Half-Year Capex Analysis – Telcos Flat; Enterprise Nudges Up; Hyperscale Boom Continues

RENO, NV, September 1, 2021

New data from Synergy Research Group shows that telco capex levels in the first half were once again flat while hyperscale operator capex shot up by another 30%. Meanwhile enterprise spending on IT infrastructure recovered a little and grew by 6%. These numbers largely reflect the longer term trends which show that telco capex has essentially been static for the last six years while hyperscale operator spending has almost tripled and enterprise IT infrastructure spending has grown by 23%. Across the three groups infrastructure spending in the first half passed the $300 billion mark with hyperscale operators now accounting for 27% of the total, up from just 13% in the first half of 2016. Over that six-year period, enterprise share of the total has hovered around the 30% mark while telco share has fallen from 56% to 44%. Total spending in the first half of 2021 was $307 billion, having grown by 9% from 2020 and by an average of 6% per year since 2016. The data covers total capital expenditure for telcos and hyperscale operators, which is mostly focused on networking and data center hardware and software. To make the numbers more comparable, for enterprises it covers spending on IT infrastructure, which is primarily data centers, networking and collaboration tools. It excludes enterprise spending on communication and IT services, devices and business software. Hyperscale operators include the 19 companies that meet Synergy’s criteria for being considered hyperscale, with the biggest spenders in the first half being Amazon, Microsoft, Google, Facebook, Apple, Alibaba and ByteDance. Telcos include both fixed and mobile operations, with the biggest spenders in the first half being China Mobile, Deutsche Telekom, NTT, Verizon, AT&T, Vodafone and Orange.  

“There is an increasingly sharp contrast in spending patterns across the three main industry sectors,” said John Dinsdale, a Chief Analyst at Synergy Research Group. “Telcos remain locked in a low-to-no growth world and their capex reflects that. While there were big hopes for 5G, it has proven to be a case of changing the mix of investments within relatively fixed budgets, rather than substantially growing overall telco spend. That picture is unlikely to change too much over the next few years. Meanwhile hyperscale operator revenues are currently growing by over 30% per year, which has required them to grow their spending at a somewhat similar rate. Those growth rates will moderate a bit over the coming years but will be viewed jealously by the telco world. The enterprise picture is more complex with cloud, big data and increasingly sophisticated collaboration requirements driving a multitude of changes in their IT operations, but on balance we should continue to see modest growth in their infrastructure spending.”