Neoclouds Not Ready for AI Networking, Omdia Warns

Key Terms

ipv4 technical

IPv4 is the set of rules that gives every device on the internet a unique address, like a street address for computers so data knows where to go. It matters to investors because those addresses are limited and running out, creating costs and business opportunities for networks, data centers and address brokers, and signaling infrastructure upgrades as companies move toward newer addressing systems.

ip transit technical

IP transit is a service that lets a company send and receive internet traffic through a larger network operator so its data can reach any destination on the public internet. Think of it as buying a highway connection rather than just local roads: it determines how fast, reliable, and costly a business’s online reach is. Investors care because transit affects customer experience, operating costs, and resilience for any company dependent on online services or cloud infrastructure.

internet exchanges (ixps) technical

An internet exchange (IXP) is a physical meeting point where different networks—like internet service providers, content platforms, and cloud companies—plug into shared equipment to pass traffic directly to one another instead of routing it through third parties. Think of it as a highway interchange that reduces travel time and tolls; for investors, IXPs can lower operating costs, improve speed and reliability for users, and create steady revenue streams for operators and related infrastructure owners.

tier 1 ip backbone technical

A tier 1 IP backbone is a global, top-level internet network that can reach every other network on the internet without paying for transit, like a set of toll-free superhighways that carry large volumes of traffic between regions. For investors, ownership or access to a tier 1 backbone signals high reliability, low latency and lower recurring connectivity costs, which can be a durable competitive advantage for telecom, cloud and content businesses.

port capacity technical

Port capacity is the maximum amount of ships, containers or cargo a seaport can handle efficiently over time, determined by available docks, cranes, storage space and staffing. For investors it matters because limited capacity can cause delays and higher shipping costs that squeeze company margins and disrupt supply chains, while added capacity can increase trade flow, port revenues and local economic activity—like how a wider highway reduces traffic jams.

Audit probes scale, resilience, and sovereignty; enterprises urged to check five risk areas

LONDON--(BUSINESS WIRE)-- Many neoclouds are not prepared for the networking demands of artificial intelligence, according to a new audit by Omdia, which warns enterprises to scrutinize suppliers beyond raw compute capacity.

AI models Network traffic and performance variations

Omdia’s study, covering 50 neoclouds, finds that providers have scaled compute for AI workloads, but networking infrastructure is becoming a critical constraint. AI performance increasingly depends on the ability to process and move data securely across distributed environments and geographies.

“Network infrastructure will make or break neoclouds,” said Camille Mendler, Omdia Research Director, Telco B2B. “Low-latency, resilient and secure connectivity- from backbone to edge - is table stakes for success, not least because sovereignty spans where AI workloads move.”

Omdia identifies five key risk areas that enterprises adopting AI should investigate:

1. In-house skills: 43% of neoclouds are seeking network engineers and security specialists to fill urgent competency gaps.
2. Accountability: Certifications and service commitments for network uptime, security and data sovereignty need scrutiny; over a third of neoclouds minimize contractual liability.
3. Cloud on-ramps: High-speed interconnection to clouds via public and private peering helps secure consistent performance; more than half of neoclouds do not use Internet peering exchanges.
4. IP assets: IP address ownership supports rapid growth, traffic localization and routing control; 46% of neoclouds only control small IPv4 address blocks.
5. IP transit resilience: One in five neoclouds relies on one IP transit provider, potentially creating a single point of failure.

Neocloud networking capabilities vary from rudimentary to advanced, depending in part on their origins, which include bitcoin mining, content distribution, and web hosting.

Omdia found that neocloud networking strategy is in flux globally. Many are rushing to partner, buy or build infrastructure as their dependency on networking grows:

• A group of 15 providers led by Tier 1 IP backbone owners Arelion, Cogent, and Lumen control 47% of all identified neocloud IP transit relationships.
• Neoclouds use 64Tbps of aggregated port capacity at 191 Internet Exchanges (IXPs) worldwide, with Frankfurt’s De-CIX accounting for 10% of all port capacity.
• Equinix and Digital Realty interconnect the most neoclouds within their global facilities.

Omdia’s Telecoms group provides insights on neoclouds and AI networking across multiple expert teams:

• Telco B2B Strategies: Neocloud networking and partnerships
  • Camille Mendler: How Neoclouds Use the Internet: Where AI Interconnects
  • Kerem Arsal: Telcos and Neoclouds: Synergies and Case Studies

• Telco B2B Solutions: AI network traffic and enterprise adoption
  • Brian Washburn: AI Network Traffic Report: 2026 Update Analysis

• Service Provider Strategies: Sovereignty
  • Sarah Mc Bride: Digital Sovereignty: Data Protection, Residency, and Localization Policies and Regulation

ABOUT OMDIA

Omdia, part of TechTarget, Inc. d/b/a Informa TechTarget (Nasdaq: TTGT), is a technology research and advisory group. Our deep knowledge of tech markets grounded in real conversations with industry leaders and hundreds of thousands of data points, make our market intelligence our clients’ strategic advantage. From R&D to ROI, we identify the greatest opportunities and move the industry forward.

View source version on businesswire.com: https://www.businesswire.com/news/home/20260415649117/en/

Fasiha Khan: fasiha.khan@omdia.com
Eric Thoo: eric.thoo@omdia.com

Source: Omdia