This report reviews the growth and development of the webscale network operator (WNO, or webscale) market since 2011. It covers 21 companies. In the most recent 12 months (3Q23-2Q24), webscalers represented $2.47 trillion (T) in revenues (+8.2% YoY), $301 billion (B) in R&D spending (+5.4% YoY), and $226B in capex (+15.4% YoY). They had $612B of cash and short-term investments (-8.5% YoY) on the books as of June 2024, and $527B in total debt (-3.6% YoY). The value of webscalers’ net plant, property & equipment (net PP&E) on the books as of June 2024 was $787B, up 19.8% YoY. Webscalers employed approximately 4.182 million (M) people at the end of 2Q24, up a bit from the June 2023 total of 4.085M. Below are key highlights from the report: Revenues: Single quarter revenues in 2Q24 were $614.4 billion (B), up 8.4% YoY. That pushed annualized revenues to $2.466 trillion. Topline growth has been driven by the big 4: Alphabet, Amazon, Meta (FB) and Microsoft. For four straight quarters, all of these companies have recorded double digit revenue growth, well above the rest of the pack. For the 2Q24 annualized period, the fastest growth came from Meta, up 24.3% versus 3Q22-2Q23, followed by Microsoft (+15.7%), Alphabet (13.4%), and Amazon (12.3%). The biggest dollar impact on growth in 2Q24 came from Amazon, as its revenues grew $13.6 billion from 2Q23 to end 2Q24 at $148B, up 10.1% YoY. The biggest curb on growth was Chinese ecommerce player JD.com, which recorded 2Q24 revenues of $40.2B, down $0.8B YoY (-2.0%). Capex: After declining 5% in 2023, webscale capex has been on a tear for the first two quarters of 2024, growing 25% and 51% in 1Q24 and 2Q24 respectively. That pushed 2Q24 annualized capex to $226.4 billion in 2Q24, an all-time high and up 15.4% YoY. Webscalers continue with big land purchases and long-term efforts to develop all-new data center campuses. However, the surge appears to be driven largely by technology spending, in particular purchases of servers (GPU and CPU) for data center facilities already up and running. From 44% of annualized capex in 2Q22, Network/IT and software capex was 54% of total capex for the last two quarters. The biggest capex outlays in 2Q24 came from Amazon ($17.6B), Microsoft ($13.9B), Alphabet ($13.2B), and Meta (FB) ($8.2B). These four account for about 80% of single quarter spending. They are the reason behind the unsustainable surge in the price of NVIDIA stock. Profitability: Webscale free cash flow margins averaged out to 18.6% for the 2Q24 annualized period, much higher than the 16.3% and 14.4% recorded in the annualized 2Q23 and 2Q22 timeframes. Average net profit margins are also strong, totaling 18.8% for the overall market in 2Q24 annualized, from 15.2% in 2Q23 and 16.3% in 2Q22. Meta (FB) and Microsoft have the highest overall margins across these two categories. Amazon is a perpetual drag on margins despite its size. Alibaba and Alphabet both reported FCF figures substantially lower than 2Q23, impacting the market average negatively. Employees: Headcount in the webscale market totaled to 4.18 million in June 2024, slightly up from 4.08 million in June 2023. This difference is negligible, considering the size of some of the webscalers and how quickly the ecommerce specialists in particular can change workforce levels. Headcount has been approximately 4.1 to 4.2 million steadily since late 2021. Some of the biggest webscalers are investing heavily in AI and GenAI, with one clear goal being to improve their internal cost efficiencies. This inevitably will mean fewer employees. Even within the ecommerce space, there is a rising use of robots and autonomous vehicles in the logistics chain. Webscale employment is unlikely to rise much from here, if at all. Regional trends: The Asia-Pacific region has been a drag on the market for several quarters. Webscale revenues in the Americas, Europe, and MEA have been growing in the low double digit range for a few quarters, but AP has been weak: 2Q24 revenue growth was 3% YoY, after a 2% increase in 1Q24. Weak Asian currencies and a very competitive ‘big tech’ market in China account for the gap. One factor is TikTok’s owner, ByteDance: this private company has exploded in the last 3 years, impacting negatively the measured growth of the publicly traded Chinese webscalers that we do track (Alibaba, Baidu, JD, and Tencent). The ByteDance surge also ate into the 2022-23 growth of some western webscalers, notably Meta (FB), but that effect has ebbed.