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Server Vendors Gain on Increased IT Infrastructure Investments

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Worldwide server revenues jumped 12% year over year to $20.9 billion in first-quarter 2021, while overall shipment grew 8.3% to 2.8 million units, according to the latest data compiled by the International Data Corporation (IDC).

IDC noted volume server revenues increased 15.4% year on year to $17.3 billion, while the mid-range server witnessed a decline of 2.7% to $2.4 billion. High-end system revenues inched up 0.1% to $1.2 billion.

Also, x86 servers retained the growth momentum during the first quarter. Per IDC, x86 server revenues climbed 10.9% year over year to $18.7 billion, while revenues from non-x86 servers increased 23% to $2.2 billion.

IDC stated that the server market is benefiting from increased investments in data-center infrastructure, modernization of business applications and IT operations. Additionally, the year-over-year rise reflects benefits from the pandemic-hit year-ago quarter’s comparison.

Computer - Integrated Systems Industry 5YR % Return Computer - Integrated Systems Industry 5YR % Return

Computer - Integrated Systems Industry 5YR % Return

Dell Tops Vendor List

With respect to individual server manufacturers, Dell Technologies (DELL - Free Report) secured the top vendor position on a revenue basis during the first quarter, with a market share of 17%. The company’s server revenues increased 2.4% to $3.56 billion.

Hewlett Packard Enterprise (HPE - Free Report) ranked the second, with a market share of 15.9%. Its server sales grew 15% year on year to $3.32 billion.

The third spot is a tie between China-based Inspur/Inspur Power Systems and Lenovo (LNVGY - Free Report) , generating 7.2% and 6.9% share of total server revenues, respectively. Inspur’s revenues increased 9.7% year over year to $1.51 billion. Moving on to Lenovo, the company’s server revenues improved 34.9% in the first quarter to $1.44 billion.

International Business Machines’ (IBM - Free Report) server revenues climbed 29.1% to $1.11 billion. The company holds the fourth position in the top vendor list, with a market share of 5.3%.

In terms of volume too, Dell topped with a market share of 17.5% followed by Hewlett Packard Enterprise’s 14.5%. Inspur held the third position with a market share of 11.1%. Lenovo captured the fourth position, with market stakes worth 6.1%. Super Micro and Huawei jointly held the fifth position with 4.6% and 4.2% share, respectively.

While Lenovo carries a Zacks Rank #2 (Buy), Hewlett Packard, Dell and IBM carry a Zacks Rank #3 (Hold), at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

What Lies Ahead?

The server market is likely to continue benefiting from increased investments in data centers as well as the communications infrastructure market, as enterprises are modernizing their operations amid the pandemic-induced shift in work environment. Surge in remote working and network traffic will be the key catalysts driving the strategic spending.

We have become more tech dependent as working and learning from home, and maintaining social distancing have become the new normal. We are now more active on social media sites, such as Facebook, WhatsApp, Instagram groups and other digital platforms, to keep in touch with our near and dear ones. Office collaboration tools from Zoom Video Communications (ZM - Free Report) and Atlassian (TEAM - Free Report) have become the only way for many of us to work from our homes.

The trend is likely to prevail for some time now, which will, ultimately, aid server vendors, as the need for cloud services that help us work, learn and maintain social contact digitally, will shoot up.

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