2Q25 IB: Executive Summary
The recent quarter saw the sector pick up from where it left off in the 1Q25 period. The larger debate over the meaning and impact of the hyperscale pullbacks continued to rage, but more data points and insights emerged that arguably supported the more bullish perspective. Healthy earnings, increased CapEx, rising RPOs and an ongoing and intensifying imbalance between supply and demand offers solid empirical evidence countering the more bearish overbuild thesis. Meanwhile, and perhaps more importantly, hyperscale executives provided direct feedback, describing the pullbacks as routine capacity optimization and recalibration of expansion plans in the face of new information, and shifting demand signals and priorities. There continue to be few indications that anything is wrong with the sector’s underlying fundamentals. If anything, the sector faces the challenge of finding enough capacity in the right places to serve the demand that exists and is building up in the pipelines at a frenetic pace. Energy constraints, supply chain difficulties and global trade issues continue to complicate the landscape and make it difficult to bring inventory to market in a reasonable time frame. The recent quarter also saw multiple developments that speak to the impact AI is having on the sector. AI is of course at the centre of the debate over whether the sector is entering a bubble. But AI is already creating tailwinds that have translated into real numbers. AI uptake is driving hyperscale cloud growth and spinning out into the ecosystem, with data centre colocation, interconnection and managed services benefitting. It is also motivating organizations to migrate to outsourced infrastructure and accelerate transformation initiatives. The rising use of AI is rapidly creating demand for AI inferencing infrastructure and this has pushed demand to webscale clouds, network services and edge-hyperscale infrastructure deployments. The recent quarter’s results were highlighted by several signs of accelerating growth and while there is volatility in the macro landscape, the sector is on solid footing and positioned to push forward. This report takes a close look at the noteworthy trends and developments from the recent 2Q25 period. A more detailed look at the M&A landscape, APAC region and hyperscale cloud sectors is available to clients in separate quarterly reports.
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