Webscale Network Operators: 4Q23 Market Review Network/IT capex up 4% in 2023 even as total capex dips; good outlook for 2024-25 driven by GenAI land grab; big jump in sector profitability amidst layoffs

Webscale Network Operators: 4Q23 Market Review Network/IT capex up 4% in 2023 even as total capex dips; good outlook for 2024-25 driven by GenAI land grab; big jump in sector profitability amidst layoffs

This report reviews the growth and development of the webscale network operator (WNO) market since 2011. In the most recent 12 months (1Q23-4Q23), webscalers represented $2.37 trillion (T) in revenues (+6.2% YoY), $293 billion (B) in R&D spending (+9.4% YoY), and $192B in capex (-5.1% YoY). They had $679B of cash and short-term investments (+9.8% YoY) on the books as of December 2023, and $562B in total debt (+1.9% YoY). Webscalers employed approximately 4.093 million (M) people at the end of 2023, down from the YE2022 total of 4.194M.

Tech spending: total capex dipped in 2023 but the tech portion rose 4%; R&D spend remains elevated

Total capex did fall a bit in 2023, down 5.1% to $192B. This doesn’t imply a negative market sentiment. Capex spend by quarter can vary significantly due to supply chain and other issues, and the webscale market is especially volatile since it’s driven by just a few big players; the top 4 capture 77% of global capex, after all. Moreover, the tech portion of capex actually grew in 2023, up 4% YoY. The disparity is due to an easing of spend on transportation, logistics, fulfillment and non-tech infra categories at Amazon, Alphabet, Alibaba and others.

Looking beyond the 2023 numbers, what is most important is that last year the webscale market found a new lifeforce, a new reason for being: Generative AI.

Please Note: This product is delivered as a zip file with an Interactive Excel Workbook.