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Data Center Physical Infrastructure Thrives with Impressive Growth

In a recent report published by Dell'Oro Group, a leading source for telecommunications and data center market insights, the global Data Center Physical Infrastructure market demonstrated strong growth, registering an 18% increase year-over-year in the second quarter of 2025. This expansion has pushed the market to a staggering $8.9 billion in manufacturer revenue. Remarkably, this marks the third consecutive quarter of growth rates in the high teens, emphasizing the persistent and rising demand spurred by the ongoing acceleration in artificial intelligence (AI) development.

Alex Cordovil, Research Director at Dell'Oro Group, described the current situation in the data center sector by stating, “Hyperscalers and colocation providers are scaling capacity at an unprecedented pace, and direct liquid cooling has consolidated as the technology of choice, moving quickly from early adoption to mainstream design.” This statement underscores the transformative changes occurring in the data center landscape, driven by advancements in technology and the growing necessity for more efficient cooling methods.

Highlights from the 2Q 2025 Report

Among the key findings of the report are several noteworthy trends:
1. Thermal Management Growth: The thermal management segment experienced substantial growth, expanding 29% year-over-year. Notably, direct liquid cooling witnessed a staggering 156% increase, establishing itself as the standard for large AI clusters. This shift is largely attributed to the increasing power demands and the need for efficient cooling solutions in data centers.

2. Power Distribution: Power distribution markets also thrived, with a growth of 26% year-over-year. This uptick is primarily driven by the adoption of overhead busways and intelligent rack Power Distribution Units (PDUs), which are essential to support higher-density racks essential for AI operations.

3. Uninterruptible Power Supply (UPS): The UPS revenue itself rose by 13% year-over-year to reach $3.3 billion, with the highest demand noted for large three-phase systems rated at 251 kVA and above. Companies are increasingly investing in reliable supply systems to ensure seamless operations during power fluctuations.

4. Regional Performance: Notably, North America led the charge with a growth rate of 23% year-over-year, attributable to several record-breaking gigawatt-scale campus announcements made recently. While the EMEA and Asia Pacific regions also showed growth, they are currently lagging and are expected to ramp up their capabilities in the coming quarters.

5. Leading Players: Hyperscalers and colocation providers continue to play a pivotal role in driving expansion, accounting for over 80% of the growth in this sector. This highlights their essential contribution in facilitating what is termed the AI supercycle, a significant trend in the tech industry typified by the rapid adoption and integration of AI technology.

6. Market Beneficiaries: Various vendors across the spectrum have benefited from the AI surge. Major infrastructure players like Vertiv and specialized cooling companies such as Munters have seen enhanced demand due to this evolving landscape.

Conclusion

As we look toward 2026, the prospects for the Data Center Physical Infrastructure market appear exceptionally promising. With AI being seen as critical for maintaining competitiveness across various industries, the expansion of data center infrastructure is likely to continue its robust growth trajectory.

For more information on this report, or to gain insight into future market trends, Dell’Oro Group can be contacted directly via email or through their website. As the data center industry evolves, staying ahead of these trends will be essential for businesses seeking to capitalize on these technological advancements.