Enterprises led the bulk of growth in the data center switch market during the second quarter for the first time in about five years. According to Dell’Oro Group, enterprise spending on these devices broke record levels for the fifth quarter in a row.
The research firm said that Arista, Cisco, and HPE captured most of the revenue growth and gained revenue share during the quarter. From a geographic perspective, sales growth was broad-based across all regions except China.
AI continues to have an effect. During the second quarter, 200 Gbps and 400 Gbps switches comprised about 25 percent of the revenue and 20 percent of the total shipments. Google, Amazon, Microsoft, and Meta continue to drive most deployments; Dell’Oro observed increasing loads directed toward Tier 2/3 cloud service providers and large enterprises.
"The market performance continues to hit high notes, propelled by the release of a substantial backlog. Most of this backlog is from orders placed after the list price increases implemented by most vendors more than a year ago, said Sameh Boujelbene, VP at Dell'Oro Group. "Additionally, a more significant portion of the second quarter's shipments was destined for enterprises, resulting in a favorable product mix with higher prices than shipments to Cloud service providers.
Boujelbene added that the market is heading into a new transition phase in terms of spending.
“Meanwhile, the music in the Cloud SP arena has begun to fade, as many of them have entered a digestion phase following several quarters of robust spending,” she said. “Furthermore, a sense of urgency pervades as they rush to build cutting-edge Artificial Intelligence (AI) infrastructure to accommodate emerging large AI workloads. These investments in AI infrastructure appear to be diverting budget away from traditional front-end networks that typically support general-purpose workloads.”
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