The research group said revenue growth shows mixed patterns across regions. North America and Asia-Pacific, excluding China, experienced economic downturns primarily due to year-on-year difficulties, indicating that a digestion cycle has begun in these regions.
However, EMEA maintained its growth, albeit with a noticeable slowdown compared to the previous three quarters, according to Dell'Oro. In China, revenue soared after four consecutive quarters of weak growth.
vendor shift
There were also changes in the vendor space during the quarter.
Arista has achieved a milestone by securing the top revenue position for the first time in the Ethernet data center switch market, edging out Cisco.
“Arista recorded the highest revenue share increase in the quarter and took the top spot in revenue for the first time,” Bougelbene said.
Adoption of 400 and 800G is accelerating
The growing emergence of AI will drive the demand for higher speeds in the data center switch market. In 2023, 200 Gbps, 400 Gbps, and 800 Gbps switches accounted for more than 20% of total port shipments.
Dell'Oro expects the adoption of 400 Gbps and 800 Gbps to accelerate in 2024 and 2025 as some AI workloads begin to prioritize Ethernet.
In its AI Networks for AI Workloads report published in January, Dell'Oro predicted that the data center switch market will grow by 50% due to spending on switches deployed for AI backend networks. It has become clear that Current data center switch market spending is primarily focused on front-end networks that connect commodity servers.
However, Dell'Oro noted that AI workloads require building new backend infrastructure. The research firm added that competition between InfiniBand and Ethernet is intensifying as manufacturers vie for market dominance in AI backend networks.
“While InfiniBand is expected to maintain its lead, Ethernet is expected to make significant gains, increasing its revenue share points by 20 points by 2027,” Bougelbene said in the report.
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Cloud providers aren't the only ones increasing Ethernet speeds. Dell'Oro pointed out that Tier 2/3 and large enterprises will be important users, and over the next five years he is projected to approach $10 billion. Enterprises will prioritize Ethernet.