Webscale Network Operators: 3Q19 Market Review
Webscale capex stages a mild recovery with 1% YoY growth in 3Q19, while R&D outlays remain robust
By Arun Menon and Matt Walker

After successive slumps in capex during the first two quarters of 2019, global webscale operators loosened their purse strings somewhat in 3Q19. Capex spend grew slightly by 1% YoY in 3Q19 – a modest recovery considering declines of 18% and 11% during 1Q19 and 2Q19, respectively. The marginal respite in the latest quarter, however, wasn’t enough to lift capex growth on an annualized and YTD (9 months) basis, which posted a 0.9% and 9.3% decline, respectively, for the period ending 3Q19.

By contrast, R&D investments continued their robust growth journey as most of the “Top 8” webscale network operators (WNOs) continue to invest heavily in R&D projects across a wide spectrum – from self-developed AI-based chips customized for their datacenters and more grandiose moonshot projects such as driverless vehicles.

MTN Consulting’s 3Q19 WNO Market Review analyzes the network infrastructure spending and financial position of webscale network operators (WNOs).

WNOs are web-centric companies who own and operate large multi-country communications networks based upon hyperscale data centers and submarine cables. Webscale operators may also own access networks, typically using fixed satellite or fiber. WNOs own network assets in order to support their core businesses, which comprise digital advertising, online retail, cloud, digital media and content services, and other digital-based services. The webscale segment excludes companies with digital business models who rely primarily on rented cloud capacity or collocation space. Twitter, for instance, is not a webscale operator, as its network relies on a mix of rented space in carrier-neutral data centers and rented cloud resources from Google.

WNOs tracked in this report include the “Top 8” companies (Alibaba, Alphabet, Amazon, Apple, Baidu, Facebook, Microsoft, and Tencent) and 12 others: Altaba, ChinaCache, Cognizant, eBay, Fujitsu, HPE, IBM, JD.COM, LinkedIn, Oracle, SAP, Yandex.

Table Of Contents

  1. Abstract
  2. Analysis
  3. WNO Market: Key Stats thru 3Q19
  4. Top 8 WNOs
  5. All WNOs: Company Drilldowns
  6. Totals by Company
  7. About

Figures & Charts

  1. Key Metrics: Growth rates YTD19/YTD18 vs. 2011-18
  2. WNO Revenues: Single-quarter (US$M)
  3. Top 8 WNOs: YoY revenue growth in 3Q19
  4. Annualized profitability: WNOs
  5. Free cash flow per employee, 3Q19 annualized (US$)
  6. FCF Margins vs. Net Margins, 3Q19 annualized
  7. Advertising revenues as % total (FY2018)
  8. Annualized capex and R&D spending: WNOs (% revenues)
  9. WNO capex by type, Annualized: 3Q15-3Q19 (US$M)
  10. Network & IT capex as share of revenues, 3Q19 annualized
  11. R&D expenses as % revenues, Top 8 WNOs (2Q19 annualized)
  12. Net PP&E per employee (US$M) – 3Q19
  13. Ranking the Cloud’s Webscale Network Operators: 3Q19 revenues (US$B)
  14. Ranking the Cloud’s Webscale Network Operators: 3Q19 R&D expenses (US$B)
  15. Ranking the Cloud’s Webscale Network Operators: 3Q19 total capex (US$B)
  16. Network, IT & software capex (US$B) by WNO, 3Q19
  17. 1H profitability trends, WNO Market
  18. WNOs: R&D spending, and network/IT capex, 1H
  19. Network & IT capex as % of revenues
  20. WNO Network, IT and software capex: YoY growth
  21. Total employees: Webscale network operators
  22. Webscale market: Revenues & FCF per employee (US$K)
  23. Revenues & Spending (US$M)
  24. Webscale Business Mix by Revenues (FY2018) – MTN Consulting estimates
  25. Top 10 recent acquisitions & investments
  26. Revenues & YoY revenue growth: by company
  27. Annualized profitability: by company
  28. Annualized capex and capital intensity: by company
  29. Annualized capex and R&D spending as % of revenues: by company
  30. Share of WNO network & IT capex, Annualized: by company
  31. Total employees: by company
  32. Annualized per-employee metrics (US$000s): by company
  33. Net debt (debt minus cash & stock) (US$M): by company
  34. Profitability and cash flow, 2011-18 (% revenues): Webscale operators
  35. Free cash flow and cash on hand, 2011-18: WNOs (US$M)
  36. Revenues & capital intensity, 2011-18: WNOs
  37. Capex and R&D spending, 2011-18: WNO segment (US$M)
  38. Cash on hand, capex and acquisition costs, 2011-18: Webscale operators
  39. Capex and R&D as a % of revenues, 2011-18: WNOs
  40. Capex and leasing expenses as a percent of revenues, 2011-18: WNOs

Visuals

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