DCI demands jump
As hyperscaler data center providers look to facilities in new markets, they are also procuring either dark fiber or managed circuits, such as optical wavelengths, from service providers.
In tandem with new fiber and managed services into data centers for DCI, the optical transport market grew 20 percent year-over-year in 1Q 2026, driven by double-digit revenue increases in both WDM Systems and IPoDWDM ZR/ZR+ optical pluggable modules.
Also, revenue tied to direct purchases for DCI grew an estimated 40 percent year over year.
“We estimate that the Optical Transport market grew 20 percent year-over-year in the first quarter of this year, driven by demand for data center interconnect,” Yu said. “However, many key optical suppliers are noting a growing backlog of orders as lead times continue to stretch out.”
He added that “supply may be the biggest factor keeping the Optical Transport market’s growth rate from being even higher this year due to all the AI data center build-outs.”
While it’s clear that DCI builds continue to ramp, there were regional differences in growth. North America, Europe, and the Middle East Africa (MEA) regions grew year-over-year, while Asia Pacific and Latin America declined.
Five vendor leaders
The optical transport systems market — which consists of two segments: optical transport systems and IPoDWDM ZR/ZR+ — continues to be dominated by five vendors.
On a four-quarter basis, the top Optical Transport Systems vendors with over 80 percent combined revenue share were Huawei, Ciena, Nokia, and ZTE.
Ciena and Nokia continued to report optical growth. While Ciena won’t report its second-quarter earnings until June 4, the company reported in its first-quarter results that the optical networking segment rose 67.9% to $1.02 billion, driven by Waveserver and RLS product lines.
Likewise, Nokia Network Infrastructure net sales grew 6%, with Optical Networks growing 20% to $955 million, supported by the demand for its optical network products, which continues to grow primarily driven by AI and cloud.
For IPoDWDM ZR/ZR+, the lead vendors were Marvell and Cisco Acacia.
Marvell reported fourth-quarter revenue of $2.22 billion, up 22% year-on-year. For fiscal 2026, Marvell’s revenue was $8.2 billion, growing 42% year-over-year, driven by robust AI demand.
Cisco, meanwhile, reported third-quarter total product orders were up 35% year over year, or up 19% excluding hyperscalers. It raised expected hyperscaler AI orders to $9 billion in FY26, up from $5 billion.
Within Cisco Acacia, orders exceeded $1 billion in Q3, up triple digits year-over-year, well ahead of the Fiscal Year 2025 quarterly order run-rate. A major contributor to growth was demonstrated by the number of coherent port shipments to date: over 750,000 units shipped for 400G ports and over 40,000 units shipped for 800G ports.
Cisco said Acacia’s results “reflect the transition to coherent pluggables, which offer high cost and power savings, and “we’re seeing significant traction in 800G-ZR with one hyperscaler.”
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