Dublin, April 21, 2022 (GLOBE NEWSWIRE) -- The "Webscale Network Operators: 4Q21 Market Review" report has been added to ResearchAndMarkets.com's offering.
Revenues for the webscale sector of network operators ended 2021 at $2.14 trillion. That's up 25% from 2020, and nearly 3x the total recorded in 2011. One reason for this is a dramatic uptick in cloud services revenues: cloud revenues for the top 3 (AWS, GCP and Azure) climbed 42% YoY, to $120.3B. Still, this accounts for less than 6% of total webscale sector revenues. Larger factors behind 2021's growth include: digital ad revenues for Alphabet and Facebook (Meta); ecommerce sales at Amazon, JD.com, and Alibaba; and, 5G device revenue sales at Apple. The webscale sector is now comfortably larger than telecom, which recorded just under $1.9 trillion in 2021 revenues.
On a capex basis, telecom remains far ahead, with nearly $325B in 2021 annualized capex, or nearly double the webscale total of $175B. But webscale is gradually bridging this gap: in 2021, webscale capex spiked 30% YoY, versus an approximate 10% rise for telco capex. Capex in 4Q21 for webscalers was $50B, up 23% YoY. Webscalers also invest heavily in R&D, and have bleeding-edge requirements for the technology they deploy in their network. That has led them to drive the creation of many new innovations in network infrastructure over the last few years. These span semiconductors, optical transmission and components, intent-based routing, network automation, and other areas. Facebook (Meta) is perhaps the most influential of all webscalers due in part to its openness and support for the OCP and TIP organizations.
Asia Pacific records best recent revenue growth in 2021
Regionally, the strongest growth in 2021 was in Asia Pacific, where revenues grew 29% YoY. The more mature Americas region lagged, with growth of just over 21% YoY. That pushed Americas down to about 44% of global webscale revenues, from 45% in 2020. Asia Pacific follows, with a 36% global revenue share, then Europe (17%) and MEA (3%). The Americas still account for the majority of webscale capex, with the US at the center. For instance, both Alphabet and Facebook (Meta) say well over 70% of their "long-lived assets" are in the US. Going forward, the non-US portion should rise as the cloud providers within the webscale market build out their global data center footprints. In January 2022, for example, AWS launched its first data center in Jakarta, Indonesia, and is planning a new region in Mexico.
Profitability still relatively high, but weaker than 2020
Using a standardized definition of free cash flow (cash from operations less capex), the webscale sector's FCF was $347.4B in 2021, or 16.2% of revenues. That is down significantly from a 19.7% margin in 2020. This ratio is still high relative to many sectors, however. The decline is due largely to a webscaler choice to accelerate capex during the COVID dislocation; that should pay off over the long run. Oracle, for instance, saw its FCF drop from 30.8% in 2020 to 17.2% in 2021, due mainly to its rapid cloud expansion. Nonetheless, Oracle says it will continue capex at a roughly $1B per quarter run rate, as it aspires to be the fourth major cloud provider with global scope. Amazon is actually the worst hit company in terms of FCF margin drop, due directly to its enormous 2021 capex outlays: Amazon's FCF in 2021 was -3.1%, from 6.7% in 2020. Amazon, however, says its 2022 infrastructure (AWS) capex will likely rise.
Cash on hand, including short-term liquid investments, amounted to $747B for the webscale sector at the end of 4Q21, down 2% from the end of 2020. Total debt increased by 7%, to $518B. As a result, net debt (debt minus cash) in Dec. 2021 was -$228B for the webscale sector, from -$280B in December 2020. The companies with the biggest stockpiles of cash (and equivalents) are Alphabet ($139.6B), Microsoft ($125.4B), Amazon ($96.0B), and Apple ($63.9B). Facebook has just $48B, but no debt at all. Apple, IBM, and Oracle all have significantly more debt than cash.
Top 8 webscalers remain the biggest spenders, but Oracle and Twitter also important
This webscale tracker considers a "Top 8" group of companies as being, traditionally, the most influential in the market's overall technology development and investments. These include three Chinese Internet companies (Alibaba, Baidu and Tencent), the world's leading smartphone provider (Apple), the world's biggest social media company (Facebook), and the leading three cloud providers: Alphabet, Amazon, and Microsoft. Ranking webscalers based on their share of tech capex, Amazon tops the list easily, accounting for 27.0% of network/IT capex in 2021. Amazon is followed by Alphabet (16.2%), Microsoft (14.0%), Facebook (10.0%), Tencent (6.3%), Apple (5.0%), Alibaba (4.1%), Oracle (2.9%), Baidu (2.1%), IBM (1.7%), HPE (1.5%), and Twitter (1.3%). Amazon's recent capex surge is well known, and has supported expansion of the company's AWS footprint and service offerings. Oracle has been quieter but its capex growth is equally impressive, from a smaller base: 2021 capex was $3.1B, up 70% from 2020. Twitter, a new addition to our webscale coverage, spends more on network/IT capex as a percentage of revenues (over 19%) than all other webscalers, due to ongoing software development and construction of its first owned data center.
Top 8 WNOs
- Alibaba
- Alphabet
- Amazon
- Apple
- Baidu
- Microsoft
- Tencent
Other WNOs
- Altaba
- ChinaCache
- Cognizant
- eBay
- Fujitsu
- HPE
- IBM
- JD.com
- Oracle
- SAP
- Yandex
For more information about this report visit https://www.researchandmarkets.com/r/mbafzk
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