Worldwide Server Market Revenues Decline by 3.6% in the First Quarter, Curbed by Hyperscale Slowdown, According to IDC

FRAMINGHAM, Mass.--()--According to the International Data Corporation (IDC) Worldwide Quarterly Server Tracker, vendor revenue in the worldwide server market decreased 3.6% year over year to $12.4 billion in the first quarter of 2016 (1Q16). This ended a seven quarter streak of year-over-year revenue growth as server market demand slowed due to a pause in hyperscale server deployments as well as a clear end to the enterprise refresh cycle. Worldwide server shipments decreased 3.0% to 2.2 million units in 1Q16 when compared with the same year-ago period.

On a year-over-year basis, volume system revenue increased 1.8% and midrange system demand increased 8.3% in 1Q16 to $9.8 billion and $1.1 billion, respectively. Midrange systems were helped by enterprise investment in scalable systems for virtualization and consolidation, as well as increases in x86-based mission critical systems. Meanwhile, 1Q16 demand for high-end systems experienced a year-over-year revenue decline of 33.4% to $1.4 billion on a difficult compare to the prior year, in which a major IBM system z upgrade drove a spike in mainframe system refresh.

"As expected, server growth slowed in the first quarter, with a clear end to the Intel-led enterprise refresh, a pause in hyperscale cloud expansion, and a very difficult year-on-year comparison in the high end of the market, coming off of a major mainframe refresh from IBM one year ago," said Kuba Stolarski, Research Director, Computing Platforms at IDC. "Now that the cyclical refresh has comes to an end, the market focus is shifting towards software-defined infrastructure, hybrid environment management, and next-gen IT domains such as the Internet of Things (IoT), robotics, and cognitive analytics. In the short term, IDC expects the second half of 2016 to re-energize hyperscale cloud infrastructure expansion with existing datacenters filling out and new cloud datacenters standing up across the globe."

Overall Server Market Standings, by Vendor

Hewlett Packard Enterprise (HPE) retained the number 1 spot in the worldwide server market with 26.7% market share in vendor revenue for 1Q16, as revenue increased 3.5% year over year to $3.3 billion. Dell maintained its number 2 position in the worldwide server market following server revenue declines of 1.8% year over year to $2.3 billion, holding 18.3% vendor revenue market share in 1Q16. IBM retained the number 3 spot with 9.2% share for the quarter as revenue decreased -32.9% year-over-year to $1.1 billion in 1Q16. IBM experienced a very difficult comparison to a strong year-ago period that had triple-digit growth for its system z mainframes. Lenovo and Cisco tied* for the number 4 position with 7.0% and 6.9% market shares, respectively. Lenovo earned $871 million in revenues following a decline of 8.6%, while Cisco's revenues declined 4.5% year over year to $850 million.

 

Top 5 Corporate Family, Worldwide Server Systems Vendor Revenue, Market Share, and
Growth, First Quarter of 2016 (Revenues are in Millions)

Vendor     1Q16 Revenue    

1Q16 Market
Share

    1Q15 Revenue    

1Q15 Market
Share

   

1Q16/1Q15
Revenue
Growth

1. HPE     $3,306.8     26.7%     $3,196.2     24.9%     3.5%
2. Dell     $2,267.8     18.3%     $2,308.3     18.0%     -1.8%
3. IBM     $1,139.5     9.2%     $1,697.3     13.2%     -32.9%
4. Lenovo *     $871.2     7.0%     $953.6     7.4%     -8.6%
4. Cisco *     $850.2     6.9%     $890.3     6.9%     -4.5%
ODM Direct     $863.8     7.0%     $971.0     7.6%     -11.0%
Others     $3,082.4     24.9%     $2,826.7     22.0%     9.0%
Total     $12,382     100%     $12,843     100%     -3.6%
IDC's Worldwide Quarterly Server Tracker, June 2016
 

* Note: IDC declares a statistical tie in the worldwide server market when there is less than one percent difference in the revenue share of two or more vendors.

In addition to the table above, an interactive graphic showing the worldwide market share of the top 5 server vendors over the previous five quarters is available here. The chart is intended for public use in online news articles and social media. Instructions on how to embed this graphic can be found by viewing this press release on IDC.com.

"The brief pause in datacenter buildout resulted in shipments declining across all form factors. The data, however, supports the continuing shift to the public cloud, especially by SMBs," said Jorge Vela, Senior Research Analyst, Computing Platforms. "Tower servers, often associated with more limited deployments, continue to lead unit and revenue declines across the world. On the other hand, rack-optimized models, often considered the backbone of public cloud datacenters alongside density-optimized servers, were the only form factor to experience revenue growth for the quarter. The shift is even greater in less mature markets such as China, where rack- and density-optimized servers delivered impressive 19.7% and 47.8% year-over-year growth rates, outpacing a fast-growing China market that itself experienced a 14.9% year-over-year increase. Unsurprisingly, Chinese vendors such as Lenovo, Huawei, and Inspur captured much of that growth, but Dell also made meaningful inroads in the Chinese rack server market."

Top Server Market Findings

  • Regionally, Asia/Pacific (excluding Japan)(APeJ) experienced the sharpest revenue growth with a year-over-year increase of 10.2% in 1Q16. Western Europe was the only other region to register positive revenue growth for the quarter at 1.7%. The United States experienced a year-over-year decline of 6.0%. Central and Eastern Europe (CEE) and Latin America experience the largest revenue declines, at 41.6% and 32.3%, respectively. China once again exhibited significant growth with year-over-year revenue up 14.9% to $1.9 billion.
  • Demand for x86 servers improved in 1Q16 with revenues increasing 2.6% year over year in the quarter to $10.6 billion worldwide while unit shipments declined 2.9% to 2.2 million servers. HPE led the market with 29.7% revenue share based on 5.5% revenue growth over 1Q15. Dell retained second place, securing 21.5% revenue share following a 1.8% year-over-year revenue decline.
  • Non-x86 servers experienced a revenue decline of 28.7% year over year to $1.8 billion, representing 14.7% of quarterly server revenue. IBM leads the segment with 62.7% revenue share despite a 32.9% revenue decline when compared with the first quarter of 2015. IDC also continued to track falling revenue from ARM server sales in 1Q16, with the HP Moonshot system deployments representing the largest single component.

IDC's Server Taxonomy

IDC's Server Taxonomy maps the eleven price bands within the server market into three price ranges: volume servers, midrange servers and high-end servers. The revenue data presented in this release is stated as vendor revenue for a server system. IDC presents data in vendor revenue to determine market share position. Vendor revenue represents those dollars recognized by multi-user system and server vendors for ISS (initial server shipment) and upgrade units sold through direct and indirect channels and includes the following embedded server components: Frame or cabinet and all cables, processors, memory, communications boards, operating system software, other bundled software and initial internal and external disk shipments.

IDC's Worldwide Quarterly Server Tracker is a quantitative tool for analyzing the global server market on a quarterly basis. The Tracker includes quarterly shipments (both ISS and upgrades) and revenues (both customer and vendor), segmented by vendor, family, model, region, operating system, price band, CPU type, and architecture. For more information, please contact Lidice Fernandez at 305-351-3051 or lfernandez@idc.com.

About IDC
International Data Corporation (IDC) is the premier global provider of market intelligence, advisory services, and events for the information technology, telecommunications, and consumer technology markets. With more than 1,100 analysts worldwide, IDC offers global, regional, and local expertise on technology and industry opportunities and trends in over 110 countries. IDC's analysis and insight helps IT professionals, business executives, and the investment community to make fact-based technology decisions and to achieve their key business objectives. Founded in 1964, IDC is a subsidiary of IDG, the world's leading technology media, research, and events company. To learn more about IDC, please visit www.idc.com. Follow IDC on Twitter at @IDC.

All product and company names may be trademarks or registered trademarks of their respective holders.

Contacts

IDC
Kuba Stolarski,508-935-4172
kstolarski@idc.com
or
Jorge Vela, 508-935-4313
jvela@idc.com
or
Michael Shirer, 508-935-4200
press@idc.com

Release Summary

According to the IDC Worldwide Quarterly Server Tracker, vendor revenue in the worldwide server market decreased 3.6% year over year to $12.4 billion in Q1 2016.

Contacts

IDC
Kuba Stolarski,508-935-4172
kstolarski@idc.com
or
Jorge Vela, 508-935-4313
jvela@idc.com
or
Michael Shirer, 508-935-4200
press@idc.com