According to a new report by Dell’Oro Group, the cumulative revenues spent on service provider (SP) router and switch equipment are projected to approach US$77 billion over the next five years.
This represents a nine per cent increase compared to the cumulative revenue of the previous five-year period, the research firm said, propelled largely by a combination of applications driving higher volumes of traffic, such as proliferation of 5G on mobile networks, residential broadband shifting to higher speed cable and passive optical networks (PON), and increased use of video.
“Although we’ve seen strong market growth in 2023, double the normal growth rate, we expect it to be short term,” said Ivaylo Peev, senior analyst at Dell’Oro Group. “Vendors have been building backlog for two years and the recent strong growth is a result of improved component supply which enabled vendors to release large quantities of product into the market.
“We saw particularly strong sales to hyperscalers in North America at the beginning of 2023. Large cloud SPs deploy routers to interconnect geographically dispersed facilities, connect to telecom SP wide area networks, and connect inside the data centers. However, we believe that the surge in sales to cloud SPs has passed its peak and will slow over the forecast period. Cloud SPs have heavily invested in 400 Gbps infrastructure in the last few years and are well prepared for AI workloads.”
