The Optical Transport market, after a 9% downturn in 2024 due to oversupply and macroeconomic insability, is anticipated to bounce back to growth by 2025. According to a forecast by Dell’Oro Group, the sector is positioned to achieve a 5% average annual increase through to 2029, reaching a valuation of $19 billion.
“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 sub-sea transmission.”
Key insights from the July 2025 Forecast Report include:
- Transition of DCI to IPoDWDM in metro applications while DWDM Long Haul for DCI is predicted to grow at a 15% five-year CAGR, bolstered by cloud entities.
- The revenue from ZR/ZR+ optical plugs for routers and Ethernet switches (IPoDWDM) is projected to increase by an annual 20%, making up a significant portion of nearly 12% of the Optical Transport market over the forecast period.
- Cloud providers’ favoring the disaggregation of WDM systems into subsystems, which is seeing growing adoption among communication service providers. Demand has been fueled by transponder units over the past decade and now will be fueled by ZR/ZR+ optics and optical line systems (OLS) in the near future.
