Cloud IT infrastructure revenues down in Q2 amid a lull in overall spending—report

A report by IDC says cloud IT infrastructure revenues are down in the second quarter of 2019. (Pixabay)

A recent trend for declining capex in the cloud IT infrastructure sector continued in the second quarter, according to a report by International Data Corporation (IDC.)

After a strong showing last year, IDC expects the public cloud IT infrastructure sector to cool off this year with spending dropping to $42 billion, which is a 7% decrease from 2018.

While public cloud spending from the likes of Amazon Web Services still account for the lion's share of the spending in cloud IT environments, that share will decrease from 69% last year to 66% this year.


Like this story? Subscribe to FierceTelecom!

The Telecom industry is an ever-changing world where big ideas come along daily. Our subscribers rely on FierceTelecom as their must-read source for the latest news, analysis and data on the intersection of telecom and media. Sign up today to get telecom news and updates delivered to your inbox and read on the go.

RELATED: Public cloud market is nowhere near plateauing, says IDC

By contrast, IDC's report said that spending on private cloud IT infrastructure shows more stable growth since it started tracking IT infrastructure products across various deployment environments. In the second quarter, vendor revenues from private cloud environments increased 1.5% year-over-year to reach $4.6 billion. IDC predicts spending to grow 8% year-over-year in 2019.

Overall, vendor revenue from sales of IT infrastructure products, which includes server, enterprise storage and private cloud, for public and private clouds decreased 10% year-over-year in the second quarter to reach $14 billion.

IDC also lowered its forecast for total spending on cloud IT infrastructure in 2019 to $63.6 billion, down 4.9% from last quarter's forecast and changing from expected growth to a year-over-year decline of 2%.

Vendor revenue from hardware infrastructure sales to public clouds in the second quarter was down 0.9% compared to the previous quarter and decreased 15% year-over-year to $9.4 billion. The hardware infrastructure sales in public environments is driven by the large hyperscale cloud providers, including AWS, Microsoft Azure and Google, whose spending on infrastructure tends to ping-pong.  

Overall, the IT infrastructure industry is at a crossroads in terms of product sales to cloud versus traditional IT sectors, according to IDC. In the third quarter of 2018, vendor revenues from cloud IT environments jumped past the 50% mark for the first time, but has dropped since then. In the most recent second quarter, cloud IT environments accounted for 48% of vendor revenues.

For the full year, spending on cloud IT infrastructure will remain just below the 50% mark at 49%. Longer-term, however, IDC expects that spending on cloud IT infrastructure will grow steadily and will sustainably exceed the level of spending on traditional IT infrastructure in 2020 and beyond.

Spending on three technology segments in cloud IT environments is forecast to deliver growth for Ethernet switches while compute platforms and storage platforms are expected to decline this year, according to IDC.

Ethernet switches are expected to grow at 13% while spending on storage platforms will decline by 7% and compute platforms will decline by 2%. Compute will remain the largest category of spending on cloud IT infrastructure at $33.8 billion.

Going by regions for cloud IT Infrastructure revenues in the second quarter, Middle East and Africa was fastest growing at 29% year-over-year, followed by Canada at 15%. Other growing regions in the second quarter included Central and Eastern Europe (6.5%), Japan (6%) and Western Europe (3%).

Cloud IT Infrastructure revenues were down slightly year-over-year in Asia/Pacific by 7.7%, Latin America by 1.%, China by 7%, and the U.S by 16%.

Suggested Articles

On the heels of TalkTalk shareholders approving the deal to sell FibreNation to CityFibre, CityFibre is now targeting 8 million premises in the U.K.

Cisco's Kevin Wollenweber has turned into a COVID-19 sleuth of sorts over the past few weeks as he tracks the virus' impact on networks.

The coronavirus pandemic has led to organizations of all sizes sending their employees home for work, but will they want to return to the office?