WSS: Earnings shows growth acceleration across hyperscale, webscale tiers; expansions in SEA, Middle East
Earnings season is in full swing and in the past week we took a closer look at the results coming from the the rest of the US-based ‘big four’ hyperscalers, which reported after Oracle. The results from AWS, Microsoft and Google were squarely in line with trends playing out across the hyperscale ecosystem. Most notably, revenue growth acceleration picked up pace, building on momentum seen in the last few quarters. Microsoft saw some slight upticks, but has already been growing right at 40% y/y for the last several quarters. And both AWS and Google Cloud showed significant acceleration in the pace of growth, with Google Cloud growing at 63% y/y in the recent quarter. There are multiple drivers of this growth acceleration. Large-scale AI models are jumping on to hyperscale clouds and signing on for extremely large commitments and this is starting to be recognized on the balance sheet. And the past week saw yet another large-scale deal, with Meta agreeing to a massive spend with AWS and its Graviton processor line. Meanwhile, existing cloud customers are expanding core infrastructure consumption and increasing adoption of add-on services and tools, of which many are oriented to AI. It goes without saying that demand levels remain high, and hyperscalers continue to report that supply is not keeping up. More than one of the hyperscalers confirmed in earnings reports that growth could have been materially higher if the inventory was there to serve it. And the hyperscalers all disclosed significant increases to RPO and backlog metrics. The backlogs are starting to get top-heavy, but they speak to what is in the pipeline. As a result, hyperscalers continue to invest in CapEx and Google again raised its CapEx guidance for 2026.
Healthy growth levels, driven by many of the same dynamics, is also being seen in the neocloud and webscale space. There was not necessarily the same pace of growth acceleration on a sequential basis as seen with the hyperscalers, but things have been on the upswing over the last few quarters and the early returns show things have held steady. We will look more closely at the results next week coming from CoreWeave, DigitalOcean, Akamai, Cloudflare and Fastly. Meanwhile, Megaport has moved into the webscale cloud infrastructure segment through the acquisition of Latitude.sh and it confirmed signing a record cloud infrastructure deal, speaking to the growth potential of the market segment.
The past week was saw significant activity in a number of global markets, with a number of developments coming out of Indonesia and the UAE. In Indonesia, Princeton Digital Group acquired a powered land parcel of 240MW to support its hyperscale expansion requirements in Jakarta, while DayOne signed a PPA to support further hyperscale expansion in Batam, Indonesia and Digital Realty confirmed plans to land its interconnection platform in its Indonesia-based data centres. Over in the Middle East, things continue to push forward despite the presence of armed conflict. VOLT revealed plans for a build in Dubai that will surpass 100MW and Pure DC added capacity to its data centre in Abu Dhabi. The war is making its presence felt of course. The attack on AWS data centre at the outset of the war continues to have a negative impact on customers, and AWS confirmed that recovery of services in the affected UAE-based data centres will take months to restore. Needless to say, this will continue to make disaster planning a top priority for organizations.
Finally, there was more movement in the ecosystem supporting GPU-based AI infrastructure. On the vendor side, Datadog rolled out new monitoring and observability capabilities tailored for GPU infrastructure, while on the service provider side, DigitalOcean released Inference Engine, an automated toolset that helps end users optimize model selection based on various variables around infrastructure, cost and performance. In a rapidly developing market, the push is on to find differentiation and value-add. Some will use third party vendors and others will build in-house.
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