WSS: Hyperscale earnings point to the reality of supply and demand imbalance as CapEx set to climb and neocloud expansion pushes forward
The sector had another busy week as earnings season kicked off with data centre bellwethers and hyperscale platforms first to report. We took a look this past week at the hyperscale results and there were signals that growth is accelerating amid an environment still marked by a supply and demand imbalance. AWS’s results, in particular, showed how closing that cap can propel a spike in growth rates. Elsewhere in the sector, we saw more neocloud expansion, developments around the Stargate initiative and M&A activity.
Equinix and Digital Realty reported last week and we will delve into the details later this week. Alongside the data centre bellwethers, the hyperscalers reported and the cloud infrastructure performance was strong. AWS saw revenue growth acceleration and the quarterly revenue was up over 20% y/y as it exited the quarter with $132b in ARR. Microsoft held steady and is pushing 40% y/y growth for its cloud infrastructure services and Google saw another quarter with revenue growth upticks. This follows Oracle’s early September results, which also showed significant revenue growth acceleration. The hyperscalers continue to report an imbalance between supply and demand, and are trying to address this with aggressive CapEx investments. Both Google and AWS, for example, raised CapEx guidance for the remainder of 2025 and all hyperscalers expect to increase CapEx in 2026. AWS showed in the past quarter that if supply is built, it can be absorbed and monetized quickly. On its earnings call, Amazon management credited the pipeline of supply it brought online as a meaningful contributor to the growth acceleration it has seen in the last two quarters.
The past week also saw yet more neocloud expansion as both AI-oriented cloud infrastructure providers and the training models look to build out infrastructure. Various data centre deployment models are being used. On the colocation side, Applied Digital brought online the first phase of its Polaris Forge 1 data centre housing CoreWeave in Ellendale, North Dakota, while Lambda is set retrofit and build into an unoccupied data centre in Kansas City, Missouri. When it comes to infrastructure, timing is a priority, and the likes of Anthropic and others are turning to cloud infrastructure. Anthropic has just secured capacity with Google Cloud, jumping on to its cloud, and by extension also diversifying by using Google’s proprietary TPUs.
AI infrastructure shows no signs of slowing down and the Stargate initiative, involving OpenAI and Oracle Cloud is picking up the pace. STACK Infrastructure will build for Stargate in New Mexico and Vantage Data Centers is now building for Stargate in Wisconsin. Both these data centres are nearly 1GW builds. Meanwhile, the European side of Stargate is gathering some momentum. Nscale and Aker fnalized the Stargate Norway JV and there are reports of a second location in Norway being evaluated and considered.
The pace of neocloud demand has driven data centre colocation leasing and is also motivating M&A as the likes of CoreWeave look to make larger strategic moves to accelerate infrastructure expansion. CoreWeave was set to acquire Core Scientific to acquire a pipeline of land and energy, while bringing data centre development capabilities in-house. The deal, however, has been rejected by Core Scientific’s shareholders and will not go through. This does not mean that the urgency to build infrastructure will go away, but it will mean that for now, until neoclouds or AI platforms can bring in data centre development expertise, there is going to be a lot of colocation leasing and overflowing to cloud infrastructure platforms. CoreWeave will not yet become a self-builder of data centres, which is what Core Scientific would have helped it become.
Finally, the end of the month saw us publish our various monthly insights. Overflow to hyperscale clouds is one of the topics addressed, while we also look at hyperscale growth drivers revealed through earnings season, momentum in Stargate, neocloud data centre expansion, and hyperscale challenges around resources and capital when it comes to building out next-generation infrastructure at unprecedented levels of scale.
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