WSS: Hyperscalers lead off earnings season with cloud infrastructure growth accelerating as demand continues to be robust
A busy week saw the start of earnings season and the hyperscalers got things going. Oracle Cloud reported just over a month back and the past week saw Amazon, Microsoft and Google disclose results for the 1Q26 period. We will have details soon, but a quick look at the numbers and it is clear that hyperscale cloud infrastructure revenue growth is showing meaningful acceleration. AI is clearly a driver of this growth, but the spin-off effect from AI is also contributing. Organizations are doubling down on cloud infrastructure to take advantage of AI tools and services, and inferencing workloads are creating demand for more cloud-based infrastructure. Demand levels remain high and CapEx is being invested in data centre, silicon and server infrastructure. The trajectory is steady, consistent and reaching new levels. The optimistic sentiment was also expressed by listed infrastructure companies in recent annual letters to shareholders. We took a closer look at Amazon CEO Andy Jassy’s letter recently and in the past week, delved into CoreWeave CEO Michael Intrator’s letter, which shared various metrics around the business. The most notable number from CoreWeave was around customer concentration. CoreWeave went public early last year with heavy exposure to a small handful of customers. But it has been able to rapidly reduce that number as it signs additional new customers and expands deals with existing customers.
On the data centre side, Applied Digital reported, along with Equinix and Digital Realty. We will have details on the latter two bellwethers, but we took a closer look at Applied Digital this past week. Applied Digital is showing revenue growth from the CoreWeave deployment in North Dakota and building for a second hyperscale tenant. Applied Digital is also expanding in the southern US and signed its third hyperscale tenant for a data centre project that is reported to be underway in Louisiana. This is a significant 15-year and 300MW IT load deal. Large-scale deals are happening in other parts of the world and in Australia, recently confirmed a 250MW lease at its S4 data centre campus in Sydney, Australia.
Hyperscale builds and tenancy does not always move in a straight line. In Abilene, Texas, the Stargate data centre project saw Microsoft come in and take 700MW of capacity after OpenAI declined to expand beyond the initial tranche deployed there last year. Microsoft stepped in quite quickly and this is a solid indicator of hyperscale demand levels. Something similar also happened in Europe. OpenAI paused its data centre projects in the UK and Norway, but Microsoft also stepped in to take down capacity that had become available.
Microsoft has been busy expanding on a global basis and in the last several weeks, committed billions of investment dollars in APAC-based markets. Microsoft is planning a $10b investment in Japan, A$25b in Australia and more than $1b in Thailand. These are multi-faceted investments, but a significant portion is being allocated for data centre and cloud infrastructure.
The growth of the sector continues to be dynamic and spans a wide range of infrastructure providers. Websale providers like DigitalOcean are also seeing revenue growth acceleration, spurred by AI-based demand, particularly around inferencing. Customers are not exclusively using hyperscale cloud platforms and DigitalOcean disclosed a number of customers that have opted for these alternative cloud platforms or made a conscious decision to migrate over. DigitalOcean will be reporting soon and we will get a sense for how well some of these alternative webscale cloud providers are tracking. The early signs point to upticks in growth rates.
Finally, we published some of the more noteworthy trends in our monthly insights. We shared more data points on neocloud and AI model growth, and continue to track the progress cryptocurrency firms are making transitioning to HPC and data centre infrastructure services. Meanwhile, there was more activity around silicon diversification, CoreWeave won a number of large-scale deals and data centre construction and development is seeing more innovation.
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