The Booming Data Center Industry
The economy may have taken a hit, but there is one sector that continues to thrive: data centers. This is evident in the recently announced expanded partnership between Schneider Electric and Compass Datacenters.
Schneider Electric is a renowned electrical hardware and software giant, while Compass specializes in building data centers. This partnership, valued at a whopping $3 billion, indicates the strong outlook for data center spending. Tech giants like Microsoft, Alphabet, and Amazon.com are driving this growth.
According to Aamir Paul, President of Schneider Electric North America, this extended partnership will cater to the ever-increasing demands of various industries. These industries include cloud and service providers, semiconductors, electric vehicles (EVs), healthcare, and telecommunications.
The cloud industry, which relies on data centers to operate, continues its upward trajectory. In the third quarter alone, Amazon Web Services witnessed a 12% year-over-year increase in sales, amounting to approximately $23 billion. Microsoft's cloud sales grew by 24% year over year, reaching around $32 billion. Google Cloud also experienced significant growth with a 22% increase, bringing its sales to $8 billion in the third quarter.
Sales Growth in Cloud and Data Center Services
As the demand for digital infrastructure, including data centers, continues to surge in the post-Covid era, sales in the cloud and data center service provider industry are experiencing significant growth.
Schneider Electric: In the first half of 2023, Schneider Electric, a European-based company that reports full results semiannually, reported "double-digit" data center growth in percentage terms.
Vertiv (VRT): Sales for Vertiv, a leading data center infrastructure provider, are projected to reach $6.8 billion in 2023, reflecting an increase from $5.7 billion in 2022. The company has revised its 2023 sales guidance multiple times this year, with Wall Street projecting $7.4 billion in sales for 2024.
The expansion of digital infrastructure, such as data centers, has resulted in positive market recognition for Schneider, Vertiv, and other key players in the industry, including electrical component suppliers (NVT) and Eaton (ETN).
Stock Performance: Schneider stock has seen a 15% increase over the past 12 months, trading at approximately 18 times estimated 2024 earnings. Comparatively, the S&P 500 has risen 17% during the same period and trades at about 17.5 times.
Vertiv stock has experienced a significant 174% gain over the same span, while Eaton shares have risen 38% and nVent shares have seen a 31% increase. These stocks trade at approximately 19 times, 22 times, and 15 times estimated 2024 earnings, respectively.
The growing sales in the cloud and data center service provider industry reflect the rapid expansion of digital infrastructure in various sectors, creating favorable market conditions for companies like Schneider and Vertiv.
All Rights Reserved © 2024
Post a comment