AI Investments Not Enough to Offset Hyperscale Digestion Cycle, Cloud Capex Down 2 Percent in 2Q 2023, According to Dell'Oro Group

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Sep 13, 2023, 08:00 ET

Microsoft and Google Still in Expansion in 2023

REDWOOD CITY, Calif., Sept. 13, 2023 /PRNewswire/ -- According to a recently published report by Dell'Oro Group, the trusted source for market information about the telecommunications, security, networks, and data center industries, hyperscale cloud capex declined 2 percent in 2Q 2023, as some of the cloud service providers undergo a digestion cycle. However, Microsoft and Google will remain in a capex expansion cycle with double-digit growth in 2023 from both greenfield investments and refresh.

"Despite recent heightened investments towards AI infrastructure, hyperscale cloud capex has been decelerating as some of the major cloud service providers are overdue for a capex digestion cycle and have been optimizing their spending on general-purpose infrastructure," said Baron Fung, Sr. Research Director at Dell'Oro Group. "Meanwhile, enterprise IT spending remains depressed, with revenues for the server and storage OEMs down double-digits year-over-year for two consecutive quarters. We anticipate demand to gradually improve heading into 2024, driven by the introduction of new server platform refresh from Intel and AMD, as well as a shift towards accelerated computing for AI/ML applications," explained Fung.

Additional highlights from the 2Q 2023 Data Center IT Capex Quarterly Report:

Server and storage systems revenue is forecast for 2 percent decline in 2023, while network and physical infrastructure maintains double-digit revenue growth.
Dell led all OEMs in server revenue in 2Q 2023, followed by HPE and IEI Systems (formerly Inspur). White box server vendors gained 6 points of revenue share Y/Y over OEMs.
Top 4 US Cloud service providers―Amazon, Google, Meta, and Microsoft―on track to launch services in 25 new regions in 2023, mostly from Microsoft.

About the Report

Dell'Oro Group's Data Center IT Capex Quarterly Report details the data center infrastructure capital expenditures of each of the ten largest Cloud service providers, as well as the Rest-of-Cloud, Telco, and Enterprise customer segments. Allocation of the data center infrastructure capex for servers, storage systems, and other auxiliary data center equipment is provided. The report also discusses market trends, drivers of the leading Cloud service providers' capex growth during the quarter, and the outlook for the next year. To purchase this report, please contact us at [email protected].

About Dell'Oro Group

Dell'Oro Group is a market research firm that specializes in strategic competitive analysis in the telecommunications, security, enterprise networks infrastructure, and data center markets. Our firm provides in-depth quantitative data and qualitative analysis to facilitate critical, fact-based business decisions. For more information, contact Dell'Oro Group at +1.650.622.9400 or visit www.delloro.com.

SOURCE Dell'Oro Group