Yu added that the growing demand for cloud connectivity and data center interconnect (DCI) bandwidth has led the research firm to raise its expectations for routers and switches.
"The outlook for the high-end Router market has been revised upward, fueled by increased demand for capacity, cloud connectivity, and data center interconnect (DCI),” he said. “The largest upward revision is for Core Routers, driven by their use in scale-across DCI. Additionally, demand for Edge Routers is anticipated to surpass initial estimates, supported by AI growth.”
North America to lead
From a regional point of view, North America will continue to be the top market for growth, reflecting the expansion of AI infrastructure.
What’s driving North America growth is that the region hosts the largest cloud providers—Amazon, Microsoft, and Google—and major data center projects (Digital Realty and Equinix).
On a global scale, Dell’Oro forecasts spending on high-end routers will increase at a 16 percent compound annual growth rate (CAGR).
The 6G wireless factor
AI networks aren't the only factor driving router growth.
While Edge Router and Aggregation Switch revenue for mobile backhaul is expected to be relatively flat for the next four years due to the slowdown in 5G deployment, the eventual 6G deployment will give the market a boost.
Yu said that “challenges remain in the telecom sector as the 5G rollout winds down.”
By 2030, the research firm expects demand to increase as communication service providers begin deploying 6G radios and upgrading their networks to deliver higher speeds and enhanced services.
A separate report commissioned by Dell’Oro forecasts that worldwide RAN revenues are projected to grow at a 1 percent CAGR through 2030, supported by investments in 5G and emerging opportunities in AI RAN, Cloud RAN, private wireless networks, and early 6G deployments.
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