WSS: Earnings season and expansions indicators for sector health; legacy and next-gen dynamic continues to play out
We pick up our coverage after a break due to public holidays and there has no shortage of activity and developments in the last few weeks.
The tail end of earnings season saw more signs of sector stabilization. Cloudflare and GoDaddy both reported steady and consistent results. These two operate in different market segments, but there are commonalities in their growth dynamics. Both have legacy businesses that are stable and not necessarily growing that fast. But both have had success offsetting the slower growth with value-add. Cloudflare has tapped into even greater upside, with the push into computing infrastructure. This is a next-generation service that has a chance to open a lot of doors for Cloudflare and the recent quarter showed how that is playing out. The challenge for a Cloudflare and GoDaddy is to keep growing existing customers, while building things interesting and valuable that can drive new customer addition. In cloud and managed infrastructure, the game is very much about addition and offsetting subtraction.
On the data centre side, Iron Mountain reported its 3Q24 results and data centre colocation continues to be a healthy growth driver. Iron Mountain also released details about a new expansion project in Northern Virginia. Meanwhile, over in the UK, iomart Group and Redcentric reported results and it was a bit of a mixed bag as both operators deal with the various ups and downs that come with regular M&A activity.
Cloudflare and GoDaddy are far from the only companies engaged in decisions around product development. Balancing the pursuit of next-generation offerings and legacy services is at the centre of strategic evaluations and in the past few weeks Equinix made a big decision around bare metal. The service will be shuttered in 2026 as Equinix looks to get the scale and reach for compute, hybrid and interconnection through hyperscale cloud infrastructure platforms, rather than building things in-house. We have more details and discussion.
The strategic dynamics around legacy and next-generation services have led to quite a bit of realignment activity in the last few years and there has been plenty of movement in the CDN space. Akamai continues to consolidate CDN contracts as operators exit the business or shift to new growth areas. The latest pickup for Akamai is the Edgio CDN customer base, which combined customers formerly with competitors Edgecast and Limelight Networks, which had merged into Edgio not that long ago. Akamai has also consolidated customers from Lumen and StackPath. The legacy bare bones CDN space is getting closer to the end of the road and the future is about how it can be attached to or a part of a wider, multi-faceted offering or platform. Akamai and Cloudflare both present this possibility and upside.
The past few weeks also saw more activity around the GPU cloud space. CoreWeave is building more data centre capacity in partnership with colocation provider Core Scientific and partnered with Pure Storage to give customers an option for storage and data management. Pure Storage also joined Cisco as one of CoreWeave’s minority investors. A transaction was recently closed valuing the company at over $20b.
Shifting to global markets, we saw large-scale development activity in APAC and Europe. Data4 is working on a new project in Athens, Greece and Equinix is expanding in highly constrained Singapore, while Ark Data Centres is raising funds for an expansion in Hayes, UK. East Asia has seen meaningful activity of late. CPP Investments and Pacific AMC set up a JV to develop a data centre in South Korea and Keppel will partner to build a hyperscale data centre in Taiwan. South Korea has also seen self-build activity, with Microsoft bringing online another hyperscale self-build in Busan.
Edge-hyperscale, combing multi-MW with edge locations and proximity, is an emerging tier that is picking up pace in the US. DC BLOX is developing a number of hyperscale-edge data centres and Ark data centers broke ground on a multi-MW data centre in edge market Green Bay, Wisconsin. Elsewhere in the US on the hypercale side, Cologix is building big in Ohio and Yondr brought online its first data centre in Virginia.
The health of the sector continues to spark new company formation. We saw a few new players being launched in Europe and take a look at some of this activity over the last quarter. There is no lack of interest in the sector, but there continue to be projects and aspiring entrants that are a bit behind when it comes to having the pieces of the puzzle, experience and expertise to build successful projects. Our contributor Daniel Golding comments again on the coming age of fake data centres.
Finally, we published our regular monthly and quarterly updates in the past few weeks, with summary and analysis in our regular updates. Please note that our monthly insight notes are marked with the lead ‘MI’ and our quarterly Infrastructure Bulletin updates for 3Q24 are marked ‘3Q24 IB’.
or