COVID-19 Spurs Record Data Center Spending By Amazon, Google, Microsoft

‘The hyperscale companies are once again breaking all records for their level of spending, spurred on by business models that have actually benefited from the pandemic,’ says Synergy Research Group’s John Dinsdale.

The global COVID-19 pandemic has spurred massive spending increases on data centers from the world’s largest data center operators—led by Amazon, Google, Facebook and Microsoft—which spent a record $37 billion in the third quarter of 2020.

“The hyperscale companies are once again breaking all records for their level of spending, spurred on by business models that have actually benefited from the pandemic,” said John Dinsdale, a chief analyst at market research firm Synergy Research Group, in an email to CRN.

The global COVID-19 pandemic has yet to slow down Capex spending from the largest cloud players, which continue to spend billions each quarter on data centers as demand for cloud services has spiked since the start of the pandemic in early 2020. Over 80 percent of revenue generated by the 20 leading hyperscale data center operators came via cloud, digital services and online activity sales—all of which have seen COVID-19-related boosts, according to Synergy.

[Related: VMware Lawsuit Against Nutanix CEO Cloud ‘Disrupt’ Strategy]

“As expected, the hyperscale operators are having little difficulty weathering the pandemic storm,” said Dinsdale. “Their revenues and Capex have both grown by strong double-digit amounts this year and this has flowed down to strong growth in spending on data centers, up 18 percent from 2019.”

Amazon, Facebook, Google and Microsoft continue to lead the way in terms of Capex spending on data centers, followed by Apple, Alibaba and Tencent. The majority of the $37 billion spent in the third quarter of 2020 went toward building, expanding and equipping massive data centers.

Synergy analyzes the Capex and data center footprint of the world’s 20 biggest cloud and internet service firms. In aggregate, the 20 companies generated $1.1 trillion in revenue during the first three quarters of 2020, up 15 percent year over year.

“As these companies go from strength to strength, they need an ever-larger footprint of data centers to support their rapidly expanding digital activities. This is good news for companies in the data center ecosystem who can ride along in the slipstream of the hyperscale operators,” said Dinsdale.

Modern hyperscale data centers house tens of thousands of servers and other critical IT products such as storage, networking and power systems. As of the third quarter of 2020, the number of hyperscale data centers across the globe reached 573.

Total Capex spending on data centers by these 20 market-leading hyperscale companies jumped to nearly $100 billion in the first three quarters of 2020, representing an increase of 16 percent year over year.

“While the hyperscale operators have seen a COVID-19 boost to business this year, the longer-term trend remains one of strong, steady growth, from which many companies in the data center ecosystem will benefit,” said Dinsdale.