WSS: More hyperscale earnings show accelerating growth amid more infrastructure expansion
An eventful earnings season wound down, but there were two more hyperscale platforms reporting in recent weeks. Alibaba was the last hyperscaler to release its results and Oracle reported its latest quarterly earnings this week on its fiscal year calendar cycle and we also looked at Tencent’s results. Alibaba and Oracle both reported growth acceleration as demand for AI infrastructure continues to push the needle. Oracle’s results elicited a significant volume of chatter in the investor and equity analyst communities given the ongoing increases in CapEx investments. The investments are meant to be success-based and the RPO numbers and demand profile being disclosed confirm things are real. But there are those that are concerned with the short-term margin profile of the business, underscoring how viewing the cloud infrastructure space requires an inherently long-term perspective that is not amenable to short-term, quarter to quarter analysis. Oracle saw its RPO number increase further in the recent quarter as it signed large cloud infrastructure deals with the the likes of Meta and NVIDIA.
The development of AI infrastructure continues to push forward globally and the Stargate initiative that Oracle Cloud is involved in is now looking at deploying infrastructure in India. OpenAI is reported to be in talks with Tata Consultancy Services and its data centre arm HyperVault to potentially develop ~500MW of capacity in India. OpenAI is also pushing into Australia and NEXTDC and OpenAI signed a MoU with plans to develop a campus in Sydney. To this point, OpenAI has been deploying on hyperscale cloud platforms that take care of the data centre piece. The NEXTDC partnership is an initial sign that OpenAI is looking to deploy infrastructure directly in data centre colocation environments.
Elsewhere in APAC, there has been a significant volume of expansion activity. NEXTDC also broke ground in Tokyo, while SC Zeus broke ground in Osaka, and Vantage Data Centers brought online another building at its campus in Cyberjaya, Malaysia. Meanwhile, the Singapore government announced it would allocate more capacity for data centre development in a highly constrained market, and the second round application process is set to begin.
In Europe, there was plenty of expansion activity involving the likes of Digital Realty in Frankfurt, Global Technical Realty in Zurich, Echelon and Pure DC in Madrid, and Thésée Datacenter in Paris, while there was cloud expansion activity in Germany from Scaleway and OVHcloud.
The end of the year always sees a bit of a surge in strategic activity. This year has been a bit lighter on that front, but there were a few developments of note and some of those we will comment on next week. RadiusDC, backed by Blue Owl Capital, added a fourth connectivity-oriented asset to its portfolio with the acquisition of the 55 Marietta carrier hotel in Atlanta, Georgia, and TierPoint received an additional investment, while InfraRed Capital Partners completed its acquisition of the Rogers Communications data centre assets and launched its Canada-focused data centre platform Qu Data Centres.
Finally, in other strategic developments, there was reporting that CoreWeave will not make a third bid to acquire Core Scientific after two failed attempts. The acquisition of Core Scientific would have accelerated CoreWeave’s ability to self-build data centres, but CoreWeave is starting to build this organically. However, data centre colocation remains its preferred deployment model given how crucial time-to-market is.
The close of the quarter sees us publish our regular bulletin, capturing some of the leading themes across the sector. We take a look at the sector’s growth acceleration, which is being supported by increasing CapEx investments. The state of demand is always difficult to pinpoint exactly, but the climbing RPO numbers speak volumes, as well as the overflow from large-load customers to public cloud infrastructure platforms. We continue to see an imbalance between supply and demand and hyperscalers are not just using colocation and self-building in tandem, but looking at external financing options to support the unprecedented scale and scope of what they are trying to build for the future.
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