Cloud Providers Expected to Propel Optical Transport Market to $19 Billion by 2029

Cloud Providers to Propel Optical Transport Market to $19 Billion by 2029

The Optical Transport market is on the verge of a significant rebound, as projected by the Dell'Oro Group, a trusted source of market insight in the fields of telecommunications and data centers. Following a challenging year marked by a 9% decline in 2024, the market is anticipated to return to growth in 2025. Experts predict a compound annual growth rate (CAGR) of 5% over the next five years, ultimately achieving a robust value of $19 billion by 2029.

According to Jimmy Yu, Vice President of Dell'Oro Group, an increasing emphasis on the interconnection of modern AI data centers is a primary driver behind this upward trend. "We're expecting the data center interconnect (DCI) to double the growth rate of the market overall. Increased investment from cloud providers is a key factor," he noted. This is being propelled primarily by heightened expenditure on equipment necessary for DCI, such as ZR/ZR+ optics for IPoDWDM, optical line systems for transport, and DWDM systems designed for effective long-distance terrestrial and subsea transmission.

Key Highlights from the Dell'Oro Report

1. Metro Applications Focus: Most of the DCI market is expected to transition to IPoDWDM technology within metropolitan areas. However, long-haul DWDM for data center interconnects is predicted to experience dramatic growth with a CAGR of 15% due to demand from cloud service providers.

2. ZR/ZR+ Optical Plugs: Revenue from ZR/ZR+ optical plugs utilized in routers and Ethernet switches is forecasted to grow by an impressive average of 20% annually, which will account for nearly 12% of the Optical Transport market during the projected period. This surge highlights the importance of these components in supporting network traffic and enhancing data throughput.

3. Disaggregation of WDM Systems: A trend towards the disaggregation of wavelength-division multiplexing systems into their subsystems is becoming increasingly popular among cloud providers and also gaining traction with communication service providers. Historically, growth was led by demand for transponder units, but the upcoming five years are expected to shift the focus toward ZR/ZR+ optics and optical line systems (OLS), indicating a transformative change in how these technologies are utilized.

The comprehensive report by the Dell'Oro Group outlines the optical transport industry's landscape, featuring extensive tables that cover manufacturers' revenue, average selling prices, unit shipments, and wavelength shipments categorized by speed, reaching up to 2.4 terabits per second. This in-depth analysis covers various segments including DWDM long haul, WDM metro, multiservice multiplexers, disaggregated WDM, DCI, and ZR/ZR+ optical plugs, providing industry stakeholders with valuable insights to inform their strategic decisions.

Conclusion

The revival of the Optical Transport market signifies an essential phase in the evolution of telecommunications infrastructure, driven primarily by cloud providers adapting to meet increasing data demands. As cloud services continue to expand, the shift toward more interconnected data center capabilities is heralding a new era of telecommunications that directly impacts the optical transport landscape. With significant growth on the horizon, stakeholders across the technology and telecommunications sectors are encouraged to monitor these developments closely.

For those interested, additional information regarding the report is available by contacting Dell'Oro Group directly. As they stand on the cutting edge of market research, their insights offer a crucial lens through which future trends can be analyzed and understood.