WSS: More hyperscale growth acceleration, backlogs signal upward trajectory as technology and energy acquisition strategies remain in motion
We have worked our way through a long earnings season and overall, the sector executed well. The performance was steady across the board and hyperscale platforms, along with the likes of CoreWeave, showed signs of growth acceleration amid strong demand signals. One of the strongest performers in hyperscale has been Oracle Cloud and it reports on a different cycle, sharing its 1QFY26 results just this past week. Oracle Cloud raised its guidance on the heels of accelerating growth, while reporting a significantly higher backlog number that is reported to be the result of an expanded infrastructure deal with OpenAI (we will have more details on that development this week).
Hyperscale and neocloud platforms continue to invest in technology and are using M&A to bring in specific capabilities. CoreWeave just acquired a young startup called OpenPipe that has built technology for fine tuning the training of AI agents. This is CoreWeave’s second technology acquisition of the year after it acquired Weights & Biases to enhance its infrastructure management, monitoring and optimization tools.
The sector continues to face constraints around energy as growth continues to push forward and increases both short-term and long-term infrastructure capacity requirements. Procuring alternative energy sources will be crucial and progress is being made. Equinix shared details on its energy strategy, partnering with the likes of Oklo, Radiant and Stellaria on the nuclear side, while expanding the work it is doing with fuel cell provider Bloom Energy. In other energy developments, Oklo and Vertiv partnered to build integrated nuclear power and cooling solutions, while energy companies partnered with operators for data centre development projects in Italy and Indonesia.
APAC saw a number of notable developments in energy and data centre development. Asian Energy Capital is the firm looking to build a data centre in Jakarta mentioned above, while DAMAC’s EDGNEX Data Centers acquired more land in Jakarta that it intends to develop into a multi-MW data centre. The Jakarta projects would potentially add yet more inventory to a market that is still in an absorption phase. Meanwhile, In Malaysia, Digital Halo signed an energy supply agreement for a large 150MW build in Johor, and there is chatter that OpenAI is considering a data centre build in India as part of the Stargate initiative. This would be a significant build estimated to be in the range of 1GW.
Across the market there continue to be strong indicators for the sector’s growth prospects. One of the clearest signals is the level of financing and investment activity, which was in full swing this past week. Flexential secured $1b in equity to fund development, while in the UAE, Khazna Data Centers secured $2.62b in debt and EcoDataCenter raised €600m to continue building in Sweden. Meanwhile, Blue Owl is set to fund $20b in developments through a partnership with Chirisa Technology Parks and Aligned secured additional financing from Blackstone. Meanwhile, on the investment side, Silver Lake launched a $400m investment platform to target the energized land market. The capital raising activity is built on a solid foundation and leasing from hyperscalers and neoclouds are a driver here.
Finally, another good indicator of health is new company formation and this continues to be a regular occurrence. Atmosphere Data Centers was the latest and received an equity investment from AGC Equity Partners to support its maiden project in Dickerson, Maryland.
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