Hello,

Thanks for your interest in our latest research. You can view a summary of our latest report below.



Webscale Network Operators: 3Q22 Market Review

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.  

Revenue growth slowing for most key webscalers

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.

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.

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.

Technology spending continues to surge, despite slower revenue growth

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.

In $ terms, annualized capex has increased dramatically, reaching $199B in 3Q22, from $124B in 3Q20. The tech (network/IT/software) portion of capex...

Read more
To see our most recently published reports, click here

Best regards,
Matt Walker
Chief Analyst
Email Marketing Powered by MailPoet