REDWOOD CITY, Calif. – According to a new report by Dell’Oro Group, the worldwide data center physical infrastructure market grew 28 percent year-over-year to $12 billion in manufacturer revenue in the first quarter of 2026. 

This marks the fifth consecutive quarter of more than 20 percent growth, as tightly constrained compute supply continued to run behind relentless artificial intelligence demand. The quarter’s total also reflects newly expanded heat rejection coverage, which adds roughly $1 billion to the measured market.

“Demand for AI compute remains exceptionally strong, and access to power is still the defining challenge for the buildout,” said Alex Cordovil, research director at Dell’Oro Group. “Permitting delays and local opposition have grown into a watchout over the past few quarters – particularly in the United States, where community pushback is becoming a real factor in project timing, alongside unsettled compute architectures and giga-scale projects slipping their schedules. Against that backdrop, the vendors pairing industrial scale with deep data center exposure are the ones capturing the opportunity, with liquid cooling firmly at the center of it. We expect the market to hold a firmly positive trajectory, supported by record order backlogs.”

Additional highlights from the report include:

  • Thermal management led all data center physical infrastructure segments, expanding nearly 50 percent year-over-year, with direct liquid cooling continuing to be a vector of transformation for cooling architecture as a whole.
  • Heat rejection – a newly introduced category that rebases prior chiller tracking ahead of broader equipment coverage – posted strong early momentum and is emerging as a focal point of next-generation data center design.
  • Service providers reached a record share of total manufacturer revenue, as hyperscalers, neoclouds, colocators and a new wave of developers pressed for capacity; North America remained the market’s center of gravity, accounting for more than half of revenue.
  • The market outlook remains robust and was revised upward, with data center physical infrastructure revenue expected to sustain a low 20s percent year-over-year growth trajectory into early 2027, supported by record order backlogs even as project-timing and U.S. permitting uncertainties persist.