Next-Gen Digital Infrastructures: The Evolution of Data Centers

Having enabled the huge explosion of data, devices, processing and connectivity requirements globally, Data Centers are now the backbone of the world’s digital economy. Entering 2025, the sector is at a critical inflection point. The bottom line? To keep up with growth of expected demand, in ways that are economic, sustainable and investable, some big challenges will have to be overcome.  

Key developments entering 2025 

Along with surging data demands, trends such as accelerated digitalisation, the realisation of Internet of Things (IoT) and the rise of processor-intensive growth of AI and machine learning are all been combining to drive explosive year-on-year growth. The global Data Center market is on course to expand from $242bn in 2024 to $584bn by 2032¹, a CAGR of 11.6% for an already huge market.  

With global cloud storage worth US$376bn by 2029¹, it’s the cloud hyperscalers like AWS, Microsoft Azure and Google Cloud that are leading the way on demand.  This is also fuelling a thriving global and regional economy of firms and Data Center operators providing capacity, hardware, efficiency technologies and operational know-how.  

Investor interest in the sector has inevitably surged, attracting firms like Blackstone, Berkshire Partners, KKR, and Digital Bridge. With high market growth potential and average EBITDA margins of 45%, it’s easy to understand why.  However, investment requirements are huge and business cases have significant exposure to critical energy prices on the supply side and technology advances on the demand side (China’s DeepSeek AI being a recent market disruptor to many AI economic models).  

Sustainability remains a major focus for Data Centers in 2025, with many operators committed to carbon-neutral operations by 2030. With ongoing innovations in cooling technologies and renewable energy integration, the sector’s pivotal role at the heart of the green digital economy, and the scrutiny that goes with that in many markets, will remain a hot topic for 2025².   

The focus for 2025 and beyond  

As global demand for electricity skyrockets, Data Centers face three key energy challenges: access, cost and carbon:   

• Access to energy: A step-change in competition for energy volumes, generation adequacy stretched, and power infrastructure constrained with reinforcement investment lagging new connection demand and available generation capacity.  

• Energy cost: An increasingly intermittent (renewable) generation capacity mix leading to volatility and complex market reform.  

• Decarbonisation: With tenant/investor decarbonisation expectations higher than ever, Data Centers’ licence to operate is under intense scrutiny.  

Beyond these energy challenges, the ability to meet rising expectations for enhanced customer experiences will be a crucial differentiator for Data Centers in 2025. Operators must figure out how best to orientate themselves to manage a rising cost base and drive profitable growth.  

With this in mind, expect to see Data Center operators review their operating models, seek process and systems improvements, and ensure technology architecture and data models are scalable. They’ll also need to be ready meet a rising tide of regulatory requirements – including the Digital Operational Resilience Act (DORA), effective from January 2025, which shines a spotlight on Data Center resiliency and requires operators to have a scalable and sustainable approach to customer reporting.

Discover more perspectives on key trends shaping TMT in 2025

Footnotes

1. Fortune Business Insights 
2. European Commission: Green Digital Sector