Worldwide Server Market Revenue Declines 7.0% in Q3 2016

Vendor revenue in the worldwide server market declined 7.0% year over year to $12.5 billion in the third quarter of 2016 (3Q16), according to new IDC report. Overall server market growth had recently slowed in part due to a slowdown in hyperscale datacenter growth and continued drag from declining high-end server sales. In addition, the robust enterprise refresh cycle of 2015 has created difficult comparisons in 2016 to the prior year's quarterly results. Worldwide server shipments decreased 4.6% to 2.38 million units in 3Q16 when compared with the same year-ago period.

On a year-over-year basis, volume and midrange system revenue decreased 4.9% and 4.1% in 3Q16 to $10.3 billion and $1.1 billion, respectively. Server demand across enterprise portfolios was soft for the quarter. Meanwhile, 3Q16 demand for high-end systems experienced a year-over-year revenue decline of 25.0% to $1.1 billion. IDC expects continued long-term secular declines in high-end system revenue.

"The server market suffered a difficult quarter as previously healthy volume server growth faltered, suggesting that weakness in enterprise demand was more pronounced than expected," said Kuba Stolarski, research director, Computing Platforms at IDC. "While cloud datacenter buildouts by key hyperscalers helped in part to prop up the quarterly results, the overwhelming downward trend was difficult to overcome. It remains to be seen whether hyperscale can drive enough demand to keep the market positive going into the home stretch of 2016.