Evercore ISI highly praises the prospects of the server market: the recovery of the traditional computing market and the AI infrastructure will drive revenue growth by over 25% in 2025.

Investment bank Evercore ISI has released a research report stating that they have adjusted their server market model forecasts following the latest market forecasts update from IDC. With fourth-quarter performance exceeding expectations, the bank has raised its revenue growth forecast for the server market in 2025 for the third consecutive quarter. Currently, the bank expects a year-over-year revenue growth of 25.3% in the server market in 2025 (previously expected 19.5%), and a year-over-year shipment growth of 8.4% (previously expected 8.2%). Evercore ISI pointed out that in the fourth quarter of 2024, server shipments grew by 25.0% year-over-year (previously expected 21.8%), exceeding the growth rates of 18.8% in the third quarter and 17.2% in the second quarter of the previous year. The bank attributes the accelerated growth in server shipments to the continued large-scale deployment of accelerated computing servers (GPU servers) and the recovery of the traditional computing market. This view from Evercore ISI aligns with IDC's perspective. The latter attributes the strong performance of the server market in the fourth quarter of 2024 to the large-scale deployment of GPU servers by hyperscalers and AI infrastructure buyers. In addition, non-accelerated computing (traditional servers) continued to grow in that quarter, with an overall shipment growth of 16.9%, mainly driven by the overall market recovery and the replacement cycle of older equipment. Specifically, ARM architecture server shipments in the fourth quarter of 2024 grew by 71.1% year-over-year (higher than the previous forecast of 49.2%), showing the highest growth rate; followed by x86 servers, which grew by 18.4% year-over-year. At the same time, RISC servers and other architecture servers (CISC and EPIC) saw year-over-year shipment declines of 16.9% and 7.2% respectively. According to IDC data, Dell Technologies, Inc. Class C (DELL.US) and Super Micro Computer, Inc. (SMIC.US) had market shares that were almost equal in the fourth quarter of 2024 (with a market share difference of less than 1%). Dell Technologies, Inc. Class C had a market share of 7.2% (compared to 11.3% in the same period last year); Super Micro Computer, Inc. had a market share of 6.5% (compared to 8.0% in the same period last year); Hewlett Packard Enterprise Co. (HPE.US) had a market share of 5.5% (compared to 6.8% in the same period last year); Inspur Electronic Information Industry had a market share of 5.0% (compared to 5.8% in the same period last year); and Lenovo had a market share of 4.9% (compared to 5.5% in the same period last year). It is worth noting that despite the fact that the top five server vendors achieved year-over-year revenue growth of over 20% in the fourth quarter of last year, their market shares still declined. This is mainly due to the continued expansion of market share by ODM vendors. Data shows that ODM server vendors saw a year-over-year revenue growth of 155.5% in the fourth quarter of last year, occupying 47.3% of the market revenue share (compared to 35.4% in the same period last year). In addition, in the fourth quarter of 2024, total server market revenue grew by 91.0% year-over-year (previously expected 60.4%). The average selling price (ASP) of servers in the fourth quarter grew by 52.8% year-over-year and 6.9% quarter-over-quarter; the ASP for the full year increased by 49.4%. The bank expects that ASP will continue to increase in 2025 and beyond, but at a slower pace, with an expected year-over-year increase of 15.7% in 2025 and 7.1% in 2026. Looking beyond 2025, Evercore ISI expects the server market to continue growing, primarily driven by the expansion of cloud service providers (CSPs) and large enterprise infrastructure. The bank expects server market revenue to grow by 15.4% year-over-year in 2026, with overall server shipments increasing by 7.7%. Overall, Evercore ISI believes that the server market continues to benefit from significant investments in AI-related infrastructure, as well as the recovery of traditional server deployments. Therefore, the bank has once again raised its market expectations. The bank also notes that while traditional OEM server vendors are still achieving double-digit growth, ODM suppliers are growing at a faster rate, occupying a larger share of the overall market in the fourth quarter of last year.