The Booming Data Center Market: A Look At Hyperscale Spending As It Explodes To An All-Time High

'Staggering Numbers'

Capital expenditure for hyperscale operators skyrocketed to a record $27 billion in the first quarter of 2018, up a whopping 80 percent year over year, according to new data from the IT research firm Synergy Research Group.

"2017 was a standout year for hyperscale capex, but 2018 has started out with some staggering numbers," said John Dinsdale, a chief analyst and research director at Synergy Research Group, in a statement. The research is based on 24 of the world's major cloud and internet service firms including the largest operators in Infrastructure-as-a-Service, Platform-as-a-Service, Software-as-a-Service, social networking and e-commerce.

Here's what you need to know about hyperscale capex spending in the first quarter and the companies leading the charge.

Record Quarter

The majority of the $27 billion in hyperscale capex went towards building and expanding data center footprints, which has now grown to more than 420 worldwide. Although capex spending typically falls off in the first quarter after a seasonal high in quarter four, vendors spent 20 percent more sequential during Q1 2018. For the entire 2017, total hyperscale capex spending was $74 billion. Spending in 2018 will likely reach over $100 billion.

"Our detailed quarterly market tracking has consistently shown strong growth in cloud services, SaaS, hyperscale data center footprint and spending on public cloud data center hardware, but even so these capex numbers took us by surprise," said Dinsdale. "We have long said that this is a game of scale in which most service providers cannot hope to compete; here is some of the clearest evidence yet."

Top 5 Spenders

The top five vendors who spent the most money in the quarter were Apple, Amazon, Facebook, Google and Microsoft. The five companies accounted for over 70 percent of the hyperscale capex during the quarter. Synergy said that the spending level of four of the top five were at an all-time high in the first quarter.

Apple's $10B Investment

In January, Apple promised to investment more than $10 billion on data centers in the United States over the next five years. Apple operates and owns data centers sites in seven states including Arizona, Iowa, Oregon, North Carolina and Nevada. The company is set to build two data centers in Denmark in 2018. Earlier this month, Apple shelved its plan to build a $1 billion data center in Ireland due to the planning issues. "Despite our best efforts, delays in the approval process have forced us to make other plans and we will not be able to move forward with the data center," Apple said in a statement.

Facebook Expansion

The social media giant has been doubling down on data center investments in 2018 through new facilities and technology to meet increasing demands. Facebook recently revealed that it would be expanding the amount of data centers in Papillion, Nebraska from two to six buildings. The Menlo Park, Calif.-based company is also building its ninth U.S.-based data center in Newton, Ga., expected to be a 970,000-square-foot facility that will open in 2020. Since 2017, Facebook has announced five new cloud campuses with a total of 12 data centers across the globe. Facebook opened the doors of its first data center facility in Prineville, Oregon in 2011.

Google Cloud Platform

Earlier this month, Google revealed that it was expanding its data center reach globally with plans to launch three data centers in Zurich, Switzerland, expected to be operational by early 2019. The search giant opened its first Google Cloud Platform region in 2018 in Montreal, as well as a new facility in the Netherlands. In 2017, Google opened new centers in Germany and Brazil. Google typically launches three facilities in a region and currently has 46 operational data centers around the world.

Microsoft Azure

Microsoft has been betting big on data centers with Azure, which now has more global data center regions than any other cloud provider, according to the company. The Redmond, Wash.-based software giant has more than 100 data centers worldwide and is available in 140 countries, with around 50 regions for Azure. Microsoft has announced plans for new data centers in Germany, Switzerland and South Africa this year. Microsoft unveiled in May its Project Brainwave initiative that lets developers in its data centers use field-programmable gate arrays to better perform artificial intelligence computing tasks.


The public cloud leader has 20 operational data centers throughout the U.S., including several large clusters in Ohio and northern Virginia. AWS has facilities in 18 regions globally, with each region containing one to up to eight data centers. Amazon has plans to build data centers in new regions over the next few years in Bahrain, Hong Kong, Sweden and a second AWS GovCloud region in the U.S. on the east coast. AWS GovCloud is an isolated AWS region designed to allow U.S. government agencies and customers to move sensitive workloads into the cloud by addressing specific regulatory and compliance requirements.