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Data center market flourishes amid rising backlogs and AI demand, Dell’Oro Group study finds

Data center market flourishes amid rising backlogs and AI demand, Dell’Oro Group study finds

According to a recent report from Dell’Oro Group, the Data Center Physical Infrastructure (DCPI) market revenue growth slowed to 15% year-over-year in 2Q 2023. This deceleration was expected due to supply chain constraints and decreasing price realization. However, vendor backlogs have exceeded expectations, leading to upward revisions from DCPI vendors.

Lucas Beran, a research director at Dell’Oro Group, states that the DCPI market has exceeded already high expectations in the first half of 2023. Sales growth has been strong, but what has been most surprising is the increase in new orders, resulting in record-high vendor backlogs by the end of the second quarter of 2023.

“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,” continues Beran.

Berab notes that the remarkable growth experienced in the first half of 2023 raises concerns about a possible slowdown in the short term. Nevertheless, the high level of existing backlog, the low vacancy rates in data centers and the rise of generative AI applications are still fueling demand in the medium term.

“Any potential near-term weakness would be more a factor of tough Y/Y comparisons than weakening demand,” adds Beran.

The report also notes that Vertiv showed impressive growth, surpassing market growth and gaining over 3 percent of market share. The fastest-growing regions were North America, Asia Pacific (excluding China), Europe, and the Middle East and Africa (EMEA), all maintaining double-digit growth rates. Caribbean and Latin American (CALA) revenue growth slowed, while China’s revenue growth remained relatively flat.

The report says thermal management, cabinet PDU and busway had the fastest growth rates, benefiting from eased supply chain constraints and significant average selling price (ASP) increases. The worldwide DCPI revenue growth forecast for 2023 was also raised to over 13 percent, reflecting improved supply chain conditions and increased vendor backlogs.

The Dell’Oro Group’s Data Center Physical Infrastructure quarterly report provides an overview of the DCPI market. It includes market sizes and forecasts for segments like uninterruptible power supplies (UPS), thermal management and cabinet power distribution. The report also offers insights into data center future outlook, market trends and the competitive landscape.

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