Vendor revenue in the overall worldwide computing server market declined 4.6 percent year-over-year to $14.6 billion in the fourth quarter of 2016 (4Q16), according to the latest market study by International Data Corporation (IDC).
Server market growth has slowed in part due to maturity of the hyperscale data center growth, and from declining high-end server deployments.
In addition, the enterprise refresh cycle of 2015 had created less demand in 2016. Worldwide server shipments decreased 3.5 percent to 2.55 million units in 4Q16 when compared with the same year-ago period.
Computing Server Market Development
On a year-over-year basis, volume and mid-range system revenue decreased 3.3 percent and 6.1 percent in 4Q16 to $11.2 billion and $1.4 billion, respectively.
Server demand across the enterprise market was soft for the quarter. Meanwhile, 4Q16 demand for high-end systems experienced a year-over-year revenue decline of 10.7 percent to $2.0 billion. IDC expects continued long-term secular declines in high-end system revenue.
"The server market suffered another difficult quarter as most segments declined, including hyperscale deployments, suggesting that the weakness previously seen is more systemic," said Kuba Stolarski, research director at IDC.
According to the IDC assessment, some public cloud data center deployments are being delayed, and overall levels of deployment and refresh may slow down even through the long term as hyperscalers continue to evaluate their hardware provisioning criteria.
On the enterprise side, IDC analysts are seeing ongoing weakness as companies struggle to decide whether to deploy workloads on premises or off, and continue to consolidate existing workloads on fewer servers.
Regionally, Asia-Pacific (excluding Japan) and Japan experienced the only positive revenue growth with 4Q16 year-over-year increases of 8.1 percent and 3.3 percent, respectively. These were the same two regions that experienced the only positive growth in 3Q16 as well.
Within APeJ, China drove overall growth by increasing its revenue 18.8 percent to $2.7 billion. All other regions continued to decline. Latin America experienced a relatively small decline of 1.1 percent. The United States declined 7.6 percent year over year.
Europe, the Middle East and Africa (EMEA) declined 12.9 percent, with all sub-regions in decline: Central and Eastern Europe (CEE) declined 25 percent, Western Europe declined 11.8 percent, and Middle East and Africa (MEA) declined 7.5 percent. Canada declined by 15.1 percenrt year over year. Of all regions, the U.S. remains the largest regional market with 39.2 percent of worldwide server vendor revenue.
Outlook for Server Market Growth
Demand for x86 servers weakened in 4Q16 with revenues decreasing 1.9 percent year over year in the quarter to $12.2 billion worldwide, while unit shipments decreased 3.3 percent to 2.53 million servers.
That said, x86 average selling prices (ASPs) increased by 1.5 percent year over year and 2.4 percent sequentially. HPE led the x86 server market with 26.5 percent revenue share based on a year-over-year decline of 13 percent in x86 revenue.
Non-x86 servers experienced a revenue decline of 16.7 percent year over year to $2.4 billion, representing 16.2 percent of quarterly server revenue. IBM leads the segment with 75.4 percent revenue share despite a 17.1 percent year-over-year revenue decline.
IDC also continued to track minimal revenue from ARM-based server sales in 4Q16; ARM sales have yet to make an impact on the server market.