Global data center Ethernet switch revenue soared 11% year over year to a record high in the third quarter of 2021, Dell’Oro Group reports.

While Cisco, Arista Networks, and Huawei retained the top three spots by marketshare, Cisco's lead continued to slip during the quarter, Dell’Oro's Senior Research Director Sameh Boujelbene said.

Cisco lost five points of revenue share year over year due to greater exposure to the enterprise segment where the demand is in a secular decline. The networking giant also lost share to white-box vendors, Arista, and Juniper Networks among tier one and tier three cloud service providers, Boujelbene said in response to questions.

In contrast, Juniper and Huawei recorded double-digit revenue growth in the quarter, while Arista and white-box switch suppliers captured the majority of the market growth, she added.

The strong demand was expected, but “what surprised us is vendors' ability to fulfill demand in spite of supply challenges,” Boujelbene wrote. “Arista and certainly white-box suppliers have been so far able to better navigate the supply issues and take advantage of the situation to gain share.”

Arista had a head start on securing inventory over other vendors thanks in part to a smaller, more focused portfolio compared to Cisco, she explained. Similarly hyperscalers, “which are highly strategic for many component and system vendors and may have been prioritized in terms of supply,” bolstered white-box vendor growth during the quarter, she added. 

In aggregate, white-box vendors held the second largest market share behind Cisco.

Boujelbene predicts supply chain constraints could negatively impact more switch vendors heading into the fourth quarter.

Strong demand from cloud service providers and large enterprises drove revenue growth for the quarter, Boujelbene said, adding that some of that growth was driven by stockpiling behavior on the part of hyperscalers as opposed to "true demand."

The big three cloud providers also led 400 Gb/s Ethernet switch deployments, which amounted to 3 million ports in the third quarter, driven in large part by Google and Amazon. While Microsoft started 400 Gb/s switch deployments in the quarter, the vast majority were reported under deferred revenue due to the pending qualification cycle, the report found.

As the cloud service provider adopts higher speeds, it opens more opportunities for new switch vendors to enter the market and gain shares over the incumbents, Boujelbene said. “With the migration to speeds higher than 100 Gb/s, there is an increasing appetite for silicon diversity which will drive some vendor share shifts, especially in the cloud. ... We expect Cisco to gain some share, but we expect network spending to be strong enough to benefit all players, incumbents as well as new entrants.”