The SD-WAN market was on track for another year of record revenue growth right up until the pandemic struck. SD-WAN revenues are now expected to decelerate through the remainder of the year, according to reports from Dell'Oro Group and Vertical Systems Group (VSG).

Industry leaders Cisco, VMware, Silver Peak, Versa, and Fortinet saw their combined revenue share exceed 60% during the first quarter of 2020, according to Dell'Oro. While the SD-WAN market grew by 24% year over year in Q1, the growth rate declined sharply from the 64% year-over-year growth in Q1 2019.

“Demand for SD-WAN held up well in the first quarter, but supply chain disruptions induced by the COVID-19 pandemic caused a sharper deceleration in vendor revenue growth,” Shin Umeda, VP at Dell’Oro Group, said in the report. “We still expect the SD-WAN market to grow by double digits this year, but with so much macroeconomic uncertainty, strong performance won’t be a shoo-in for all vendors.”

The VSG report, which considered government directives, macro-economic data, enterprise demand trends, and service provider feedback, echoed many of Dell'Oro's findings.

Due to the impact of COVID-19 on supply, demand, and supply chains, VSG expects the highly competitive SD-WAN market will grow just 17% in 2020, a far cry from the triple-digit growth it reported for the full year of 2019.

However, VSG says this slump will likely be short lived. The group expects an economic rebound this fall to bolster SD-WAN sales and installations, and as the economy continues to recover, so will SD-WAN revenues.

An Already Muddled Market

SD-WAN vendors have experienced mixed results throughout the quarter with some posting strong revenues and exceeding expectations, while others have struggled with supply chain shortages.

Some VMware SD-WAN appliances, for example, are on backorder due to supply chain challenges, according to Sanjay Uppal, SVP and GM of VMware’s VeloCloud business unit. However, it should be noted that these shortages have not negatively impacted the company's bottom line, and the company has been working with customers impacted by shortages to provide them with alternative hardware.

And during Cisco's third-quarter 2020 earnings call, CFO Kelly Kramer reported that COVID-19 negatively affected the company's financial results, especially in the supply chain.