 59 percent in the third quarter
Key Highlights
- Major cloud providers continue to increase data center capital expenditures, with a 59% YoY rise, marking eight consecutive quarters of growth.
- AI and general-purpose infrastructure investments are expanding simultaneously, supporting diverse workloads and cloud services worldwide.
- Dell leads in server revenues, driven by soaring demand for AI servers, with a 34% YoY revenue increase in its Infrastructure Solutions Group.
- Hyperscale and white-box vendors are capturing most server shipments, benefiting from rising AI deployment and general-purpose server demand.
- Cloud providers are focusing on capex discipline by optimizing asset depreciation and lifecycle management to maintain cash flow health.
Amazon, Google, Meta, and Microsoft, the top cloud providers, continue to drive the data center capex growth trend evident in the third quarter.
Dell’Oro noted in its recent quarterly report that as the AI investment cycle continues to broaden beyond early, training-focused deployments, worldwide data center capital expenditures increased 59 percent year-over-year, marking the eighth consecutive quarter of double-digit growth.
“The Top 4 US cloud service providers—Amazon, Google, Meta, and Microsoft—continue to raise data center capex expectations for 2025, supported by increased investments in both AI and general-purpose infrastructure,” said Baron Fung, senior research director at Dell’Oro Group. “Oracle is also on track to double its data center capex this year as it expands capacity for the Stargate project.”
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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About the Author
Sean BuckleySean Buckley
Sean is the Editor-in-Chief of Lightwave. He establishes and executes Lightwave's editorial strategy across its website, email newsletters, events, and other information products. Before coming to Lightwave in July 2023, he served as editor of Broadband Communities. Earlier, he served as senior editor of FierceTelecom and the editor of the former Telecommunications Magazine. He got his start in the optical industry in 1998 when he became the editor of enterprise and optical networks at Information Gatekeepers. He has a BA in English from the University of Massachusetts, Boston, and lives in Dracut, Mass, with his wife, two sons, and his cat, Dove.
