WSS: Earnings season shows more consistency, while outsourcing to cloud and colocation motivated by demand for AI
A busy week saw more from earnings season. We have looked at the results coming from the hyperscalers (AWS, Microsoft, Meta, Google), along with the bellwether data centre operators (Equinix, Digital Realty) and service providers in the webscale tier such as Akamai and Cloudflare. In the past week, we examined the data centre businesses that sit within larger service and communication services companies. Iron Mountain catapulted forward its position in the data centre space through M&A back in 2018 and has progressively built the business through organic growth, strategic investments and M&A. The first quarter of the year saw Iron Mountain continue to push growth near the 20% y/y range as it signed a healthy volume of new leases. Meanwhile, American Tower, which acquired the CoreSite data centre business in 2021, is pushing forward at a steady pace and reported y/y growth right in the double-digit range. American Tower also confirmed that it has not seen a material shift in the demand profile amid an uncertain environment and landscape, and that demand for data centre infrastructure with a connectivity component remains healthy. We also took a look at the results coming from Fastly, which is pushing into cloud computing like others in its peer group (such as Akamai and Cloudflare), and delved into earnings reports from energy companies like AEP. The energy space continues to be a useful source for gauging the level of demand coming from the hyperscale ecosystem. There has been a lot of talk about the hyperscale sector pulling back, resulting in a sector that is overbuilt, but the continued need for energy suggests that is clearly a misguided sentiment.
Earnings season speaks to the growing diversity of the data centre, cloud and hyperscale ecosystem, and this is reflected in newly minted public company CoreWeave, a rising GPU cloud infrastructure provider. We will have more details on its results next week as it continues to expand its global footprint. CoreWeave recently confirmed it will be a customer with data centre provider MERLIN Edged in Barcelona, Spain, and its recently signed a significant lease with Galaxy Digital for multi-MW colocation capacity. The GPU cloud space continues to evolve and TensorWave is the latest to raise growth capital, closing a $100m Series A round. TensorWave also shared data points that speak to the aggressive pace of growth GPU-based clouds are realizing.
There is little doubt that GPU providers like CoreWeave are set to expand the hyperscale infrastructure buying universe. But there continues to be demand in other data centre colocation categories. Earnings season revealed that enterprise demand is showing signs of picking up due to the fact that cloud infrastructure and connecting to the cloud through interconnection-oriented data centres is a way to take advantage of AI services and technologies. Getting to cloud and the need to manage data is in turn driving outsourced infrastructure adoption. We saw this kind of momentum in the earnings of Equinix, CoreSite and Digital Realty. Meanwhile, we also saw edge-hyperscale deployments and infrastructure gain ground. CoreSite is getting this kind of uptake, while independent operators like Hudson Interxchange are building out more edge-hyperscale inventory.
Southeast Asia continues to be home to some of the fastest growing markets in the APAC region. Jakarta, Indonesia is one of them, but it has experienced a few ups and downs as supply and demand have not always been in alignment. This is part of the normal ebbs and flows of hyperscale infrastructure build-outs and there are signs that things in Jakarta are shifting. There was some movement in the past week as Google Cloud confirmed plans to expand its infrastructure in Indonesia. And with the Chinese clouds recovering, there are signs that hyperscale consumption (of data centre colocation capacity0 could start to pick up pace. Investors and operators have consistently been long-term believers in the market and Jakarta continues to see new entries into the competitive landscape. Equinix just inaugurated its new data centre in Jakarta and just last month, Digital Realty entered the market through a JV.
A number of strategic developments also came out of the APAC region in the past week. Partners Group acquired Singapore-based Digital Halo, with plans to expand in multiple APAC markets, while Princeton Digital Group raised $1.2b to support its regional expansion efforts. Elsewhere, in Europe, new operating platform Apto is set to invest €3b to build a hyperscale data centre campus outside Milan, Italy.
or