REDWOOD CITY, Calif. – September 5, 2023 – According to a recently published report from Dell’Oro Group, global sales of data center switches continued to break record levels for the fifth consecutive quarter in a row.

What’s also remarkable is that, for the first time in about five years, the bulk of the growth during the quarter was driven by enterprises, not cloud service providers (SPs).

“The market performance continues to hit high notes, propelled by the release of a substantial backlog. Most of this backlog is from orders placed after the list price increases implemented by most vendors more than a year ago, said Sameh Boujelbene, VP at Dell’Oro Group. “Additionally, a larger portion of the second quarter’s shipments was destined to enterprises, resulting in a favorable product mix with higher prices compared to shipments to cloud SPs. Meanwhile, the music in the cloud SP arena has begun to fade, as many of them have started to enter a digestion phase following several quarters of robust spending.

"Furthermore, a sense of urgency pervades as they rush to build cutting-edge artificial intelligence (AI) infrastructure to accommodate emerging large AI workloads," added Boujelbene. "These investments in AI infrastructure appear to be diverting budget away from traditional front-end networks that typically support general-purpose workloads.”

Additional highlights from the 2Q 2023 Ethernet Switch – Data Center Report:

• Arista, Cisco and HPE captured most of the revenue growth and were able to gain revenue share during the quarter.
• Geographically, sales growth was broad-based across all regions, except China.
• Further fueled by AI applications, shipments of 200 Gb/s and 400 Gb/s switches constituted approximately 25% of the revenue and 20% of the total shipments. Although Google, Amazon, Microsoft and Meta continue to drive the majority of deployments, Dell'Oro observed an increasing number of shipments directed toward tier 2/3 cloud SPs and large enterprises.