Optical transport equipment demand will continue to increase over the next five years despite anticipated recession pressure, Dell'Oro Group noted in a recent report.

The firm's five-year forecast tracks dense wavelength-division multiplexing (DWDM), long haul, wavelength division multiplexing (WDM) metro, multi-service multiplexers, optical switch, disaggregated WDM, data center interconnect (DCI), and ZR optics.

Dell’Oro Group VP Jimmy Yu anticipates “growth rates to fluctuate in the near term before stabilizing” at a 3% compounded annual growth rate (CAGR) over the next five years. He expects the market to generate $17 billion in annual revenue by 2027, and $81 billion cumulatively over the five years.

“There is still a large amount of market uncertainty this year due to the economic backdrop – economists are predicting a high chance of a recession in North America and Europe,” Yu wrote in a press release. He added that optical equipment manufacturers are experiencing “record levels” of backlog entering the year, and expected component supply improvements will help that backlog turn into revenue.

North and Latin America optical network vendors were stressed by supply chain challenges in the first half of 2022, but still experienced strong revenue growth and long-term demand driven by cloud adoption and supplying higher-capacity bandwidth to the network edge.

Research firm LightCounting painted a different picture, stating it expects a drop in segment revenues to have begun in the fourth quarter of 2022, and to continue through 2023. LightCounting does predict a rebound, with revenues hitting $20 billion per year by 2027.

The U.S. Fiber Fest

Dell'Oro Group's optimism is backed by recent North America fiber network expansion announcements.

GTT Communications, Infinera, and Bluebird Network last week all announced network expansion plans. The partnerships look to improve optical network footprints and speeds in the Pacific-Northwest and Mid-Atlantic regions. They closely followed announcements from Fastwyre and Lumos earlier this month, expanding in the states of Alabama and South Carolina, respectively.

More prominently, AT&T last month announced a deal with venture capital firm BlackRock to push the carrier's long-simmering fiber expansion plans. The venture’s initial plans are to deploy a multi-gigabit fiber network to 1.5 million customer locations using a commercial open access platform. This will be additional to AT&T’s own fiber deployment plans targeted at reaching more than 30 million locations within its 21-state wireline footprint by the end of 2025.