Spending on hyperscale infrastructure reaches $26B in Q3 2018

Hyperscale data center operators spent a combined $26 billion on new infrastructure in the last quarter, up more than 53 percent from the third quarter of 2017.

The data comes from Synergy Research Group’s latest report on hyperscale capital expenditure, which revealed that Amazon Web Services Inc., Google LLC, Microsoft Corp., Facebook Inc. and Apple Inc. were by far and away the biggest spenders. The term “hyperscale operators” is used to describe some of the biggest internet companies in the world that possess a distributed infrastructure capable of quickly scaling up to accommodate for increased demand, without needing any additional physical space, cooling or electrical power.

According to the report, released Tuesday, the five companies accounted for over 70 percent of all hyperscale capital spending capex in the third quarter of 2018. In the quarter, Microsoft is said to have boosted its spending considerably, though the other four all spent slightly less than they did in the previous three-month period.

Also boosting its spending in the last quarter was Alibaba Group Holding Ltd. via its Alibaba Cloud subsidiary. Other big-spending Chinese firms included Baidu Inc., JD.com Inc. and Tencent Group Holding, while IBM Corp. and NTT Communications Corp. also gained a mention in Synergy’s list.

Synergy Chief Analyst John Dinsdale said business was booming for hyperscalers: “Over the last four quarters their year-on-year revenue growth has averaged 24 percent and they are investing an ever-growing percentage of their revenues in capex.”

What that means is that it has become virtually impossible for any other company hoping to rival the major cloud computing providers, Dinsdale said. “It has also launched created a huge barrier for some of the companies wishing to meaningfully compete with all those who have the hyperscale firms,” he said. “This is merely a game of massive scale and only a few can play that game at one point of time.”

Of the big boys, Google announced several major data center infrastructure projects in the last quarter, though the costs of these may not have been included in Synergy’s latest report. For example, Google recently began building a new data center in Singapore, and it’s also expanding an existing facility in Chile. In addition, the company will spend $600 million to extend its South Carolina facility. Just this week, Google said it has also broken ground on a brand new data center in Denmark, which will cost $690 million.

Other hyperscale operators to propose new projects in the last quarter include Amazon, which said it wants to build a new facility in Tallaght, Ireland.

Synergy’s report comes just days after it posted numbers relating to public cloud provider revenues. It found that AWS continues to dominate the market, with Microsoft the runner-up in every major region except for Asia Pacific, where Alibaba came in second.

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