Data center infrastructure market up 15% in Q2 2023, Dell’Oro

According to a recently published report from Dell’Oro Group, the trusted source for market information about the telecommunications, security, networks, and data center industries, Data Center Physical Infrastructure (DCPI) market revenue growth slowed for the first time in six quarters to 15 percent year-over-year (Y/Y) in 2Q 2023. The deceleration in revenue growth was expected, primarily due to normalizing supply chain constraints and price realization beginning to wane. However, vendor backlogs have defied expectations and continued to grow in 2Q 2023, prompting another quarter of upward revisions from DCPI vendors and to our 2023 DCPI forecast.

“The DCPI market has blown past our already elevated expectations in 1H 2023. Sales growth has been notably strong, but what has been most surprising is the strength in new orders which pushed vendor backlogs to record highs at the end of 2Q 2023,” said Lucas Beran, Research Director at Dell’Oro Group. “This isn’t isolated to a select group of vendors, as nearly every public vendor has touted continued backlog growth while raising their 2023 guidance.

“This unprecedented rate of growth in 1H 2023 raises questions about a potential digestion cycle in the near term. However, existing backlog levels, record low data center vacancy rates and the emergence of generative AI applications are continuing to drive demand over the medium term. Any potential near-term weakness would be more a factor of tough Y/Y comparisons than weakening demand,” added Beran.

Additional highlights from the 2Q 2023 Data Center Physical Infrastructure Quarterly Report:

• Vertiv significantly outpaced market growth and gained over 3 percent of market share in 2Q 2023.
• North America, Asia Pacific (excluding China), Europe, and the Middle East and Africa (EMEA) were the fastest-growing regions in 2Q 2023, maintaining double-digit growth rates. Caribbean and Latin American (CALA) revenue growth slowed to a low single-digit rate, while China revenue growth was relatively flat Y/Y.
• Product growth was broad-based, but thermal management and cabinet PDU and busway grew at the fastest rates as a result of easing supply chain constraints and realizing the highest ASP increases of any product category.
• We raised the worldwide DCPI revenue growth forecast for 2023 to over 13 percent. This upward revision was due to multiple DCPI vendors raising full year guidance as supply chain constraints ease and vendor backlogs continue to grow.

Dell’Oro