Redwood City – October 14, 2026 -- The worldwide Data Center Physical Infrastructure (DCPI) market grew 27% year-over-year to $14 billion in manufacturer revenue in the second quarter of 2026, according to Dell'Oro Group. Growth has now run above 20% for consecutive quarters as demand for AI data center capacity outpaces supply. Dell'Oro attributes the modest slowdown from 1Q 2026 to a tougher comparison base, not weaker demand.
The research firm now ranks siting and permitting as the most serious near-term brake on the market. "The quieter and more consequential one is whether it will be permitted," said Alex Cordovil, Research Director at Dell'Oro, contrasting the issue with the louder debate over project cancellations. He said power availability, long-lead equipment and community opposition are stretching project timelines. He added that the timing of permits and grid interconnections is harder to forecast than the demand behind them.
Statewide Actions Delay Data Center Projects in Three States
Since the quarter closed, community opposition has become state policy. New York imposed the first statewide data center moratorium in July. Pennsylvania removed data centers from its fast-track permitting program in August. Texas ordered an audit of data center projects in the ERCOT interconnection queue, which delayed the first batch of large-load studies.
Thermal Management Grows More Than 40% and Holds Record Revenue Share
Thermal Management remained the fastest-growing DCPI segment, expanding more than 40% year-over-year and matching its record share of DCPI revenue. Liquid Cooling, led by Direct Liquid Cooling, and Heat Rejection both outpaced the segment as a whole.
UPS revenue rose about 20%, with gains concentrated in large three-phase systems as AI data halls standardize on megawatt-class power blocks. Vendors are moving toward medium-voltage designs and preparing for 800 VDC power architectures. Busway remained the preferred overhead power train for AI clusters, and supply, not demand, is the binding constraint.
Colocation Leads Customer Segments While AI Cloud Roughly Doubles
Dell'Oro's first report under a new five-segment customer structure splits demand into hyperscalers, other cloud providers including neoclouds, colocation, telco and enterprise. Colocation was the largest segment, followed by Hyperscalers. Other Cloud, home to neoclouds and AI model builders, grew fastest, with AI-specialized cloud roughly doubling year-over-year. Enterprise continued to lose share.
North America remained the market's center of gravity. EMEA accelerated to its fastest growth since 2021, driven by European colocation and sovereign AI projects.
Ecolab, Vertiv and SLB Move Deeper Into Cooling and On-Site Power
Ecolab closed its acquisition of liquid cooling specialist CoolIT Systems in July. Vertiv agreed to acquire UtilityInnovation Group, a behind-the-meter power and microgrid provider. SLB agreed to acquire heat-exchanger maker Kelvion. The deals show suppliers pushing further into on-site power and heat rejection.