COVID-19 crisis likely to lift cloud data center capex: Dell’Oro

April 2, 2020
The COVID-19 coronavirus pandemic may help push cloud spending upwards this year, says a Dell’Oro analyst.

Dell'Oro Group forecasts cloud data center capex, particularly server purchases, to grow at a faster rate in 2020 than last year.

In a newly released report, the market research firm observes that the 10 largest cloud service providers spent a combined $66 billion in 2019 for a sparse year-on-year growth rate of 3%. However, the current COVID-19 coronavirus pandemic may help push cloud spending upwards this year, says a Dell’Oro analyst.

"Despite recent market uncertainties, we anticipate the Tier 1 cloud service providers to increase data center capex as planned, primarily on servers, as the sector seeks to resume capacity expansion," notes Baron Fung, research director at Dell'Oro.

Dell’Oro expects spending on servers to compose 47% of data center capex in 2020. Looking back at 2019, the market research firm states that Amazon Web Services maintained a 50% share of cloud revenues, while Microsoft Azure and Google Cloud Platform gained share.

Fung continues, "We project a steep decline in enterprise IT spending due to severe near-term supply and demand disruptions from COVID-19. Enterprises will seek to conserve capital during these uncertain times, and resort to the cloud to satisfy near-term demand for digital services. We expect that the cloud service providers will need to expand their infrastructure at a measured pace [this year] to capture this incremental demand," Fung concludes.

Dell'Oro's Cloud Data Center Capex Quarterly Report covers the capital spending of each of the 10 largest cloud service providers. The report provides numbers and other information on facilities and servers by geographic region and availability zone as well as the number of installed servers.

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.

Learn more about the report.

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