Data Center Physical Infrastructure Market Grows 27 Percent Y/Y to $14 Billion in 2Q 2026, According to Dell'Oro Group

Delays, Not Cancellations: Permitting Emerges as the Main Near-Term Risk to the AI Data Center Buildout

According to a recently published report by Dell'Oro Group, the trusted source for market information about the telecommunications, security, networks, and data center industries, the worldwide Data Center Physical Infrastructure (DCPI) market grew 27 percent year-over-year (Y/Y) to $14 billion in manufacturer revenue in 2Q 2026. The quarter extended the market's run of growth above 20 percent, as demand for AI data center capacity continued to outpace supply. The modest slowdown from 1Q 2026 reflects a tougher comparison, not softer demand. This is also the first quarterly report under a new five-segment customer structure that breaks out hyperscalers, other cloud providers including neoclouds, colocation, telco, and enterprise.

"The quarter's loudest debate was whether the AI data center buildout is being cancelled; the quieter and more consequential one is whether it will be permitted," said Alex Cordovil, Research Director at Dell'Oro Group.

"The hyperscalers' spending plans leave little doubt about demand, but power, long-lead equipment, and community opposition are all stretching project timelines. We now regard siting and permitting as the most serious near-term brake on the market, and the timing of permits and grid interconnections is harder to call than the demand behind them," add Cordovil.

Additional highlights from the 2Q 2026 Data Center Physical Infrastructure Quarterly Report:

• Thermal Management Leads DCPI Growth: Thermal Management remained the fastest-growing segment, expanding more than 40 percent Y/Y and matching its record share of DCPI revenue. Liquid Cooling, led by Direct Liquid Cooling (DLC), and Heat Rejection—the chillers that reject heat outside the building—both outpaced the segment.
  
  
• UPS and Busway Track AI Buildout: UPS revenue grew about 20 percent Y/Y, with gains concentrated in large three-phase systems as AI data halls standardize on megawatt-class power blocks. Vendors are also moving toward medium-voltage designs and preparing for 800 VDC power architectures. Busway remained the preferred overhead power train for AI clusters, with supply, not demand, the binding constraint.
  
  
• Hyperscalers, Neoclouds, and Colocation Anchor Demand: Under the new customer structure, Colocation was the largest customer segment, followed by Hyperscalers. Other Cloud—home to the neoclouds and AI model builders—grew fastest, with AI-specialized cloud roughly doubling Y/Y. Enterprise continued to lose share. North America remained the market's center of gravity, while EMEA accelerated to its fastest growth since 2021 on European colocation and sovereign AI projects.
  
  
• Power and Cooling M&A Continues: Ecolab (NYSE: ECL) closed its acquisition of liquid cooling specialist CoolIT Systems in July. Vertiv (NYSE: VRT) agreed to acquire behind-the-meter power and microgrid provider UtilityInnovation Group, and SLB (NYSE: SLB) agreed to acquire heat-exchanger maker Kelvion, as suppliers push further into on-site power and heat rejection.
  
  
• Data Center Permitting Goes Statewide: Since the quarter closed, community opposition has turned into statewide policy. New York imposed the first statewide data center moratorium in July, and Pennsylvania removed data centers from its fast-track permitting program in August. Texas ordered an audit of data center projects in the ERCOT interconnection queue, delaying the first batch of large-load studies.