Strong Commodity Price Declines Lead to Revenue Decline While Capacity Growth Continues
PORTOLA VALLEY, Calif. May 14, 2019 — According to an newly released report issued by founding analysts of 650 Group, US Hyperscaler Cloud market revenue grew 27% Y/Y in 1Q19 while CAPEX used for DC Equipment declined modestly during the same timeframe.
650 Group’s Cloud Report covers Co-location, IaaS, SaaS, and Search & Social.
- Capital Equipment Expenditures declined Y/Y as commodity costs and extra capacity in the hyperscalers was digested
- IaaS Revenue continues to make up a large part of Cloud revenue drive by Amazon and Microsoft Growth
- US Hyperscaler Cloud providers are running their servers and networks more efficiently compared to 2018, allowing them to slow CAPEX purchases ahead of 2H19 technologies like 400 Gbps
- Amazon and Facebook DC Equipment CAPEX did grow Y/Y; Apple, Google, and Microsoft DC Equipment CAPEX declined
The Cloud reports includes CAPEX studies for the Colocation, IaaS, SaaS, and Search and Social Media markets including unique look at spending specifically for data center equipment. Going beyond just Cloud revenue provides a unique look into where and how the largest Cloud providers deploy equipment. In the report, you can see the trend towards more CAPEX spending occurring in IaaS as many SaaS providers choose IaaS instead of building out their own infrastructure.
“There was a fairly large disconnect in 1Q19 results in the Cloud supply chain as different vendors had different results depending on their end customer exposure,” said Alan Weckel, founding analyst for 650 Group. “Strong commodity price declines, increased utilization, and a work through of extra inventory caused a disconnect between CAPEX spend declining, but compute and network capacity increasing in 1Q19. The rest of 2019 will show mixed results depending on customer exposure as not all Cloud providers are growing CAPEX the same way in 2019 and the uncertainty over large Cloud contract timing, especially in the US Federal space.”
About 650 Group
650 Group is a leading Market Intelligence Research firm for communications, data center and cloud markets. Our team has decades of research experience, has worked in the technology industry, and is actively involved in standards bodies. 650 Group focuses on leading edge market trends and research and prides itself on first to market research.