Servers Market Share

Worldwide Server Market Spending Remain slightly positive in 2023 while expected to Continue with a CAGR of 8.9% in a Five-Year Period, according to IDC

Despite a huge decline in unit demand, the server market continued experiencing strong spending growth in the second quarter of 2023 with 3.4% y/y growth, driven by high ASP growth, mostly related to higher than usual GPU server shipments to hyperscalers.

The market faces continued challenges heading into the second half of 2023, including remnants of impact from the pandemic, historically high inflation, slowdown in economic activity, supply chain disruption and geopolitical conflict. However, the server market has proven very resilient in recent years, as IT infrastructure has become increasingly mission critical for many organizations.

While the nature of investment and workload choices may be impacted by economic and other pressures, overall, the market is expected to grow over the next five years at an 8.9% CAGR. An aging installed base is primed for refresh, and some of this may have already happened in 2022, although increasingly it appears that some of it may spread into early 2024, as the tech transition to new CPU platforms gradually moves forward. Large cloud service providers will continue their refresh and expansion plans steadily through 2027. An expected digestion phase of excess inventory may be masked by additional investments in new deployment themes such as GPU server infrastructure for AI, although there may have been steps taken towards reduction in excess capacity by some hyperscalers already.

The war between Russia and Ukraine continues to impact the market in both direct and indirect ways. In the most direct way, system sales in Russia and Ukraine continued shrinking throughout 2023 and will continue to drive the decline in the overall CEE region. Indirectly, the war added to already growing energy prices and transportation costs, which have a rippling impact on the IT industry, especially on regions that historically relied more on energy resources from Russia. Cutting energy supply worsens already declining consumer and business confidence. This has driven higher demand for energy efficient and sustainable systems, which is also expected to be a longer-term trend across all regions. Direct impact of inflation on servers was felt more strongly each subsequent quarter during 2022, with year over year ASP growth rates escalating to 29.0% year over year in the second quarter of 2023, while unit growth, which had been in the teens through most of 2022, dropped to a meager +1.4% in 2022Q4, declined year over year in 2023Q1 by -10.0%, and now by -19.9% in 2023Q2.

Throughout 2020-2021 and even into early 2022, while the supply chain struggled to deliver specific components to the market, other components were plentiful. As vendors could not deliver all customer orders because they could not complete all system builds, the order backlogs began to grow. IDC estimates that backlogs with server OEMs are continuing to shrink and may be back to normal overall. While some components were in short supply, as backlogs grew, vendors accumulated enough of the other components (such as CPUs) to be able to meet the backlog orders once the supply chain could catch up to the backlog demand.

Fortunately, GDP growth forecasts are showing some signs of improvement. While IDC believes the server market is far more resilient than it was a decade or more ago, slower growth means smaller revenues and ultimately some budget cuts that will impact capex spending on servers. Global labor markets are still relatively healthy but an initial increase in layoffs (mostly in the tech sector) seems to be subsiding. Enterprises are spending less on server infrastructure in 2023, but they are not cutting their workforce any more than during normal economic conditions. The macroeconomic environment will continue to be a defining factor for market performance in 2023 and heading into 2024, as some macroeconomic headwinds are expected to drag out longer than initially expected. In the longer-term, modernization, AI/ML, cloud, and edge deployments will drive further growth in the market and are the focus of many mission critical investment during the current downturn.

Data table for "Worldwide Server Market Forecast 2022 - 2027 Value (US$M)" chart

Year	Non-x86 Value (US$M)	Non-x86 Annual Growth %	x86 Value (US$M)	x86 Annual Growth %	Total Value (US$M)	Total Annual Growth %
2022	$12,269	32.8%	$110,955	18.8%	$123,224	20.1%
2023	$14,984	22.1%	$113,487	2.3%	$128,471	4.3%
2024	$16,240	8.4%	$127,407	12.3%	$143,648	11.8%
2025	$18,208	12.1%	$140,120	10.0%	$158,328	10.2%
2026	$20,256	11.2%	$153,483	9.5%	$173,739	9.7%
2027	$23,571	16.4%	$165,568	7.9%	$189,139	8.9%