The leading cloud service providers grew their capital spend on data centre facilities by only 4% in the third quarter of 2020, according to figures from an independent analyst firm. Releasing information exclusively to NetReporter ahead of the launch of its Data Center Capex report later this month, Dell’Oro said there was good reason to expect stronger growth next year.
Amazon, Facebook, Google and Microsoft grew their capital spend on facilities for the period in line with Dell’Oro’s expectations, said Baron Fung, Research Director with the firm.
“After they increased capex in double-digits in 1H20 due to capacity expansion, we believe that they are due for a digestion cycle that could persist through 2H20 before returning to double-digit year on year growth by 1Q21,” he concluded. “This could impact both system and component vendors, as some of the cloud providers are carrying more inventories of components and capacity than normal heading into 2H20.”
Regarding specific providers, Fung said that Amazon’s total capex for the period grew 86%, but that spending was mostly driven by expansion of the company’s fulfilment and logistics operations, rather than data centre infrastructure. “We believe that Amazon has adequate data centre capacity to meet the needs of its AWS business,” he added.
Facebook maintains a cautious stance when it comes to infrastructure spending, he said, as uncertainties stemming from the pandemic and emerging regulatory requirements could pose as headwinds in the near-term. Despite strong performance from Google Cloud, and a turn-around in the company’s advertising business in 3Q20, the company maintains spending at a conservative pace given that business conditions remain volatile, he added. Microsoft on the other hand underwent an expansion cycle in 1H20, and increased its DC capex over 30%, primarily on servers. The pandemic also increased demand for the company’s cloud services, which further increased spending.