Executive Summary
Hyperscale cloud continues to push forward amid strong macroeconomic headwinds, but it has not been immune. Growth across the category has slowed meaningfully and the Chinese clouds, in particular, have experienced significant declines. Growth rates have come down consistently over the last several quarters and the recent quarter was no exception.
A key contributor to the slowdown is the cautiousness exhibited by the broader enterprise market. Weak macroeconomic conditions have stalled and cancelled projects, extended decision-making timelines, shifted priorities and pushed decision-makers to cut costs. Cloud growth levels have taken a hit as a result, but the sector’s fundamentals remain strong. Hyperscale clouds continue to have high renewal rates, low churn and healthy consumption levels when it comes to existing customer expansion in both raw infrastructure expansion and uptake in value-add. Meanwhile, scale is steadily accumulating for hyperscale cloud platforms and driving operating margin even as they aggressively build more inventory to accommodate growth.
The health and direction of the public cloud market will go a long way to determining the fate of the data centre market. The slowing growth in public cloud is impacting the demand profile for colocation and interconnection as projections are now being dialed down and planning horizons, which were often conservative in the past, may now end up being somewhat optimistic. There is also the question of the self-build. Hyperscale data centre self-builds are taking some volume out of the colocation demand pipeline. But in the current environment, there are also good reasons to believe that colocation operators may stand to benefit as the self-build scenario has drawbacks and shortcomings that colocation operators can solve for.
The slowing in hyperscale cloud has to be kept in context. This is a market approaching $200b in market value, and while growth is slowing, it is still exhibiting very healthy positive growth rates. In tougher times, Internet infrastructure always seems to find a way to stay on course, given its strong foundation and inherent stability. The willingness to help customers even if it means less revenue, further reinforces its value proposition. That is what is happening on the ground both from the perspective of cloud end users and the data centre colocation that supports the cloud infrastructure.
This report provides comprehensive growth rate projections and total revenue estimates for the world’s seven hyperscale cloud platforms on a five-year basis. Included are geographic splits and a total market summation. This latest version also features a refresh of our hyperscale cloud region and interconnection node tracking. Hyperscale cloud is projected to reach $395b in value in 2027, with a five-year CAGR of ~26.6%. This is the lowest five-year CAGR posted for some time and accounts for the slowing we have seen across the sector.
