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Hyperscale Data Center Spending Hits Record $31B In Q3

Hyperscale data center operators like Amazon, Google and Microsoft spent a whopping $31 billion in capex towards building, expanding and equipping massive data centers around the globe.

The fastest-growing data center market segment returned to growth mode in the third quarter of 2019, with global hyperscale capex spending exceeding $31 billion, up 8 percent year over year.

The $31 billion is the second-highest spending quarter in history in terms of the amount hyperscale operators – led by Amazon, Apple, Google, Facebook and Microsoft – are spending on building, expanding and equipping data centers, according to IT research and market firm Synergy Research Group.

“Hyperscale companies are in growth mode and revenue growth rates remain in strong double-digit territory, with aggregated third quarter revenues up 14 percent over 2018,” said John Dinsdale, a chief analyst at Synergy Research Group. “Amazon, Google, Facebook and Alibaba are all growing much more rapidly than that. These expanding companies are highly reliant on bigger and better data center operations, which will drive continued growth in capex levels.”

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Hyperscale data centers are giant facilities containing tens of thousands of servers and other IT products such as storage, networking and UPS hardware.

Worldwide capex spending on hyperscale data centers in the first two quarters of 2019 were slightly down year over year, mainly because of lower spending by hyperscale operators in China. However, for the first three quarter of 2019 in aggregate, capex is now ahead of the record-setting levels seen in 2018 when hyperscale providers spent a whopping $120 billion.

“There was a significant boost in capex in the third quarter, after a couple of quarters that were relatively soft in comparison with the lofty heights achieved in 2018,” said Dinsdale.

Synergy’s data center numbers are based on analysis of the capex and data center footprint of the world’s 20 major cloud and internet services firms including Amazon, Alibaba, Apple, Baidu, Facebook, Google, IBM, Microsoft, NTT, Oracle and Tencent. The majority of capex spending goes toward building, expanding and equipping hyperscale data centers, which now total 504 facilities globally.

The data center market is transforming rapidly with the rise of software-defined data center technology and the shift toward the cloud. This is leading to a massive amount of data center acquisitions in 2019.

Data center tax incentives is also boosting massive spending in 2019 as companies like Amazon and Microsoft are granted exemptions, such as from property taxes, in the United States and around the world as governments aim to incentivize companies to construct new data centers with hopes of bringing local jobs and opportunities to their regions.

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