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Cloud companies set new record for infrastructure spending

Infrastructure spending by 16 leading cloud companies grew by 54 per cent in the first quarter of 2016 compared to the year-ago quarter, according to the latest quarterly update from market research firm LightCounting.

Alibaba, Alphabet (Google), Amazon, Apple, Baidu, Facebook, Microsoft, Twitter, Yahoo, and seven other major Internet-based businesses spent a total of $14.5 billion on property, plant, and equipment in Q1 2016, 20 per cent more than the old record set in Q4 2014 (source: public financial reports).

Apple, Facebook, and Tencent more than doubled their spending compared to Q1 2015, reaching all-time highs. Microsoft also spent more than ever before, with an outlay of $2.3 billion.  Amazon, eBay, LinkedIn, and Microsoft all increased spending by double-digit growth rates, while Alphabet, Baidu, Twitter, and Yahoo went against the trend and curbed spending somewhat versus 1Q15 levels. 

While costs allocated under ‘property, plant, and equipment’ includes a wide range of purchases outside data centres and networks, the upward trend carried over into optical networking. LightCounting reports that increased data centre interconnect (DCI) spending by the leading cloud players helped to drive record growth in 100G DWDM ports.  Cisco and Juniper reported a significant increase in router sales to cloud companies, also contributing to very strong demand for client-side 10km-reach LR4 100GbE optics.

Shipments of 100m, 0.5km and 2km 100GbE optics to cloud companies also picked up in early 2016, but sales remained modest in comparison with 100GbE LR4. Several suppliers interviewed by LightCounting reported a sharp increase in purchases of these products by cloud companies in June 2016 and expectations are very strong for the second half of the year.

LightCounting’s report on Mega Datacenter Optics, published in March 2016, forecasts that sales of 100GbE optics to cloud companies will reach $300 million in 2016. The latest market data supports these findings, but the product mix will remain volatile, the analyst firm concludes.

LightCounting’s market update provides snapshot of optical transceiver growth trends, backed up with detailed quarter-by-quarter sales data collected via LightCounting's proprietary vendor survey. The latest update presents analysis of revenue and spending trends of top-tier telecom and Internet service providers, as well as the financial results of telecom and datacom equipment vendors.

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