According to a new report by Dell’Oro Group, the trusted source for market information about the telecommunications, security, networks, and data center industries, the worldwide Data Center Physical Infrastructure (DCPI) market grew 28 percent year-over-year to $12 billion in manufacturer revenue in 1Q 2026. This marks the fifth consecutive quarter of more than 20 percent growth, as tightly constrained compute supply continued to run behind relentless AI demand. The quarter’s total also reflects newly expanded Heat Rejection coverage, which adds roughly $1 billion to the measured market and will widen further in upcoming reports.
Additional highlights from the 1Q 2026 Data Center Physical Infrastructure Quarterly Report:
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Thermal Management led all DCPI segments, expanding nearly 50 percent Y/Y, with Direct Liquid Cooling (DLC) 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. -
Power distribution categories favored by AI deployments outpaced the broader market, with busbars growing in the low-thirties percent range, while UPS rose at a high-teens pace as higher-capacity, grid-interactive designs gained ground. -
IT Racks and Containment and Rack PDUs both posted high-teens growth—solid double digits, but the most measured within DCPI—as rising rack density and OCP-style in-rack DC distribution reshape content per rack. -
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. -
M&A activity accelerated, headlined by Ecolab’s agreement to acquire CoolIT Systems, alongside Vertiv’s acquisitions of Strategic Thermal Labs, ThermoKey, and BMarko Structures, and Legrand’s additions of Kratos Industries and a stake in Accelsius—with liquid cooling the clear center of gravity. -
The market outlook remains robust and was revised upward, with DCPI revenue expected to sustain a low-twenties percent Y/Y growth trajectory into early 2027, supported by record order backlogs even as project-timing and U.S. permitting uncertainties persist.
Alex Cordovil, Research Director at Dell’Oro Group
Demand for AI compute remains exceptionally strong, and access to power is still the defining challenge for the buildout. 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.