Worldwide server market revenue declines 4.6% in the first quarter as the market prepares for a major refresh, according to IDC


Jun 7, 2017

FRAMINGHAM, Mass., June 6, 2017 – According to the International Data Corporation (IDC) Worldwide Q uarterly Server Tracker, vendor revenue in the worldwide server market declined 4.6% year over year to $11.8 billion in the first quarter of 2017 (1Q17). Overall server market growth continues to slow down with most hyperscale service providers waiting until the second half of the year for deployment of Intel's new Skylake processors. High-end server sales continue to be a drag on overall market performance. The market has also been negatively affected by DRAM pricing issues. Worldwide server shipments increased 1.4% year over year to 2.21 million units in 1Q17. One customer accounted for more than 10% of the servers shipped in 1Q17.

Volume server revenue declined by 3.4% to $9.5 billion, while midrange server revenue grew 16.5% to $1.3 billion. Demand for high-end systems experienced a year-over-year revenue decline of 29.0% to $1.0 billion. IDC expects continued long-term secular declines in high-end system revenue.

"The server market continues to struggle to find growth," said Kuba Stolarski, research director, Computing Platforms at IDC. "As the market prepares for the switch to Intel's Skylake this year, we may be witnessing a shift in how workloads are deployed in the future, and what architectural choices will be made around modularity, operating environments, software, and cloud services. As indicated by this quarter's results, one large server customer appears to be betting on a major transition to cloud services, as it alone accounted for approximately a quarter of a million servers deployed in the first quarter."

Overall Server Market Standings, by Vendor Group

Hewlett Packard Enterprise (HPE) retained the number 1 spot in the worldwide server market with 24.2% market share in 1Q17, as revenue decreased 15.8% year over year to $2.9 billion. HPE's share and year-over-year growth rate includes revenues from the H3C joint venture in China that began in May of 2016; as a result, the reported HPE/New H3C Group combines server revenue for both companies globally. Dell Inc maintained its number 2 position in the worldwide server market with 20.1% of vendor revenue for the quarter and 4.7% year-over-year growth to $2.4 billion. Cisco, IBM, and Lenovo were statistical tied* for the third market position. Cisco had 7.0% share, with revenue declining 3.0% year over year to $825 million. IBM had 6.3% share, with revenue declining 34.7% to $745 million. Lenovo had 6.2% share, with revenue declining 16.5% to $727 million. The ODM Direct group of vendors grew revenue by 41.8% to $1.2 billion. Dell Inc and HPE were statistically tied* for first place in overall unit share, with 21.0% and 20.8% of worldwide server shipments, respectively.

Top 5 Companies, Worldwide Server Systems Vendor Revenue, Market Share, and Growth, First Quarter of 2017 (Revenues are in Millions)

Vendor 1Q17 Revenue 1Q17 Market Share 1Q16 Revenue 1Q16 Market Share 1Q17/1Q16 Revenue Growth
1. HPE / New H3C Group** $2,861.7 24.2% $3,397.7 27.5% -15.8%
2. Dell Inc $2,368.5 20.1% $2,262.0 18.3% 4.7%
3. Cisco* $824.7 7.0% $850.2 6.9% -3.0%
3. IBM* $744.5 6.3% $1,139.6 9.2% -34.7%
3. Lenovo* $727.0 6.2% $871.2 7.0% -16.5%
ODM Direct $1,224.5 10.4% $863.8 7.0% 41.8%
Others $3,058.3 25.9% $2,990.3 24.2% 2.3%
Total $11,809.3 100% $12,374.8 100% -4.6%

IDC Worldwide Quarterly Server Tracker, June 2017

*Note : IDC declares a statistical tie in the worldwide server market when there is a difference of one percent or less in the share of revenues or shipments among two or more vendors.

**Note : Due to the existing joint venture between HPE and the New H3C Group, IDC will be reporting external market share on a global level for HPE as "HPE/New H3C Group" starting from 2Q 2016 and going forward.

View Chart

Top 5 Companies, Worldwide Server Systems Unit Shipments, Market Share, and Growth, First Quarter of 2017 (Units are in Thousands)

Vendor 1Q17 Units 1Q17 Market Share 1Q16 Units 1Q16 Market Share 1Q17/1Q16 Unit Growth
1. Dell Inc* 465.3 21.0% 464.6 21.3% 0.1%
1. HPE / New H3C Group* ** 460.4 20.8% 537.4 24.6% -14.3%
3. Lenovo 146.1 6.6% 200.9 9.2% -27.3%
4. Huawei* 119.2 5.4% 89.8 4.1% 32.7%
4. Inspur* 98.6 4.5% 87.2 4.0% 13.0%
ODM Direct 443.6 20.0% 307.9 14.1% 44.1%
Others 481 21.7% 496.6 22.7% -3.1%
Total 2,214.3 100% 2,184.5 100% 1.4%

IDC Worldwide Quarterly Server Tracker, June 2017

"Results for the quarter were right in line with what IDC had forecast in the fourth quarter of 2016. Demand for two-socket form factors continues to control a majority of unit shipments now and going forward as they are the sweet spot for density-optimized servers," said Lloyd Cohen, director of Worldwide Market Analysis, Computing Platforms at IDC. "Two-socket machines are attractive for datacenter deployment in terms of both power usage and cost per server. Their growth rate may slow down over the short term and, because they control a significant portion of the overall server market, the overall server market growth rate will be dampened worldwide."

Top Server Market Findings

On a geographic basis, Central and Eastern Europe (CEE) was the fastest growing region with 7.2% year-over-year growth, followed by Canada with 2.8%, and Asia/Pacific (excluding Japan) with 0.9%. Within Asia/Pacific, China grew a modest 1.7%. the United States declined 2.3%, Japan declined 4.3%, Western Europe declined 14.3%, Latin America declined 14.6%, and Middle East and Africa declined 14.8%.

Demand for x86 servers was flat (0.0%) in 1Q17 with $10.6 billion in revenues. Non-x86 servers declined 30.9% year over year to $1.3 billion.

IDC's Server Taxonomy

IDC's Server Taxonomy maps the eleven price bands within the server market into three price ranges: volume servers, midrange servers and high-end servers. The revenue data presented in this release is stated as vendor revenue for a server system. IDC presents data in vendor revenue to determine market share position. Vendor revenue represents those dollars recognized by multi-user system and server vendors for ISS (initial server shipment) and upgrade units sold through direct and indirect channels and includes the following embedded server components: Frame or cabinet and all cables, processors, memory, communications boards, operating system software, other bundled software and initial internal and external disk shipments.

IDC's Quarterly Server Tracker is a quantitative tool for analyzing the global server market on a quarterly basis. The Tracker includes quarterly unit shipments and revenues (both vendor revenue and value of shipments), segmented by vendor, family, model, region, operating system, price band, CPU type, and architecture.

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