Demand for High End Routers and Aggregation Switches is projected to increase at a five-year compounded annual growth rate (CAGR) of 4 percent, according to a new report from Dell’Oro Group. The increase in demand for routing equipment is expected to be driven by improving conditions across multiple facets of the networking industry.
“We slightly raised our outlook for the routing market due to improving market conditions,” stated Jimmy Yu, Vice President at Dell’Oro Group. “From our perspective, the inventory correction that pulled sales of high-end routers down by 18 percent in 2024 is behind us. Looking ahead, we see numerous opportunities for routers as economic conditions improve and bandwidth demands increase. In addition, cloud providers are aggressively investing in AI computing clusters and developing agentic AI applications. So, the question we are all asking ourselves is when will the new bandwidth be needed and how much,” added Yu.
Additional highlights from the Service Provider Router and Switch 5-Year July 2025 Forecast Report:
- The cumulative router revenue for the five-year forecast period is $73 billion.
- Core Routers are forecast to have the highest five-year CAGR, following a steep drop in 2024.
- Cloud provider demand is projected to grow at a higher rate than that of communication providers. Cloud provider direct purchases of High End Routers are forecast to grow at a double-digit CAGR.
- Router demand is projected to increase across all the major regions, with North America posting the highest growth rate, considering the number of hyperscale companies in the area.