The Optical Transport market is forecast to return to growth in 2025 after declining 9 percent in 2024, according to a new report from Dell’Oro Group. Following the steep decline caused by oversupply and poor macroeconomic conditions, the Optical Transport market is projected to grow at an average annual rate of 5 percent for the next five years, reaching $19 billion by 2029.
“We are anticipating that the time has come to interconnect all those new AI data centers being built,” said Jimmy Yu, Vice President at Dell’Oro Group. “We are forecasting data center interconnect to grow at twice the rate of the overall market, driven by increased spending from cloud providers. The direct purchases of equipment for DCI will encompass ZR/ZR+ optics for IPoDWDM, optical line systems for transport, and DWDM systems for high-performance, long-distance terrestrial and subsea transmission,” added Yu.
Additional highlights from the Optical Transport 5-Year July 2025 Forecast Report:
- While much of data center interconnect (DCI) is projected to shift to IPoDWDM in metro applications, DWDM Long Haul for DCI is expected to grow at a five-year compounded annual growth rate (CAGR) of 15 percent, driven by cloud providers.
- Revenues for ZR/ZR+ optical plugs used in routers and Ethernet switches (IPoDWDM) are forecast to grow at an average annual rate of 20 percent, contributing nearly 12 percent share of the Optical Transport market during the five-year forecast period.
- Disaggregating WDM systems into their subsystems is expected to remain a popular choice among cloud providers and will increasingly be adopted by communication service providers. Over the past decade, most growth was driven by demand for transponder units; in the next five years, it will be fueled by a greater demand for ZR/ZR+ optics and optical line systems (OLS).