Microsoft is continuing to pour billions into building and equipping new data centers across the U.S as demand for Microsoft Azure and its cloud services soars.
Microsoft has unveiled plans to spend $200 million in building two data centers just outside Chicago at a former AT&T campus. Each data center at the 53-acre site will be around 200,000 square feet and expected to become operational in 2022.
The Redmond, Wash.-based software giant is currently constructing a separate data center in Elk Gove Village, about 10 miles from the former AT&T campus. Just last month, Microsoft announced plans to open another data center in the Atlanta area to deliver faster access and a broader range of Azure cloud services to the region.
Microsoft is also continuing to expand its data center footprint outside the U.S. with new data centers currently being built in Poland, New Zealand, Mexico, Spain and Israel, among other countries.
Microsoft is one the largest spenders in the data center market today alongside the likes of Amazon Web Services and Google. The global COVID-19 pandemic spurred a record-breaking third quarter 2020 as data center spending reached $37 billion, led by AWS, Google and Microsoft.
AWS, Microsoft and Google collectively now account for more than 50 percent of the world’s largest data centers across the globe, according to data from Synergy Research Group. The number of large data centers operated by hyperscale providers like Microsoft increased to nearly 600 by the end of 2020, twice as many as there were in 2015.
During Microsoft’s most recent second fiscal quarter 2021, the company generated a whopping $16.7 billion in commercial cloud revenue, up 34 percent year over year. Microsoft Azure sales were up 50 percent year over year, which were included in the company’s Intelligent Cloud busines unit that hit $14.6 billion in sales.
“What we have witnessed over the past year is the dawn of a second wave of digital transformation sweeping every company and every industry,” said Microsoft CEO Satya Nadella during the company’s second quarter earnings call with media and analysts in January. “Building their own digital capability is the new currency driving every organization’s resilience and growth. Microsoft is powering this shift with the world’s largest and most comprehensive cloud platform.”
The COVID-19 pandemic has significantly shifted how businesses of all sizes buy and use online tools, from video-conferencing and virtual business events to entertainment and remote education. This change was enabled mostly by cloud environments, particularly public clouds. Spending on public cloud infrastructure reached a massive $13.3 billion in the third quarter of 2020 alone, representing an increase of 13 percent year over year, according to IT research firm IDC.
In addition to rapidly building out its global data center footprint, Microsoft is also spending heavily on leasing data center space from colocation partners.
Microsoft led the nation in leasing U.S. data center capacity last year. Multi-tenant data center operators leased nearly 700 megawatts of capacity in the U.S. in 2020, more than tripling 2019, with Microsoft dominating leasing in America, according to North American Data Centers’. Microsoft leased 178 megawatts of capacity in Virginia alone in various data centers, as well as leasing in other large U.S. markets including the Bay Area and Phoenix.
Microsoft is also preparing to begin the massive $10 billion Department of Defense JEDI cloud contract it has been awarded on two occasions.