CSP switch sales slow as they shift focus to AI: Dell’Oro

According to a recently published report from market information firm Dell’Oro Group, global sales of data centre switches was up seven per cent, following seven consecutive quarters of double-digit growth. But, for the first time in more than three years, spending from cloud service providers (SPs) was flat, and did not contribute to market growth.

“Data centre switch sales have maintained robust performance, reaching near-record levels in Q3 2023,” said Sameh Boujelbene, vice president at Dell’Oro Group. “However, despite such a strong level of sales, the market growth started to exhibit signs of slowdown compared to previous quarters, particularly evident in the cloud SP segment where spending remained flat compared to the year-ago period.

“Concurrently, spending from large enterprises surged by strong double-digits. While cloud SPs seem to be shifting spending away from traditional front-end networks supporting general-purpose servers to focus more on artificial intelligence (AI) infrastructure, the slowdown in Cloud SPs spending during the quarter is also the result of ongoing digestion of existing capacity.

“We anticipate this digestion will impact various segments to varying degrees and timelines, aligning with the sequence in which they got their demand and orders fulfilled. In other words, customers who received their orders early on are the first to enter a digestion cycle.”

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