WSS: Hyperscalers earnings show accelerating growth and investment levels as demand continues to outpace supply
The past week saw earnings season pick up pace and we got more visibility into the performance of the hyperscale cloud platforms. Amazon and Microsoft followed Google last week and Oracle back in June, reporting on back-to-back days. The results showed accelerating growth and both Amazon and Microsoft again reported healthy demand and a backlog that it is accumulating, but having trouble serving due to various constraints. Meanwhile, on the data centre side, Equinix and Digital Realty reported and we will take a closer look at those results in the upcoming week, but early returns show a level of performance that was solid and demonstrated steady forward progress. Elsewhere in the sector, we saw more hyperscale and AI build activity, there were developments of note in South Korea and Japan and we saw yet more financing developments. All the data points and developments point to ongoing infrastructure builds amid healthy sector tailwinds.
There are various data points and signals for hyperscale infrastructure demand and CapEx is one of the metrics worth keeping a close tab on. Google increased its CapEx projection for 2025 by an additional $10b and both Microsoft and Amazon saw CapEx increases in 2Q25 amid an environment that continues to see demand outpace supply. Microsoft saw CapEx climb to $24.2b this quarter, while Amazon hit $31.4b. CapEx levels remain high, but Microsoft and Amazon have different projections for the rest of the year. Microsoft sees some closing of the imbalance between demand and supply, while Amazon expects it to persist moving into next year.
The data centre building and expansion activity is a strong indicator of demand and future growth. We touched on the Stargate project last week and OpenAI shared some additional details about the state of this initiative and the project currently underway in Abilene, Texas. In other parts of the US, we saw Aligned Data Centers confirm a new project in Ohio as the US Midwest continues to see significant development activity.
East Asia also saw elevated levels of activity in recent weeks. In Japan, AirTrunk broke ground on a new 40MW phase at its TOK1 campus in Inzai, while STT GDC brought online a large building at its campus, also in the Inzai area. In South Korea, Empyrion Digital launched a new data centre in the Gangnam area of Seoul, South Korea. Empyrion has projects in multiple APAC markets and is looking to carve out a niche in the edge-hyperscale segment. Empyrion’s backer Seraya Partners also brought in additional capital to support its development activity. Another new entrant to the South Korean market is Digital Edge and it secured a green loan to fund development of a 60MW facility in Seoul.
Finally, there was significant financing activity that speaks to the ongoing need for capital to support build and expansion activity. Cologix, Digital Edge, EdgeCore and Scala Data Centers all closed on financing for development in markets across the Americas and also including APAC.
There continues to be ongoing debate about the sector’s trajectory. Is a bubble forming? Are hyperscalers pulling back and is the sector about to be overbuilt? The past week saw a number of data points that counter this sentiment. Hyperscale showed more signs of growth acceleration amid AI uptake and hyperscalers continue to invest in infrastructure amid a constrained environment, which is flowing through to drive development activity in the data centre colocation space.
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