Industry News
Data center switch revenue hits record high?
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Author : JIUZHOU
Update time : 2025-03-28 11:12:25
Ethernet data center switch sales grew strongly at the end of the year. This growth was driven by strong AI development and the recovery of traditional front-end networks. The sales reached a new record.
According to reports released continuously by market research institutions, the global Ethernet data center switch market experienced significant fluctuations in 2024.
Affected by macroeconomic pressures, budget adjustments and AI infrastructure construction priorities. In the first quarter of 2024, the market saw its first decline since 2020, and traditional front-end network spending continued to be weak.
The outbreak of AI back-end network investment helped the market recover quickly in the second quarter. It saw strong double-digit growth in the third quarter and reached a record high. The fourth quarter also ended the year with strong double-digit growth and set another record high.
Key turning point
- Growth rate change: Starting in the third quarter of 2023, the data center switch market's growth rate fell sharply to 7%. This was a drop from double-digit growth for seven straight quarters.
It also decreased year-on-year in the first quarter of 2024. For the first time in over three years, spending on cloud services stayed the same or went down. This shows a shift from general servers to AI infrastructure.
-Technology is changing quickly: High-speed ports of 200G, 400G, and 800G are the only area growing. They made up almost 25% of total port shipments in the first quarter of 2024.
In the third quarter, shipments exceeded 20 million. By the fourth quarter, these ports accounted for nearly 40% of total shipments and 50% of total sales.
AI back-end network: the core engine driving market expansion
The demand for high-performance networks from AI workloads has completely changed the market structure:
1. Market size doubled:
AI back-end network building is expected to grow the data center switch market by 50%. Sales of related switches will surpass $100 billion from 2025 to 2029.
2. Speed jump:
800G port shipments will grow four times in 2024. They will become the main choice for back-end networks in 2025. Ports of 1600G and 3200G are expected to take over in 2027 and 2030, respectively.
Front-end network: recovery signal and long-term potential
Despite the short-term budget squeeze, the front-end network is still regarded as the market base for the next five years:
-2025 rebound expectation:
As AI reasoning demand grows and the digestion cycle ends, the front-end network market is expected to grow. The growth rate should reach high single digits to low double digits.
-High-speed port scale:
51.2T/102.4T chips will promote the deployment of 800G and 1.6T ports. The number of front-end network ports is expected to reach 100 million by 2028. The back-end demand will be more than double that amount.
Technology trends and ecological evolution
-Optical module innovation:
During the forecast period, companies will substantially apply linear drive pluggable optics as an alternative to co-packaged optics.
-Manufacturer strategy adjustment: Traditional switch manufacturers are accelerating the layout of AI back-end networks.
Future outlook: A $100 billion market under dual-track growth
Market research groups expect the data center switch market to grow faster in 2025. This growth will happen as the front-end network recovers.
In the long run, AI investment and faster network upgrades will help the market grow. It is expected to exceed US$100 billion in the next five years, including:
Backend network: continues to lead the growth rate;
Front-end network: still occupies the main revenue, AI reasoning and high-speed port deployment drive structural upgrades.
The global data center switch market is undergoing a dual-track transformation of "AI-driven" and "traditional upgrades". Manufacturers must understand how technology changes and balance their front-end and back-end networks. This will be key for future competition.
According to reports released continuously by market research institutions, the global Ethernet data center switch market experienced significant fluctuations in 2024.
Affected by macroeconomic pressures, budget adjustments and AI infrastructure construction priorities. In the first quarter of 2024, the market saw its first decline since 2020, and traditional front-end network spending continued to be weak.
The outbreak of AI back-end network investment helped the market recover quickly in the second quarter. It saw strong double-digit growth in the third quarter and reached a record high. The fourth quarter also ended the year with strong double-digit growth and set another record high.
Key turning point
- Growth rate change: Starting in the third quarter of 2023, the data center switch market's growth rate fell sharply to 7%. This was a drop from double-digit growth for seven straight quarters.
It also decreased year-on-year in the first quarter of 2024. For the first time in over three years, spending on cloud services stayed the same or went down. This shows a shift from general servers to AI infrastructure.
-Technology is changing quickly: High-speed ports of 200G, 400G, and 800G are the only area growing. They made up almost 25% of total port shipments in the first quarter of 2024.
In the third quarter, shipments exceeded 20 million. By the fourth quarter, these ports accounted for nearly 40% of total shipments and 50% of total sales.
AI back-end network: the core engine driving market expansion
The demand for high-performance networks from AI workloads has completely changed the market structure:
1. Market size doubled:
AI back-end network building is expected to grow the data center switch market by 50%. Sales of related switches will surpass $100 billion from 2025 to 2029.
2. Speed jump:
800G port shipments will grow four times in 2024. They will become the main choice for back-end networks in 2025. Ports of 1600G and 3200G are expected to take over in 2027 and 2030, respectively.
Front-end network: recovery signal and long-term potential
Despite the short-term budget squeeze, the front-end network is still regarded as the market base for the next five years:
-2025 rebound expectation:
As AI reasoning demand grows and the digestion cycle ends, the front-end network market is expected to grow. The growth rate should reach high single digits to low double digits.
-High-speed port scale:
51.2T/102.4T chips will promote the deployment of 800G and 1.6T ports. The number of front-end network ports is expected to reach 100 million by 2028. The back-end demand will be more than double that amount.
Technology trends and ecological evolution
-Optical module innovation:
During the forecast period, companies will substantially apply linear drive pluggable optics as an alternative to co-packaged optics.
-Manufacturer strategy adjustment: Traditional switch manufacturers are accelerating the layout of AI back-end networks.
Future outlook: A $100 billion market under dual-track growth
Market research groups expect the data center switch market to grow faster in 2025. This growth will happen as the front-end network recovers.
In the long run, AI investment and faster network upgrades will help the market grow. It is expected to exceed US$100 billion in the next five years, including:
Backend network: continues to lead the growth rate;
Front-end network: still occupies the main revenue, AI reasoning and high-speed port deployment drive structural upgrades.
The global data center switch market is undergoing a dual-track transformation of "AI-driven" and "traditional upgrades". Manufacturers must understand how technology changes and balance their front-end and back-end networks. This will be key for future competition.
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