Surging AI demand drives historic growth despite mounting power shortages and regulatory hurdles.
Global revenue for the datacentre physical infrastructure (DCPI) market jumped 27 per cent year-on-year to reach $14bn in the second quarter, according to new research from Dell’Oro Group. The figures extend an impressive streak of growth above 20 per cent, as the rush to build artificial intelligence capacity continues to outstrip available supply. A slight deceleration from the first quarter of 2026 reflects a tougher comparative period rather than waning enthusiasm. The latest report also introduces a revised five-segment customer model, categorising spend across hyperscalers, neoclouds and other cloud providers, colocation operators, telecommunications firms, and traditional enterprises.
Addressing market speculation, Alex Cordovil, Research Director at Dell’Oro Group, noted that while the quarter’s loudest debate focused on whether the AI buildout was being cancelled, the quieter and more consequential question is whether projects will receive approval. He emphasised that hyperscalers’ spending plans leave little doubt about underlying demand, but power availability, long equipment lead times, and community opposition are stretching project timelines. Dell’Oro now views site selection and planning permission as the primary near-term constraints on the market, with grid interconnection timelines far harder to predict than the demand driving them.
Thermal management remained the market’s fastest-growing category, expanding by more than 40 per cent year-on-year and maintaining its record share of total revenue, spearheaded by direct liquid cooling and external heat rejection chillers. In electrical infrastructure, Uninterruptible Power Supply revenue grew roughly 20 per cent year-on-year, driven by high demand for large three-phase, megawatt-class power blocks tailored for AI data halls, as vendors transition toward medium-voltage designs and prepare for 800VDC power architectures. Meanwhile, overhead busway systems remained the preferred distribution method for AI clusters, with manufacturers constrained primarily by supply shortages rather than a lack of orders.
Under Dell’Oro’s new customer classification, colocation providers formed the largest overall segment, followed closely by hyperscalers. However, the category comprising neoclouds and AI model developers grew at the fastest rate, with spend from AI-specialised cloud providers roughly doubling year-on-year as traditional enterprise accounts continued to lose market share. Geographically, North America maintained its position as the market’s primary hub, while Europe, the Middle East, and Africa recorded its fastest growth rate since 2021, propelled by European colocation expansion and sovereign AI projects.
Industry consolidation gathered pace as suppliers sought to bolster their power and cooling capabilities, highlighted by Ecolab finalising its acquisition of liquid cooling specialist CoolIT Systems in July, Vertiv agreeing to acquire microgrid provider UtilityInnovation Group, and SLB announcing plans to buy heat-exchanger manufacturer Kelvion. However, regulatory pressures have intensified since the end of the second quarter as local opposition solidifies into state-level restrictions across the US. New York enacted the first statewide moratorium on new datacentre developments in July, Pennsylvania excluded datacentres from its fast-track planning approvals scheme in August, and Texas directed grid operator ERCOT to audit queued projects, temporarily halting initial large-load feasibility studies.
