Justifying the Explosive Growth in Hyperscale CAPEX

RENO, NV, September 18, 2025

Hyperscale operator capex reached $127 billion in the second quarter, up 72% from the second quarter of 2024. This has not been a temporary blip. Comparing the last four quarters with the preceding four quarters, CAPEX growth was again 72%. Data centers account for the vast majority of CAPEX, and it is of course building AI infrastructure that has caused hyperscale operator CAPEX to balloon. How are these huge ongoing investments justified? To put them into context, total hyperscale company revenues in Q2 totaled $720 billion, and over the last sixteen quarters year-on-year revenue growth has been averaging 10%. More importantly, hyperscale operator revenues from key digital services – IaaS, PaaS, SaaS, social media, and search – reached $301 billion in the second quarter, having doubled from the first quarter of 2021. Over the last eight quarters, which might be considered as the GenAI period, year-on-year revenue growth from those key digital services has averaged 18%. Synergy estimates that GenAI technology is now driving an incremental $50 billion in quarterly revenues for hyperscalers, over and above the growth that those services were already enjoying. That $50 billion number is increasing very rapidly. Revenues from GenAI-specific IaaS and PaaS services, for example, are currently growing by over 150% year-on-year. Hyperscale CAPEX will enable and fuel continued aggressive growth in a wide range of AI-oriented services. The research is based on analysis and tracking data that Synergy has developed covering 20 of the world’s major cloud and internet service firms, including the largest operators in SaaS, IaaS, PaaS, search, social networking, e-commerce and gaming. These companies now dominate the world’s IT landscape, accounting for the bulk of IT service revenues, spending on IT hardware, and data center capacity. Together they now have 1,244 hyperscale data centers in operation around the world, plus another 527 in Synergy's known future pipeline.

“Hyperscale company spending on infrastructure has grown dramatically and continues to rise. However, the companies making those investments are titanic in nature and they are focused on markets that will continue to grow rapidly over the coming years, as shown by our forecasts,” said John Dinsdale, a Chief Analyst at Synergy Research Group. “In 2021 hyperscale company CAPEX was running at under 9% of revenues, a metric that has grown to over 16% in the first half of this year. That represents a huge growth in investments, but it isn’t out of the ordinary for infrastructure–heavy industries. For example, telcos around the world are struggling to generate revenue growth, and yet they typically have CAPEX intensity levels in the 16-18% range. That suggests hyperscalers can comfortably accommodate the increased spending on AI infrastructure."