Morgan Stanley Research Report Analysis: Ranked Third Yet Orders Fully Booked for 7.7 Years, NTT Crushes Tech Giants
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Morgan Stanley Research Report Analysis: Ranked Third Yet Orders Fully Booked for 7.7 Years, NTT Crushes Tech Giants
A global $6.7 trillion data center investment is on the horizon, but only one type of data center truly makes money: AI-native. NTT is monopolizing this sector.
Navigating Web3 tides with focused insightsBy: Rita
TechFlow Guide
This report from Morgan Stanley reveals an interesting fact: in the global data center market, NTT, ranked third, has an absurdly full order book. With an order backlog of $20 billion, equivalent to 7.7 years of annual revenue. Meanwhile, the top two, Amazon and Microsoft, are engaged in a price war. What does this indicate? It indicates that pricing power is the core of this game. The reason NTT wins is simple: vertical integration (data centers plus submarine cables plus fiber networks) makes hyperscale customers utterly dependent on it. Gross margin rises from 39% to 55%, every AI workload coming in converts into real cash. With $6.7 trillion in global data center investment looming, only one type of data center truly makes money: AI-native, and NTT is monopolizing this track.
Vertical Integration Becomes a Moat in the AI Super Cycle
The game for pure data center operators (such as Equinix, Digital Realty) is simple: compete on scale, compete on location. But NTT, originating from a telecommunications group, holds a completely different card: vertical integration.
NTT not only operates data centers but also owns submarine cable networks and fiber backbone networks. What does this mean? It means when hyperscale customers need to connect global data centers, they can either rent NTT's racks or use NTT's network directly. Pure data center operators cannot do this; they must purchase bandwidth from third-party telecom operators, eroding their profits.
A characteristic of the AI super cycle is: data and computing resources require extremely low latency and extremely high bandwidth. NTT's vertical integration meets this demand exactly. Morgan Stanley points out that NTT has 250 megawatts of liquid cooling technology deployment globally, supporting high-density GPU environments of up to 135 kilowatts per rack. This is not just a technical indicator; more importantly, it creates a complete link "from chip to fiber," allowing AI customers to avoid coordinating among multiple suppliers.
This is why NTT, although ranked third, can achieve first-tier competitiveness in the AI era.
$20 Billion Order Backlog: A Turning Point from Capacity Constraints to Quality Upgrades
NTT's orders grew 59% sequentially in FY26, and more critically, the order backlog reached $20 billion. This figure seems huge, but it is actually a metaphor: market demand has far exceeded supply.
Why is this important? Because it changes pricing power. When demand exceeds supply, operators can choose customers, rather than customers choosing operators. Morgan Stanley's data shows that NTT's client list includes Fortune 100 automotive manufacturing enterprises, top software companies, etc. These customers are not just leasing racks; they are making long-term commitments. The table shows that the top ten customers account for 75.5% of NTT's monthly base leasing, with a single Fortune 100 enterprise accounting for 31.5%.
This level of customer concentration is a risk signal for traditional data center operators. But for NTT, it proves exactly one fact: hyperscale customers are willing to pay a premium for vertical integration. The relationship between these customers and NTT has surpassed simple leasing, evolving into strategic dependence. They need NTT's network infrastructure; they need that complete link from chip to fiber. The $20 billion order backlog converts into revenue, and gross margin will rise from 39% to 55%. This is a change in quality, not just quantity.
Gross Margin Rising from 39% to 55%: A Generational Update of the Data Center Business Model
NTT's financial forecast shows an important turning point. Gross margin is expected to reach 42% in FY27 and 55% in FY31. What does this upward trajectory mean?
The gross margin of traditional data center operators (such as Equinix) has long fluctuated around 50%. But NTT's gross margin can reach 55% or even higher, because its cost structure is different. Because it owns fiber networks, NTT's bandwidth costs are lower than competitors. For every rack added, the extra network investment cost is amortized.
More importantly, the launch of AI-native infrastructure (the AIOWN concept) has changed the pricing model. AI workloads need not just rack space, but also optimized GPU networks and power management. NTT packages these into a holistic AI-native solution. Customers are willing to pay higher prices for this integrated solution because it reduces their integration costs.
Morgan Stanley predicts that the annualized growth rate of capital expenditure from FY26 to FY31 will be 21%, but the gross margin increase is faster. This indicates that NTT is shifting from a "rapid expansion" to a "high-quality growth" model. Not all capacity creates equal value; high-end AI workloads create more value.
Looking at NTT's Gold Digging Machine from the $6.7 Trillion Market
McKinsey estimates that global data center investment will reach $6.7 trillion by 2030. 70% of this figure will be occupied by AI workloads. This is not just a huge market, but a specific one: data center demand supporting AI chips.
NTT's strategy is clear: focus on the differentiated demands of AI workloads, abandoning competition for general rack capacity. NTT's global operating capacity of 1,630MW and planned capacity of 770MW (totaling 2,400MW) ranks third globally, but the key is that this capacity is optimized for AI.
Morgan Stanley points out that NTT's capacity distribution globally is very balanced: North America 675MW, Europe, Middle East, and Africa 430MW, India 425MW, Asia Pacific 100MW. This is precisely a decentralized global layout, meaning customers in any region can obtain low-latency data center services, paired with local fiber networks.
In the $6.7 trillion cake, NTT's goal is clear: establish monopoly-level advantages in the most valuable part (AI-native infrastructure), rather than fighting for the biggest piece.
TechFlow Perspective
Many investors look at NTT GDC and see a laggard, "the world's third-largest data center operator". But Morgan Stanley sees a hidden winner, "the only data center operator owning a global fiber network". The same company, two completely different stories.
One perspective says NTT lags behind Amazon, Microsoft, and Google in scale competition. Another perspective says NTT has a unique moat in the AI era.
The data center industry is undergoing a turning point. In the past, all capacity was homogeneous; competition was about scale and price. Now, only differentiated AI-native capacity is valuable. This turn favors NTT, because vertical integration provides exactly this differentiation.
The implication for investors is simple: in the AI super cycle, scale is no longer the only condition for victory. Vertical integration, pricing power, customer stickiness—these are now as important as scale, or even more important. Although NTT ranks third, it may be the winner in this new era.
Disclaimer
This article is a compilation and interpretation by TechFlow Research of a third-party securities firm research report (Morgan Stanley, July 14, 2026). The ratings, target prices, earnings forecasts, and related judgments cited in the text are the views of the securities firm's analysts, representing only their institution's stance, not representing the views of TechFlow Research, nor constituting any investment advice.
The market carries risks; decisions must be independent. This article should not be used as a basis for buying or selling any securities.
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