WSS: Earnings season widens across ecosystem as AI pushes more neocloud leasing and hyperscale overflow
We have moved to the tail end of earnings season and last week, we took a closer look at the remainder of the webscale peer group, including the likes of DigitalOcean, Akamai, Cloudflare and Fastly. Growth trends were healthy, pipelines have been filling and there are signs that growth is starting to accelerate. We have seen this at the hyperscale level and late reporting Alibaba also saw growth acceleration. Earnings season has become longer and more diverse as the sector has evolved. Energy, semiconductor and cryptocurrency companies are now on the radar as they disclose important data points that lend perspective to the directional trends of the sector. In the past week, we looked at the results coming from Dominion Energy and companies that have shifted to data centre colocation, HPC and cloud computing such as Northern Data and Nebius. Energy companies like Dominion provide clues to the state of demand for data centre infrastructure, but the investments they are making to meet this demand is telling and similar in fashion to how the hyperscalers are investing in CapEx to build our compute infrastructure and data centres.
The past week was a big one when it came to neocloud leasing of data centre colocation capacity. TeraWulf is another of the cryptocurrency-oriented firms that have pivoted to data centres and it recently signed a series of substantial deals with FluidStack for 360MW of colocation capacity in upstate New York. TeraWulf has expertise with converting legacy coal-fired power plants into data centres and this was one of the reasons why Google is supporting the deal with a strategic investment and financial guarantees. Meanwhile, in other GPU developments, neocloud Lambda agreed to take down capacity with EdgeConneX in Chicago and Atlanta, while we look at some growth data points about Groq, which has also been leasing up colocation capacity at a steady pace. There are also some reports pointing to Lambda evaluating strategic options.
Hyperscalers continue to face challenges with overall capacity and time-to-market and Meta overflowed more capacity requirements outside its own data centres. Meta is reported to have been using CoreWeave and just signed a $10b deal with Google Cloud to provide bridge capacity and meet immediate capacity needs.
Ongoing demand means the sector is being compelled to build at unprecedented levels and this is making it necessary for consortiums of capital, real estate, energy and operating companies to come together and bring the necessary resources and expertise to bear. The past week saw a group come together to build a data centre in Texas, involving KKR, Energy Capital Partners, Calpine and CyrusOne. And Texas continues to see significant levels of development and land banking activity. Vantage Data Centers recently revealed plans to build a campus outside Dallas, while Yondr Group secured a land parcel in Lancaster, TX for data centre development.
The past week also saw some M&A activity geared to acquiring technology and capabilities for AI-oriented infrastructure. Crusoe continues to build out its cloud infrastructure platform and acquired an Israeli startup that specializes in GPU management and optimization, while Scaleway in France picked up a startup called Saagie that has built technology for simplifying data management for AI workloads.
We also provided our monthly insights in the past week, looking at webscale and neocloud momentum, new data points about demand and recent developments in M&A. As earnings season winds down, we also look at the some main takeaways from an encouraging quarter of performance.
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