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Microsoft (MSFT) Reportedly Eyeing China Data Center Expansion

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Microsoft MSFT is working toward setting up four new data centers in China by early 2022, as reported by Bloomberg citing sources familiar with the matter.

With the data center expansion, the tech giant is looking to augment its service capacity across Asia amid pandemic-triggered spurt in demand for internet services added the report.

Bloomberg further stated that Chinese business enterprises are now ramping up migration of their workloads to cloud as well as new regulations now require both local and international to shift to local data management. These factors are expected to drive demand for cloud migration as well as data storage & management services, which bode well for cloud service providers like Microsoft.

Nonetheless, Microsoft needs to watch out for tough competition from leading Chinese stalwarts like Alibaba and Huawei Technologies in the lucrative data management space noted Bloomberg.

However, there is no official word on the matter from Microsoft, so far.

Microsoft Corporation Price and Consensus

Microsoft Corporation Price and Consensus
Microsoft Corporation Price and Consensus

Microsoft Corporation price-consensus-chart | Microsoft Corporation Quote

Microsoft Looking to Tap Thriving Cloud Market

Worldwide cloud computing market is set to witness a CAGR of 17.9% between 2021 and 2028 and reach $791.48 billion, per a report from Fortune Business Insights. The market is being driven by rapid migration of workloads to cloud by business enterprises owing to work from trend and telehealth services.

Asia-Pacific (APAC) cloud market is expected to witness rapid growth in the next few years owing to rapid internet penetration as well as increasing demand for cloud-based solutions across manufacturing and healthcare verticals, added the report.

Moreover, the cloud computing market in the APAC is projected to witness a CAGR of 7.7% between 2019 and 2024 and reach $191.8 billion, per a report from GlobalData.

Microsoft is looking to capitalize on this opportunity by expanding data center footprint in China. Citing white paper China Cloud Industry Development, Microsoft noted that cloud market in China alone is forecast to reach $46 billion by 2023.

In March 2021, in association with local operating partner — 21Vianet — Microsoft announced that it was working on launching a new Azure region in North China by 2022. The company noted that it anticipates the new region to double the capacity of its intelligent cloud portfolio (Azure, Office 365, Microsoft Dynamics 365 and Power Platform) in China, going ahead.

Tough Fight for Asia-Pacific Cloud Market

However, Microsoft needs to watch out for intense competition in the cloud space from the likes of both small and large players. Given the lucrative revenue potential, the cloud services providers are ramping up their efforts, especially in APAC.

Amazon’s AMZN Amazon Web Services (“AWS”), which is the dominant name in cloud domain, recently announced its plans to roll out an infrastructure service in Hyderabad, India by mid-2022.

In 2020, Alphabet’s GOOGL Google Cloud launched a cloud region each in Jakarta and Seoul. The company is planning to launch additional cloud regions India and Australia in the coming days.

Recently, Oracle ORCL announced that it was going to double its cloud capital expenditures in fiscal 2022 to nearly $4 billion. The tech giant is also increasing its global data footprint and is expected to have 38 cloud regions, globally, by 2021.

In May 2021, the company opened its second cloud region in Brazil called Vinhedo Cloud region, marking the 30th cloud region in the world.

At present, in Asia-Pacific, Oracle operates cloud regions in Chuncheon, Tokyo, Osaka, Seoul, Mumbai, Hyderabad, Sydney and Melbourne.

At present, Microsoft carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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