According to the International Data Corporation (IDC) Worldwide Quarterly Server Tracker, factory revenue in the worldwide server market increased 5.2% year over year to $15.3 billion in the fourth quarter of 2015 (4Q15). This was the seventh consecutive quarter of year-over-year revenue growth, as server market demand remained positive due to an on-going enterprise refresh cycle coupled with continued infrastructure buildout by cloud service providers. Worldwide server shipments increased 3.8% to 2.6 million units in 4Q15 when compared with the same year-ago period. For the full year 2015, worldwide server revenue increased 8.0% to $55.1 billion when compared to 2014, while worldwide unit shipments increased 4.9% to 9.7 million units, a record high.
On a year-over-year basis, volume system revenue increased 7.4% and midrange system demand increased 0.7% in 4Q15 to $11.6 billion and $1.4 billion, respectively. The volume segment was aided by a continued expansion of x86-based hyper-scale server infrastructures while midrange systems were helped by enterprise investment in scalable systems for virtualization and consolidation. Meanwhile, 4Q15 demand for high-end systems experienced a year-over-year revenue decline of -2.4% to $2.3 billion in advance of a major IBM z Systems upgrade announced in January.
"The fourth quarter was a solid close to a strong year of growth in the server market, driven by on-premise refresh deployments as well as continued hyperscale cloud deployments," said Kuba Stolarski, Research Director, Servers and Emerging Technologies at IDC. "As the cyclical refresh of 2015 comes to an end, the market focus has begun to shift towards software-defined infrastructure and hybrid environment management, as organizations begin to transform their IT infrastructure as well as prepare for the compute demands expected over the next few years from next-gen IT domains such as IoT and cognitive analytics. In the short term, 2016 looks to be a year of accelerated cloud infrastructure expansion with existing footprints filling out and new cloud datacenter buildouts across the globe."
Overall Server Market Standings, by Vendor
The fourth quarter marks the first time that IBM and Lenovo growth rates are not affected by the latter's acquisition of IBM's x86 server business on October 1, 2014. Hewlett Packard Enterprise (HPE) retained the number 1 spot in the worldwide server market with 24.9% market share in factory revenue for 4Q15, as revenue decreased -2.1% year over year to $3.8 billion. HPE experienced slower demand for its x86-based ProLiant servers, particularly in Canada, Japan, and Latin America. Dell also held its number 2 position in the worldwide server market following server revenue growth of 5.3% year over year to $2.6 billion, holding 16.7% factory revenue market share in 4Q15. IBM retained the number 3 spot with 14.1% share for the quarter as revenue increased 8.9% year-over-year to $2.2 billion in 4Q15. More impressively, IBM experienced strong growth for POWER Systems and double-digit growth for its z System mainframes in the quarter. Lenovo took the number 4 position with 7.4% market share and $1.1 billion in revenues, a 3.7% factory revenue increase. Finally, following a year-over-year revenue increase of 20.6% to $928 million, Cisco rounds out the top 5 server vendors holding 6.1% factory revenue market share in 4Q14.
"Datacenter buildout continues, and the main beneficiary this quarter is the density-optimized segment of the market, where growth easily outpaced the overall server market," said Jorge Vela, Research Analyst, Servers and Virtualization at IDC. "Density-optimized servers achieved a 30.2% revenue growth rate this quarter, contributing a full 2 percentage points to the overall 5.2% revenue growth in the market. The story is similar if one looks at unit shipments; density-optimized server shipments increased 22.4% compared to overall market growth of 3.8%. The extra 65,000 units of this form factor shipped compared to a year ago added almost $330 million to the overall market. Unsurprisingly, HPE and Dell contributed more than half of this growth, extending their lead in this form factor. ODM manufacturers, a constant source of compute for cloud service cloud, accounted for much of the rest of the growth."
Top Server Market Findings
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 factory revenue for a server system. IDC presents data in factory revenue to determine market share position. Factory revenue represents those dollars recognized by multi-user system and server vendors for ISS 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 factory), 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.
On a year-over-year basis, volume system revenue increased 7.4% and midrange system demand increased 0.7% in 4Q15 to $11.6 billion and $1.4 billion, respectively. The volume segment was aided by a continued expansion of x86-based hyper-scale server infrastructures while midrange systems were helped by enterprise investment in scalable systems for virtualization and consolidation. Meanwhile, 4Q15 demand for high-end systems experienced a year-over-year revenue decline of -2.4% to $2.3 billion in advance of a major IBM z Systems upgrade announced in January.
"The fourth quarter was a solid close to a strong year of growth in the server market, driven by on-premise refresh deployments as well as continued hyperscale cloud deployments," said Kuba Stolarski, Research Director, Servers and Emerging Technologies at IDC. "As the cyclical refresh of 2015 comes to an end, the market focus has begun to shift towards software-defined infrastructure and hybrid environment management, as organizations begin to transform their IT infrastructure as well as prepare for the compute demands expected over the next few years from next-gen IT domains such as IoT and cognitive analytics. In the short term, 2016 looks to be a year of accelerated cloud infrastructure expansion with existing footprints filling out and new cloud datacenter buildouts across the globe."
Overall Server Market Standings, by Vendor
The fourth quarter marks the first time that IBM and Lenovo growth rates are not affected by the latter's acquisition of IBM's x86 server business on October 1, 2014. Hewlett Packard Enterprise (HPE) retained the number 1 spot in the worldwide server market with 24.9% market share in factory revenue for 4Q15, as revenue decreased -2.1% year over year to $3.8 billion. HPE experienced slower demand for its x86-based ProLiant servers, particularly in Canada, Japan, and Latin America. Dell also held its number 2 position in the worldwide server market following server revenue growth of 5.3% year over year to $2.6 billion, holding 16.7% factory revenue market share in 4Q15. IBM retained the number 3 spot with 14.1% share for the quarter as revenue increased 8.9% year-over-year to $2.2 billion in 4Q15. More impressively, IBM experienced strong growth for POWER Systems and double-digit growth for its z System mainframes in the quarter. Lenovo took the number 4 position with 7.4% market share and $1.1 billion in revenues, a 3.7% factory revenue increase. Finally, following a year-over-year revenue increase of 20.6% to $928 million, Cisco rounds out the top 5 server vendors holding 6.1% factory revenue market share in 4Q14.
"Datacenter buildout continues, and the main beneficiary this quarter is the density-optimized segment of the market, where growth easily outpaced the overall server market," said Jorge Vela, Research Analyst, Servers and Virtualization at IDC. "Density-optimized servers achieved a 30.2% revenue growth rate this quarter, contributing a full 2 percentage points to the overall 5.2% revenue growth in the market. The story is similar if one looks at unit shipments; density-optimized server shipments increased 22.4% compared to overall market growth of 3.8%. The extra 65,000 units of this form factor shipped compared to a year ago added almost $330 million to the overall market. Unsurprisingly, HPE and Dell contributed more than half of this growth, extending their lead in this form factor. ODM manufacturers, a constant source of compute for cloud service cloud, accounted for much of the rest of the growth."
Top Server Market Findings
- Regionally, Asia/Pacific (AP) experienced the sharpest revenue growth with a year-over-year increase of 14.7% in 4Q15. Europe, Middle East and Africa (EMEA) and the United States also experienced positive year-over-year growth of 5.0% and 7.9%, respectively. China once again exhibited significant growth with year-over-year revenue up 15.6% to $2.3 billion. The top 4 Chinese OEMs – Inspur, Huawei, Lenovo, and Sugon – grew their combined revenues by 19.5% on a year-over-year basis as growth in their home China market outpaced the rest of AP to reach $2.3 billion in quarterly factory revenue.
- Demand for x86 servers improved in 4Q15 with revenues increasing 8.0% year over year in the quarter to $12.5 billion worldwide as unit shipments increased 4.0% to 2.6 million servers. HPE led the market with 29.0% revenue share based on flat revenue growth over 4Q13. Dell retained second place, securing a 20.5% revenue share following 5.3% year-over-year revenue growth.
- Non-x86 servers experienced a revenue decline of -5.4% year over year to $2.9 billion, representing 18.6% of quarterly server revenue. IBM leads the segment with 75.8% revenue share on the back of a year-over-year revenue increase of 8.9% when compared with the fourth quarter of 2014. ARM server sales fell in 4Q15 compared to the same time in 2014, with HPE Moonshot system deployments representing the largest single component.
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 factory revenue for a server system. IDC presents data in factory revenue to determine market share position. Factory revenue represents those dollars recognized by multi-user system and server vendors for ISS 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 factory), 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.
