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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 2Q22, webscalers represent $2.21 trillion (T) in revenues (+12% YoY), $241 billion (B) in R&D spending (+22% YoY), and $194B in capex (+24% YoY), and had $633B of cash and short-term investments (-18% YoY) on the books as of June 2022.
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Revenue growth slowing for all key webscalers
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The webscale sector has fallen back to earth recently. During COVID, the sector exploded as many activities moved online and ecommerce surged. That growth has been impossible to sustain. Topline growth in single quarter revenues has fallen steadily since the 1Q21 peak of 37%, to record just 4% YoY in 2Q22. Among the "top 8", half saw revenues decline in 2Q22 on a YoY basis: Facebook, Alibaba, Tencent, and Baidu. All 8 have seen their growth rates fall sequentially, for each of the last 3 quarters.
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Annualized revenue growth has now fallen below its long-term average. Annualized revenues reached $2.21 trillion for the 2Q22 annualized period, up 12% YoY. Supply chain constraints, inflation, and a war in Europe all hit growth, as does a weak economy and tight online regulations in China. These factors are also impacting webscale profitability: net profit and cash from operations both declined on a YoY basis in 2Q22. Despite the recent stumble, there are few signs of a prolonged slowdown. Ad revenues are being watched closely, though, as the sector as a whole remains heavily reliant on this revenue stream.
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All regions saw a decline in their revenue growth rates in 2Q22. The Americas held out the best, with a 9% YoY increase (1Q22: 13%). Asia-Pacific was weakest, as its revenues declined by 1% YoY in 2Q22 due largely to China's slowdown.
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Technology spending continues to surge, despite slower revenue growth
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Capex and R&D spend are near all-time highs as a % of revenues. Capital intensity has been rising gradually since 2019; R&D has grown more recently, due in part to Facebook.
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In USD terms, annualized capex has increased dramatically in the last 2 years, reaching $194B in 2Q22, from $117B in 2Q20...
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Best regards,
Matt Walker
Chief Analyst
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