Data Centre demand Explodes in Q2, as Enterprises Embrace Digital

Data centre companies have reported strong quarterly growth and are upbeat about their business prospects, with a surge in demand coming from enterprise customers.

Since the onset of COVID-19, many data centres across the Asia Pacific have been identified as essential businesses or critical infrastructure by local governments. This resulted in higher recurring (data centre) revenues.

Take the case of Macquarie Data Centres. Full year revenue came in at $285.1 million, an increase of 7 per cent compared to $266.2 million for FY20.

In Macquarie’s portfolio, cloud services and government work made AU$$132 million (US$95 million), up by a sizeable 21 per cent, partially driven by government directives to move services from Chinese-owned Global Switch facilities.

Continued Growth

Malaysia’s TIME dotCom pointed out that year-on-year comparisons saw recurring revenue growth with the largest growth contributions seen coming from retail and enterprise customers.

As Malaysia continues to battle COVID-19, remote work has gradually become the new norm in the country. Therefore, surging demand for data storage, greater connectivity, and other internet services can only be handled by cloud technology.

Similarly, NextDC has posted steady revenues, improved its EBITDA and reported reduced losses for the fiscal year ending June 2021. In the 12 months ended 30 June 2021, NextDC saw its revenue grow 23 percent year over year from $200 million to $246.1 million, while EBITDA increased 29 percent from $103 million to $133 million.

NextDC also posted a loss of $20.7 million, down from $45 million last year, with the reduction credited to a deferred income tax bill. Most of the financial hit was related to depreciation costs.

In the 2021 financial year, NextDC’s growth was driven by a steady increase of enterprise customers, adding 183 and taking total customer base to 1,547 during the period. Contracted utilisation also increased 8 percent to 75.5 megawatts, while data centre interconnections grew 13 percent to 14,718, representing 7.7 percent of recurring revenue.

NextDC revealed that its S2 facility has completed its fit-out to take total installed capacity to 30 megawatts, while S3’s construction has well progressed with the first stage set to finish on target in the second half of FY2022. Additionally, in March this year, NextDC started construction of S3, one of its largest data centres, all of which point to a sustained momentum in business going forward.

In Q2, Equinix reported revenues of $1.658 billion, a 4 per cent increase over the previous quarter. For the whole fiscal 2021, Equinix has given a 10-11 per cent revenue growth guidance, outlining the bullishness in the business.

Charles Meyers, President and CEO, Equinix said: “We have continued to see significant momentum in our business as digital transformation outpaces previous expectations across all industries. Technology spend is accelerating, and we believe Equinix remains uniquely positioned as traditional technology markets continue to shift to as-a-service consumption models and hybrid multicloud is widely adopted as the architecture of choice.”

“The pandemic has highlighted that digital infrastructure is not just a business enabler, but a primary source of competitive advantage for digital leaders across all industries, and we continue to see a multitude of trends driving infrastructure to become more distributed, more on demand, and more ecosystem-connected than ever before.”

On June 14th, Equinix announced agreements with GIC to add $3.9 billion to expand the xScale data centre program. When closed and built out, these agreements will bring the xScale portfolio to greater than $6.9 billion across 32 facilities globally and more than 600 megawatts (MW) of power capacity.

Persisting Headwinds

Even as the large scale data centre buildouts are happening, continued uncertainty as a result of new COVID-19 waves continue to weigh in the minds of providers. “We are hopeful for a recovery even though headwinds are expected to persist for the near term as the wider economy grapples with the cascading effects of the COVID-19 pandemic,” TIME dotCom commander-in-chief Afzal Abdul Rahim said.

For Digital Realty, in Q2 2021, new lease signings were $113 million, down 3 per cent when compared to $117 million of signings in Q1 2021. In total, the new lease signings represented 58.7 megawatts of power capacity and 558,000 sq ft.

Venkatesh Ganesh

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