WSS: Earnings season kicks off with growth acceleration as hyperscale and AI infrastructure demand continues to drive global data centre expansion
The past week saw the beginning of what promises to be a long but revealing earnings season. Google parent company Alphabet was one of the first to report its 2Q26 results and the results were ahead of most expectations. The Google Cloud arm again saw revenue growth acceleration on a sequential basis and it was substantial. Google Cloud’s quarterly growth rate clocked in at 82% y/y and was well above the 63% y/y growth recorded in the first quarter. Oracle reports on a different fiscal year cycle and released its results earlier last month. It also showed growth acceleration for cloud infrastructure and like Google, is carrying a huge backlog. Google, however, pointed out that at least 50% of that backlog is going to be recognized as revenue in the next 24 months. We also have details about how Google is deploying TPUs and what its data centre strategy looks like as it tackles the challenge of building supply to serve high levels of demand in a constrained environment. Management shared some interesting comments on how it views third party data centre leasing and our analysis has some context and analysis. Elsewhere, publicly listed IREN also shared some data points in advance of earnings season as it secured more large-scale customers for its AI-oriented cloud infrastructure that will be material to its results. IREN’s disclosure follows what DigitalOcean did last week, sharing details about significant customer wins and expected revenue growth acceleration. The early returns suggest that the sector’s growth is going to hit another level sooner than later.
The past week also saw some strategic activity of note. Ares acquired a stake in Sabey Data Center Properties, a Seattle-based operator with a long history in the sector, while there were reports that Israel-based investor Azrieli is looking for partners to invest in its Norway-based hyperscale data centre operating platform Green Mountain. We also tracked the divestiture of a data centre asset in Singapore by CapitaLand Ascendas REIT that speaks to the value of facilities with readily available energy that came to market in a highly constrained environment.
There were other developments of note in the APAC region. India continues to see a rise in development activity and in the past week Singapore-based operator STT GDC opened a data centre facility in Jaipur, while AWS broke ground in Telangana on a self-build. There was also meaningful development activity in the Nordics. Pure DC launched and got funding for its AI campus in Finland and Polar DC is expanding in Norway. The Nordics continues to see demand land in the region as hyperscalers and AI platforms look to navigate constraints in other parts of Europe. In the past week, we tracked developments around Cerebras working with OpenAI to potentially deploy in Finland and Norway, along with France.
The frequency of large-scale deals confirm the growth trajectory of the sector and validates demand levels that continue to be viewed as exceeding supply levels. In Brazil, Ascenty secured a large hyperscale customer for 150MW in contracts, Nebius won a deal with Reflection AI, and we mentioned the IREN AI wins above. Brazil also saw Cirion recently break ground on a new data centre in Rio.
The growth of the sector is built on an underlying value proposition of criticality. Internet infrastructure is the lifeblood of everything that happens online. And this criticality is clear for all to see when it is threatened. There are more reports emerging that the AWS data centre in Bahrain has again suffered from drone attacks and the damage could be extensive. There are also reports pointing to other facilities in the Middle East region with US technology tenants that are potentially being targeted. This is definitely a new angle to facility security that the sector has traditionally not had to deal with, but is now going to be part of the overall operating calculus. Needless to say, data centres have come full circle to becoming critical infrastructure on par with water, energy, transportation, etc.
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