#United States #Redwood City #Data Center #Dell'Oro Group #AI Demand

Data Center Physical Infrastructure Market Growth

In a recent study by Dell'Oro Group, a reputable market research firm, significant growth was observed in the physical infrastructure segment of the data center market. The report highlights that the global Data Center Physical Infrastructure (DCPI) market achieved a remarkable 27% year-over-year growth, reaching $14 billion in revenue for the second quarter of 2026. This surge marks a continuation of the market's rapid expansion, as the ongoing demand for AI-driven data center capabilities continues to outstrip supply.

The quarterly earnings reflect not just growth, but a market landscape that is increasingly complex. The DCPI market has spent several quarters maintaining growth above 20%, although the modest slowdown from the first quarter of 2026 is more attributed to tougher year-over-year comparison metrics rather than diminished demand. The report introduces a revamped five-segment customer structure that distinguishes various client types, including hyperscalers, cloud providers, colocation services, telecom, and enterprise sectors.

Alex Cordovil, a Research Director at Dell'Oro Group, expressed concerns over possible delays in the construction and expansion of AI-related data centers. Interestingly, the predominant discussion wasn't about cancellations of AI data centers but rather the challenges surrounding project approvals. Cordovil noted, “The hyperscalers' spending plans indicate a strong demand, but factors such as power availability, long-lead equipment timelines, and community resistance are all elongating project timelines. As a result, permitting and siting challenges have now surfaced as significant short-term obstacles.”

Key Highlights from Q2 2026

Rise of Thermal Management

Thermal management emerged as the fastest-growing sector within the DCPI market, boasting a staggering growth of over 40% year-over-year. This segment includes critical components such as liquid cooling systems and heat rejection units, both essential for maintaining optimal operational temperatures in data centers. Solutions like Direct Liquid Cooling (DLC) have prominently contributed to this growth.

Uninterrupted Power Supply (UPS) Growth

Uninterruptable power supply revenue experienced growth of about 20% year-over-year, driven by the increasing standardization of megawatt-class power blocks in AI data facilities. Major vendors are now shifting towards medium-voltage designs and are preparing for the adoption of 800 VDC power architectures. The integrated Busway systems remain the preferred method for overhead power distribution for AI clusters, showcasing a clear demand driven by supply constraints.

Diverse Customer Segments

Under the new customer structure, colocation services have emerged as the largest client category, closely followed by hyperscalers. Meanwhile, the segment catering to other cloud providers—such as neoclouds and AI development services—demonstrated rapid growth, effectively doubling from the previous year. Meanwhile, the enterprise segment has been witnessing a gradual decline in market share. North America remains the central hub for this market, but notable growth in the EMEA region has been observed, indicating a recovery in European colocation services and state-driven AI initiatives.

Mergers and Acquisitions in Power and Cooling

Several significant acquisitions have shaped the landscape in terms of power and cooling solutions. Ecolab's acquisition of cooling specialist CoolIT Systems was finalized in July, while Vertiv entered an agreement to acquire UtilityInnovation Group, which specializes in power management solutions. Similarly, SLB has committed to acquiring heat exchanger manufacturer Kelvion—demonstrating the trend toward enhancing onsite power capabilities and thermal management solutions.

Data Center Permitting Challenges

Recent developments in data center approvals reveal an alarming trend, where community pushback has manifested into broader state-level policies. The state of New York initiated the first statewide moratorium on new data center projects earlier in July, highlighting how regulatory scrutiny is becoming a crucial factor affecting the pacing of new developments. Similarly, in Pennsylvania, data centers were taken out of the fast-track permitting process, and Texas ordered an audit of ongoing data center projects within the ERCOT interconnection framework, further obstructing the commencement of large-scale studies.

As this sector navigates the complexities of growth, the insights from Dell'Oro Group's recent report emphasize the crucial balance between rising demand and the myriad of challenges that can impede progress. Understanding these factors is essential for stakeholders aiming to capitalize on the burgeoning data center infrastructure market.