The enterprise networking market is growing at its fastest pace in years, though demand in parts of the market is being outstripped by cost.

Mauricio Sanchez, Dell’Oro Group’s senior director for enterprise security and networking, wrote that worldwide enterprise networking revenue grew 15% year over year – a far cry from the languish of the early post-pandemic.

The analyst suggests that the AI infrastructure boom has helped to change fortunes, but enterprise demand is shaping up to be “more measured,” with businesses still working out where their AI stack would sit.

But while network security, branch routing, wireless local area networks (WLAN), campus switching, and enterprise data center switching have all seen double-digit growth, the Dell’Oro analyst warns AI buildout is having a countervailing effect: tightening component supplies the enterprise core areas rely on.

“[AI] can therefore lift traditional networking revenue through price increases even where AI is not generating incremental equipment demand. Higher costs could, in turn, encourage customers to extend product lifecycles or redirect budgets,” Sanchez suggested.

The ongoing memory shortage – which SK Hynix warned is likely to extend to 2030 – was cited as a major source of pricing pressure, with enterprise IT vendors having to raise prices while also seeking alternative suppliers.

In the more enterprise-focused fixed-wireless access (FWA) customer premises equipment market, for example, some 93% of vendors admit they’ve been affected by inflationary memory chip price increases. Dell’Oro Group’s own Campus Ethernet Switch tracker suggests that memory shortages were causing average selling prices (ASPs) to rise 19% while also impacting availability.

“Since enterprise equipment is often quoted well before delivery, these increases take time to appear in reported revenue,” the analyst explained. “The latest campus switch results suggest that earlier price actions may be squeezing IT budgets and making some refresh projects harder to justify.”

Beyond AI, though, the Dell’Oro Group analyst suggested networking security was also driving revenue growth in enterprise networking.

Sanchez wrote that businesses have been increasingly looking to address vulnerability exposure and concerns stemming from AI alongside the traditional aging switches and wireless access point refresh cycle.

“Channel discussions suggest that security audits are identifying unsupported equipment and initiating replacement projects,” the analyst said. “Infrastructure modernization is becoming as much a resilience decision as a capacity decision.”

Dell’Oro Group suggests that the resulting security rethink is allowing room for SD-WAN to grow, with businesses looking at employing software-defined connectivity and cloud-supported secure access service edge (SASE) in addition to router refreshes.

“The result is not necessarily a single-vendor architecture: operational maturity, existing investments, and sovereignty requirements still favor hybrid or multi-vendor approaches in many environments,” Sanchez suggested.