WSS: Data centre segment continues strength of earnings season amid more AI deals and expansion activity
The tail end of a long earnings season is nearing and we took a closer look this past week at the results coming from the data centre colocation segment. Bellwether Equinix had another strong quarter of revenue growth and leasing activity, while Iron Mountain’s data centre arm was also busy leasing capacity to hyperscale and enterprise tenants. American Tower’s CoreSite reported steady results, while Core Scientific showed more progress as it continues to transition from the world of cryptocurrency to the data centre colocation business. The growth in AI and hyperscale that we have tracked in the last several weeks worth of results is driving demand in the data centre segment as value being driven by AI, in particular, continues to flow through the ecosystem. And it is hard to miss how inferencing has been a big part of this story. Inference helped push hyperscale and webscale demand, and in the past week there was another big win for CoreWeave as it confirmed a deal to host Perplexity on its cloud to enable inferencing workloads. Perplexity is using other cloud infrastructure platforms for model training.
The sector spent a good deal of time last year debating whether the sector was in a bubble. That conversation has died down of late, but the emergence of armed conflict in the Middle East is sure to raise questions again. The war is in the process of causing instability in the region that could lead to rising energy prices and a slowing of capital flows, which for AI has increasingly come from the region. There are also plans to build data centres in the region, such as in places like the UAE and Saudi Arabia, that could well be put on hold or pushed out into the future until things in the region calm down (if they do). The only thing certain right now is the uncertainty. We take a closer look at some the implications of the war in our regular commentary.
There are challenges on the horizon, but operating companies are still going about their business and pushing expansion initiatives forward. Applied Digital and Core Scientific are both serving hyperscale and neocloud deployments, and closed financing transactions to support data centre infrastructure development. Meanwhile, neoclouds continue to grow and need capital as well. UK-based Nscale just closed a $2b Series B round at a valuation that approaches $15b.
Last week there was strategic activity in Europe as data centre operators used M&A to accelerate new market entry. Equinix acquired atNorth to expand into the Nordics, while Digital Realty acquired Telepoint to enter the market in Bulgaria. In the past week, Digital Realty also made an acquisition in Portugal as it looks to expand its footprint in southern Europe.
Finally, we published our quarterly update in the past week. The last quarter of 2025 was highlighted by more revenue growth acceleration, while various indicators like RPO, CapEx procurement and overall demand levels continued to suggest that the sector is on strong footing and pushing forward even as the world moves into a period of uncertainty that could potentially create some headwinds. The maturation of AI is paying dividends as inferencing (as mentioned above) was almost uniformly referenced as a driver of cloud infrastructure growth and adoption. This may be the strongest signal yet that the sector is moving into a phase of growth that is going to be unprecedented. Inferencing is not just driving infrastructure uptake, but a telltale sign that AI models are being built and end users are using the technology. The flow through the Internet infrastructure ecosystem would essentially be an inevitability if things continue to go this way. AI is transformative, but also an accelerant of the sector’s core: hyperscale, neocloud and webscale cloud infrastructure.
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