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We sat down with our Server analyst, Ms. Sameh Boujelbene, to discuss the Server market during the third quarter of 2016 and wanted to share some interesting findings:

In the third quarter of 2016, server shipments were down one percent year-over-year (marking the first decline in 15 quarters) and revenues were down four percent year-over-year (marking the steepest decline in 10 quarters).

In the worldwide market, Asia Pacific was the only region that did not experience a decline, helped by sales in China.

As we have previously predicted, 2015 was the last year of Enterprise server shipment growth.

Enterprise server weakness was even more pronounced during the quarter as end users were able to use virtualization to leverage existing investments without having to buy new servers. Additionally, macro-economic uncertainties prompted users to adopt Cloud services because accounting of operating expenditures is more favorable than capital expenditures (CAPEX).

Also in line with our expectations, CAPEX spending by the four leading U.S-based Cloud Service Providers (SP) (Amazon, Facebook, Google, and Microsoft) was solid for the third consecutive quarter. Year-over-year growth was broad-based across these Cloud SPs and mainly benefitted white box vendors. It appears the growth was driven by investment in the U.S. data centers where white box servers continue to dominate.

White box shipments were up 22 percent year-over-year in the quarter as their servers are still being consumed by tier 1 Cloud SPs and are starting to gain traction in tier 2.

Shipments from White box vendors also exceeded both Hewlett Packard Enterprise and Dell shipments in the quarter as both companies experienced turbulence in the Enterprise market.