Disaggregated WDM drives Q2 optical sales recovery
Key Highlights
- The optical transport market grew 14 percent during the second quarter.
- The demand for disaggregated WDM and data center interconnect (DCI) is a key growth driver.
- The disaggregated WDM market outperformed expectations in the quarter, growing nearly 35 percent year-over-year.
- Huawei, Ciena, Nokia, ZTE, FiberHome, and Cisco were the top six vendors in the quarter
- Cloud providers have become a key element of growth in the optical networking industry.
- Data center interconnect (DCI) is set to grow at twice the rate of the overall market.
- IPoDWDM momentum continues to ramp.
The optical transport market is roaring back.
Driven by the demand for disaggregated WDM and data center interconnect (DCI), the Dell’Oro Group noted that the optical transport equipment market grew 14 percent year-over-year in the second quarter of 2025.
“Following six quarters of soft sales in optical transport, it was great to see this market recover and post a strong double-digit growth rate,” said Jimmy Yu, Vice President at Dell’Oro Group. “One area contributing to the strong growth for optical was the rising demand for disaggregated WDM, a concept that arose over a decade ago when both cloud providers and communication service providers wanted to have a more open, vendor-agnostic environment.”
He added that disaggregated WDM systems enable service providers to mix and match various network components. “A network operator had more choice in suppliers for transponders, optical line systems, and pluggable optics.”
What is IPoDWDM?
IP over DWDM (IPoDWDM) is a technology that integrates IP routers and network switches in the OTN (Optical Transport Network). IPoDWDM offers several benefits, including reducing the need for network components such as shelves, processors, and interface cards, while also lowering power consumption, OPEX (Operational expenditure), and CAPEX (capital expenditure). This approach also simplifies the network, eliminating the SDH/SONET intermediate layer.
IPoDWDM rising
The Optical Transport market growth was the result of higher year-over-year (Y/Y) revenue for both optical transport systems and ZR/ZR+ optical plugs for IPoDWDM.
In particular, the disaggregated WDM market outperformed expectations in the quarter, growing nearly 35 percent Y/Y due to strong demand across all of the individual technology segments: transponder units, optical line systems (OLS), and ZR/ZR+ optics for IPoDWDM.
Huawei, Ciena, Nokia, ZTE, FiberHome, and Cisco were the top six vendors in the quarter, ranked by revenue share.
Service providers bounce back
One of the key developments during the second quarter was the return of service provider spending.
Dell’Oro said that communication service provider spending returned to growth in the quarter, increasing slightly from the same period a year ago.
However, cloud providers continued to make their mark. Like earlier quarters, the cloud provider drove the vast majority of the optical revenue growth in the quarter: direct cloud provider purchases of WDM systems grew 60 percent Y/Y.
Cloud providers have been early proponents of disaggregating WDM systems into their subsystems and are expected to remain a popular choice among this segment. Communication service providers will also increasingly adopt this approach.
Another major factor in the growth of optical transport will be data center interconnect (DCI), which is set to grow at twice the rate of the overall market.
Within the DCI market segment, data center operators are projected to migrate to IPoDWDM in metro applications. The research firm said that 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.
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About the Author
Sean Buckley
Sean is responsible for establishing and executing the editorial strategy of Lightwave across its website, email newsletters, events, and other information products.
