Hyperscale, earnings, headwinds, CapEx, M&A, cloud expansion, financing, edge versus cloud
It was a busy week as the hyperscale cloud platforms kicked off earnings season. There was also some M&A, cloud launches and a number of data centre operators secured funding for growth and expansion initiatives.
This is a highly anticipated earnings season as it provides a window into the sector’s performance amid ongoing weakness in the macroeconomic environment. The public clouds are a bellwether and all of the ‘big three’ showed slowing growth. AWS dipped below 20% growth for the first time and Microsoft and Google also had drop-offs. The big question now is how long the deceleration in growth will last. Have we hit a bottom? Or is there more slowing to come? It was interesting that Amazon and Microsoft provided differing guidance on this question.
M&A has been slower, but there were some transactions of note. On the SMB side, One Equity Partners acquired Liquid Web as it looks to implement a consolidation play, while GI Partners acquired a data centre asset and Akamai picked up an API security provider.
A theme we will be discussing in more detail in the coming weeks is the potential impact slowing public cloud growth will have on data centre colocation leasing. The signs are that things will stay on a steady course (there are hints of this in our analysis of the ‘big three’ results) and existing cloud regions will continue to expand, while new ones will be brought online. The latest new region in Microsoft’s portfolio is in Poland.
Data centre operators certainly have no plans to slow down and are marshalling resources to push expansion. AtlasEdge secured a credit facility, Cologix closed a securitization and Raxio Data Centres raised sustainability-linked debt.
Finally, we take a closer look at some comments from pundits and analysts that still view edge as something fundamentally different from cloud, and believe that the former will eventually eat and take over the latter. This understanding of Internet infrastructure is fundamentally misconstrued and would make for inaccurate marketshare projections and estimates.
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