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Hello,
Thanks for your interest in our latest research. You can view a summary of our latest report below.
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This report reviews the growth and development of the webscale network operator (WNO) market. On an annualized (12 month) basis through 3Q22, webscalers represent $2.23 trillion (T) in revenues (+8% YoY), $255 billion (B) in R&D spending (+23% YoY), and $199B in capex (+19% YoY), and had $613B of cash and short-term investments (-19% YoY) on the books as of September 2022. Webscalers employed approximately 4.095M people in September 2022, from 4.047M in June 2022 and 3.941M in September 2021.
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Revenue growth slowing for most key webscalers
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The webscale sector has fallen back to earth recently. Annualized revenue growth has now fallen below its long-term average. Supply chain constraints, inflation, and a war in Europe all hit growth, as does a weak economy and tight online regulations in China. Globally, annualized YoY revenue growth in 3Q22 was just 8%, the lowest result since 4Q16 (7.2%). Regionally, growth in the Americas has been steady, with revenues up 13%, 9%, and 12% YoY in the last three quarters, but the other three regions have dragged down the average. In 3Q22, revenues grew 2% YoY in MEA, and just 1% YoY for both Europe and AP.
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Topline growth in single quarter revenues has been in the single digits for all of 2022, recording just under 6% growth YoY in 3Q22. In general revenue growth rates have been weakening across the board, but Amazon and Apple were exceptions in 3Q22, growing by 15% and 8% respectively, much improved from 2Q22. It's notable that neither of these companies is heavily dependent on advertising. Microsoft also had a good quarter of growth in 3Q22, and like Amazon and Apple is not reliant on ad revenues.
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Among decliners: Facebook faces tougher competition from other platforms (e.g. TikTok), while Alibaba, Tencent and Baidu were all hit by a weaker Chinese economy, lockdowns, and tighter regulations around gaming and online activities.
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Technology spending continues to surge, despite slower revenue growth
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Capex and R&D spend are both at all-time highs as a % of revenues. Capex has been rising gradually since 2019; R&D has grown more recently, due in part to Facebook.
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In $ terms, annualized capex has increased dramatically, reaching $199B in 3Q22, from $124B in 3Q20. The tech (network/IT/software) portion of capex...
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Matt Walker
Chief Analyst
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