Arizona is playing a growing role in a global challenge: managing the enormous amount of data created every day.
From smart devices to virtual meetings to online shopping, data is now at the heart of how businesses operate, as well as how people live and work. Behind all of it are data centers that store, process and move digital information around the clock.
Several powerful trends are driving the need for more data centers. Artificial intelligence is one of the biggest, as training and running systems require vast amounts of computing power. At the same time, more businesses are moving their operations from on-site servers to the cloud, relying on remote platforms instead of equipment in their own offices. Add to that remote work, telehealth, e-commerce and internet-connected devices, and the demand for real-time data handling keeps climbing. New technologies like 5G and edge computing also push data processing closer to users, which increases the need for localized data hubs — many of which are being built right here in Arizona.
The impact is already measurable. In the first half of 2025, Phoenix ranked fifth in North America for total data center capacity, according to commercial real estate firm CBRE. The total reached just under 685 megawatts of capacity, a 34% year-over-year increase. That growth reflects Arizona’s rising status as a key player in digital infrastructure.
This didn’t happen by accident. Arizona offers advantages that make it attractive to companies building data centers. The dry climate and relatively low risk of natural disasters trim operational concerns. Operating costs are generally lower and proximity to major West Coast technology markets are major pluses.
Just as important, global technology leaders — including Arizona Technology Council members Microsoft, Amazon and Google — are already investing heavily in Arizona. These investments translate into new jobs, a stronger tax base and digital economy growth. For example, Google’s Mesa data center alone is expected to generate $156 million in tax revenue over 25 years, including property and electricity taxes.
Energy and water use are often concerns voiced when people hear about data centers, and the companies building them are taking those challenges seriously. Advanced, AI-driven power management systems are improving efficiency so facilities can operate without straining the broader energy supply. Operators also are adopting innovative cooling methods — such as evaporative, adiabatic and dry-air cooling — to significantly reduce water use.
Many of today’s large data centers, often called “hyperscalers,” are also moving toward running completely on renewable energy such as solar. Arizona is especially well-positioned to lead in this area, thanks to its abundant sunshine.
Partnerships are making this possible. Google, for example, is working with SRP and NextEra Energy Resources to bring more than 430 megawatts of new, carbon-free power to its Mesa campus. Microsoft plans to source 150 megawatts of solar power for its Arizona operations through a partnership with First Solar.
State leaders already recognize the economic value of data centers. Tax incentives are offered through a program managed by the Arizona Commerce Authority and the Arizona Department of Revenue. The program provides transaction privilege tax and use tax exemptions at the state, county and local levels on qualifying purchases of equipment.
However, challenges are emerging at the local level. Phoenix and other cities’ moves toward zoning changes and new regulations could create uncertainty and add restrictive requirements that make projects harder to develop.
For businesses, the stakes are real. Data centers are not just buildings full of servers; they are engines of job creation and economic activity. Each project can employ hundreds of construction workers — sometimes more than a thousand at peak—during development.
Once online, a facility may support 100 or more skilled workers and contractors. A recent PwC report found that data centers supported more than 81,000 jobs across Arizona in 2023.
Data centers should be viewed as essential infrastructure, just like highways, airports and water systems. They support innovation, attract high-tech industries and strengthen the overall business environment. As discussions continue on energy, land use and economic incentives, one fact remains clear: The digital economy runs through data centers — and those data centers increasingly run through Arizona.
