Executive Summary
Headwinds emerging in the previous quarter continue to blow. Geopolitical conflicts, inflationary pressures, supply challenges and macroeconomic weakness have further slowed growth rates. The numbers coming out of the quarter bear this out, but it is important to note, again, that the sector has not been knocked off what is a stable and consistent trajectory. The wider sector continues to grow and scale effects are steadily flowing through to the bottom line.
Inflationary pressures, energy prices and supply challenges are certainly having an impact. Providers like Digital Ocean and OVH have had to raise pricing and data centre operators are planning further and further ahead when it comes to critical infrastructure. The acceleration of hyperscale cloud, along with the current market conditions, has pushed timing horizons out years if not decades. Real estate is increasingly scarce in certain markets, power availability is not to be taken for granted and various regulatory roadblocks are in place. Planning ahead has also meant a much closer look at the feasibility of overflow scenarios in adjacent markets.
The post-pandemic environment that is emerging is unpredictable and far from settled. This likely means that the rest of 2022 will continue along this bumpy road. But while all this is happening, the sector continues to push forward. Next-generation services are pushing legacy offerings further to the back and transforming service provider operations. This has had a significant impact on the strategic landscape. As providers re-align their businesses, they are shedding assets and acquiring new ones, and the competitive landscape continues to change as a result.
This report takes a close look at the noteworthy trends and developments from the recent 2Q22 period. A more detailed look at the M&A landscape, APAC region, hyperscale and subscale cloud sectors is available to clients in separate quarterly reports.
