Next Generation Data Center Market Size (2025 – 2030)

The Next Generation Data Center Market was valued at $347.60 billion and is projected to reach a market size of $590.92 billion by the end of 2030. Over the forecast period of 2025-2030, the market is projected to grow at a CAGR of 11.1%. 

Next-generation data centers are a kind of storage device that is meant to store data and applications for business and personal purposes. They are utilized to retrieve and save large amounts of data. Next-generation data centers are dependent on software technologies because they enable greater control over physical and virtual resources. One of the key properties that have driven the demand of the next generation data center to the market are its accuracy, reliability, security, and scalability solutions.

Key Market Insights:

• Based on a report released by the Data Centre Infrastructure Management (DCIM) Association in 2022, over 180 new mega data centers were rolled out by hyperscale operators across the globe, registering a 24% increase year on year in terms of capacity. Such remarkable growth in mega data center facilities is leading to considerable market growth across regions.
• The typical power usage effectiveness (PUE) ratio in mega data centers is better at 1.15 than for conventional data centers at 1.67, a 31% improvement in energy efficiency. The advancement translates to around $1.5 billion in energy cost savings on an annual basis in the industry, based on Green Grid Alliance figures.
• In the United States, mega data centers consume approximately 2.5% of all electricity produced, with projections indicating this could reach 4.5% by 2030. This growing energy demand has accelerated innovation in renewable energy adoption, with 72% of new facilities incorporating on-site renewable generation capabilities.
• Recent polls suggest 78% of large businesses are moving from on-site infrastructure to mega data center colocation or cloud infrastructure, with 64% reporting cost savings averaging 35% for overall IT operations if using hyper-scale facilities compared with having internal data centers.
• The mega data center industry is witnessing revolutionary change, especially in cooling technologies and AI operations. Direct liquid cooling witnessed a year-over-year adoption rate of 85%, supporting over 100kW high-density compute racks with less cooling energy consumption by up to 56% compared to air cooling. Artificial intelligence is transforming facility management with predictive maintenance reducing unplanned downtime by 43%, and autonomous systems enhancing power usage effectiveness (PUE) by 9% compared to manual methods.

Next Generation Data Center Market Key Drivers:

From CPUs to GPUs: Meeting the Demands of AI Workloads

AI and High-Performance Computing Requirements.

The growth of artificial intelligence (AI) and machine learning applications calls for data centers with increased computational power. AI workloads, especially those related to large-scale training models, demand high levels of processing and energy. For example, AI-optimized data centers are estimated to use four times more electricity by 2030 than at present. This increase highlights the demand for infrastructure that can deliver high-density computing while being energy efficient.

Edge Computing and 5G Integration.

The advent of 5G technology and the proliferation of Internet of Things (IoT) devices has propelled the growth of edge computing. Data is processed near the source in edge data centers, centers, lowering latency and improving real-time handling of data. This is vital for use cases like autonomous vehicles and smart cities, where immediate processing is necessary. The combination of 5G with edge computing is fueling the growth and diversification of data center infrastructures.

Sustainability and Energy Efficiency Programs.

As data centers increasingly become central to worldwide digital activity, their environmental footprint has been called into question. The sector is reacting by focusing on sustainability through the implementation of energy-efficient technology and green energy sources. Advances in cooling technology, power management, and the utilization of green energy are allowing data centers to minimize their carbon footprint while increasing demand. These efforts not only solve environmental issues but also drive operational cost savings.

Next-Generation Data Center Market Restraints and Challenges:

Unlocking Opportunities in a Digitally Driven World Discovering the potential of AI,
Edge computing, and sustainability to transform future-proof data infrastructures.

The market for the Next Generation Data Center (NGDC) is expected to grow significantly on the back of several key opportunities. The convergence of artificial intelligence (AI) and machine learning is revolutionizing the operations of data centers, supporting predictive maintenance, energy optimization, and stronger security protocols. The move towards AI-based infrastructures supports more streamlined and self-governing management of data centers. Edge computing is a key opportunity too, given the growing need for real-time processing of data with the growth of Internet of Things (IoT) devices and 5G networks. Through computation proximity to sources of data, edge data centers lower latency and enhance user experiences in use cases such as smart cities and autonomous vehicles. Sustainability efforts are also defining the NGDC market, where energy-efficient design and integration of renewable energy are focused. Advances like liquid cooling and data center modularity help minimize carbon footprints and operational expenditures. In addition, the implementation of hybrid and multi-cloud strategies provides enterprises with flexibility and scalability, allowing for easier integration of on-premises and cloud capacities. Each of these opportunities places NGDCs at the center opportunities individually places NGDCs at the center of enabling the changing digital infrastructure requirements of different industries.

Next-Generation Data Center Market Opportunities:

Challenges Facing the Next-Generation Data Center Market Combating energy
Requirements, regulatory barriers, and talent gaps in the dynamic digital infrastructure ecosystem.

The Next Generation Data Center (NGDC) industry is witnessing explosive growth but is confronted with some serious challenges that may hamper its advancement. One of the main problems is the growing energy usage fueled by AI and high-performance computing workloads. Forecasts show that data centers may use more power than Japan by 2030, with AI-optimized data centers taking four times the current amount. This increase not only puts a strain on power grids but also poses environmental issues. Moreover, the clustering of data centers in certain areas, like the FLAP-D cities in Europe, has created regional energy bottlenecks, prompting some governments to enact moratoriums on new data center developments. The other urgent problem is the lack of skilled labor. With the increased demand for data center services comes the parallel requirement for experts in running intricate infrastructures. The problem is, though, that the industry cannot adequately attract and retain such expertise since most specialists are on the verge of retirement and no new people are coming in to take their place. In addition, the industry faces regulatory issues, such as strict environmental and energy efficiency regulations, that necessitate operators to provide reporting on several performance indicators. Disruptions in supply chains also represent a threat since shortages of essential components such as generators and transformers can lead to project delays and cost escalation. Overall, these issues demand strategic planning and innovation to support the sustainable development of the NGDC market.

NEXT GENERATION DATA CENTER MARKET REPORT COVERAGE:

Next Generation Data Center Market Segmentation:

Next Generation Data Center Market Segmentation: By Component

• Hardware
• Software
• Services

Among the changing dynamics of Next Generation Data Centers (NGDCs), the software element is becoming the fastest-growing entity. This boom is fueled by the growing necessity for virtualization, cloud computing, and software-defined infrastructures. Sophisticated software offerings are critical to optimizing data center operations, with features like advanced encryption, intrusion detection, access controls, and real-time monitoring. In addition, the thrust for energy-efficient and eco-friendly data centers is heavily dependent on advanced software to maximize cooling infrastructure, power usage, and overall efficiency of operations. The embrace of software-defined data centers (SDDCs) is also picking up speed, giving organizations adaptive and responsive IT environments that can cope with changing workloads and business requirements. Such trends together add up to the strong growth of the software segment in the NGDC market.

On the other hand, the solutions segment continues to be the leading segment in the Next Generation Data Center Market. This area includes critical technologies, such as energy-efficient power systems, enhanced cooling systems, and monitoring and management systems to cut down energy usage and cost of operations. The urgent demand for sustainable infrastructure has prompted organizations to invest in these solutions, which help to increase efficiency and reduce environmental footprints. Consequently, the solutions segment remains to hold the greatest market share, highlighting its central position in the establishment of green data center programs.

Next Generation Data Center Market Segmentation: By Type

• Enterprise Data Centers
• Colocation Data Centers
• Hyperscale Data Centers
• Edge Data Centers

Hyperscale data centers have become the market leader in the next-generation data center space, holding around 40% of the market share in 2024. The reason behind this leadership is the need for cloud-based services, big data analytics, and artificial intelligence (AI) applications, all of which demand huge computing power and storage capacity. Top technology firms are heavily investing in hyper-scale facilities to accommodate their large-scale digital operations, taking advantage of these centers' capacity to deliver high-density computing and energy efficiency. The standardization and localization approach followed by hyper-scale data centers also adds to their operational efficiency, establishing them as the backbone of contemporary digital infrastructure.

Edge data centers are witnessing the most rapid growth in the next-generation data center market, driven by the growing demand for low-latency data processing in use cases like autonomous vehicles, smart cities, and industrial automation. By bringing computing resources closer to end-users, edge data centers reduce latency and improve the performance of applications with time sensitivities. The growth of Internet of Things (IoT) devices and the expansion of 5G networks are also driving the growth further, as these produce enormous amounts of data that need to be processed immediately. The manufacturing and automotive industries are at the forefront of adopting edge computing solutions as they see the potential of real-time data analysis in optimizing operations and innovation.

Next Generation Data Center Market Segmentation: By Deployment Model

• On-Premises
• Cloud-Based
• Hybrid

The hybrid deployment model is also growing fast within the Next Generation Data Center (NGDC) market. Hybrid deployment involves the integration of on-premises infrastructure with cloud-hosted services so that organizations get the benefit of hosting sensitive information internally while capitalizing on scalability and economics from the cloud. The adoption of hybrid deployments has been spurred on by growing data sovereignty requirements, regulatory compliance mandates, and requirements to optimize the workload across varying environments. As companies strive to achieve control versus agility, the hybrid model gives a strategic choice that fits changing IT needs and enables digital transformation efforts. Even with the increased popularity of cloud and hybrid deployments, the on-premises deployment model retains a strong share in the NGDC market.

Firms with high-security needs, e.g., the financial and health industries, generally favor on-premises data centers for them to have immediate control over infrastructure and data. This setup offers customized configurations as per specific performance and compliance demands, guaranteeing low latency and high reliability. On-premises deployments are also preferred where applications require guaranteed performance, and the sensitivity of the data is at a premium.  Although the market is slowly moving towards more elastic deployment models, the on-premises method is still a pillar for organizations that value control, security, and compliance.

Next Generation Data Center Market Segmentation: By Industry Vertical:

• Banking, Financial Services, and Insurance (BFSI)
• Information Technology and Telecommunications
• Government and Defense
• Healthcare
• Retail and E-commerce
• Manufacturing, Energy, and Utilities
• Media and Entertainment

In the Next Generation Data Center (NGDC) market, the sector of Information Technology and Telecommunications is the fastest-growing sector vertical. It is fueled by the accelerating growth in data consumption, the high penetration of cloud services, and the growth of 5G networks. Telecom operators are spending significantly on next-generation data center infrastructures to cope with the increasing data traffic and to enable emerging technologies like the Internet of Things (IoT) and edge computing. The fast-paced digitalization in this industry requires scalable and efficient data center solutions to address the rising demand for high-speed connectivity and data processing capabilities.

On the other hand, the Banking, Financial Services, and Insurance (BFSI) industry continues to lead the NGDC market. The reason for this is the industry's imperative need for secure, dependable, and compliant data processing and storage facilities. Banks process large volumes of sensitive information and need strong data center infrastructures to maintain data integrity, facilitate real-time transaction processing, and meet stringent regulatory compliance. The BFSI industry's focus on disaster recovery, cybersecurity, and the availability of services without any interruptions further speaks to its dependency on next-gen data centers for sustaining operational strength and customer confidence.

Next Generation Data Center Market Segmentation: By Region

• North America
• Europe
• Asia Pacific
• South America
• Middle East and Africa

Next-Generation Data Center (NGDC) market displays huge regional differences in terms of market share and growth paths. North America is presently leading the overall global market with around 40% of the overall share due to the dominance of key technology players and a very high acceptance level of high-tech products. Asia-Pacific comes next with a 30% market share, witnessing fast growth driven by digital transformation programs, rising internet penetration, and growing cloud services in nations such as China and India. Europe takes approximately 20% of the market, driven by strong data protection policies and a sustainability drive for data center operations. Latin America and the Middle East & Africa both contribute approximately 5%, growth in these two areas being fostered by growing digitalization and investments in IT infrastructure.

COVID-19 Impact Analysis on the Next-Generation Data Center Market:

The COVID-19 pandemic had a huge impact on the Next Generation Data Center (NGDC) industry, serving as a driving force for accelerated digital transformation in most sectors. With the rise of lockdowns and remote work, there was an unprecedented demand for digital services such as cloud computing, online learning, telemedicine, and e-commerce. This transformation created the need for strong and scalable data center infrastructures to manage more data traffic and support business continuity. As a result, companies accelerated their transition to cloud services and invested in edge computing to minimize latency and improve user experience. The pandemic also revealed weaknesses, including supply chain disruptions that caused delays in hardware purchases and data center buildouts. The unexpected surge in demand also emphasized the importance of energy-efficient and sustainable data center operations. In response, the industry saw increased adoption of prefabricated and modular data center designs that supported faster deployments as well as scaling. In sum, COVID-19 highlighted the vital importance of NGDCs in underwriting a digitally connected society and stepped-up trends that are set to shape the course of the future for the industry.

Trends/Developments:

Several significant technology releases in 2023 pushed the industry's capabilities forward. Siemon launched EagleEye Red software for improved data center network asset tracking, and Flexential grew its FlexAnywhere Platform with more than 110MW in development in Atlanta and Hillsboro. Dell also extended its Private Wireless Program to encompass Airspan and Druid technologies for better enterprise-edge connectivity.

 In the meantime, 365 Data Centers rolled out its enterprise service platform to eight new data centers and 35 points of presence, optimizing colocation and IT services. Cisco and Leonardo also signed an MoU to collaborate on joint innovation in areas of cybersecurity, IoT, and edge computing, while Cisco further expanded its Catalyst 9000 series to strengthen edge capabilities for industrial applications.

March 2022 - Alibaba Cloud launched a data center in South Korea as part of an Asia Pacific expansion plan. Additionally, the investment is facilitated by the high demand for digital transformation in the country.

PhonePe in October 2022 introduced a green data center in India that utilizes technologies of NTT Corporation and Dell Technologies Inc. October 2022 - Augtera Networks partnered with AMD Pensando DPU to automate the data center. The collaboration seeks to deploy network AI in AMD's fourth-generation data center.

Key Players:

1. Amazon Web Services (AWS)
2. Microsoft Azure
3. Google Cloud Platform (GCP)
4. IBM Corporation
5. Equinix, Inc.
6. Dell Technologies Inc.
7. Cisco Systems, Inc.
8. Digital Realty
9. Hewlett Packard Enterprise (HPE)
10. Lenovo Group Limited