Tuesday, October 24, 2023

Crehan: Merchant-built Ethernet SmartNIC revenues up 3X

 Revenues for the merchant-built Ethernet smartNIC market, which includes Data Processing Units (DPUs) and Infrastructure Process Units (IPUs), more than tripled year-over-year in the first half of calendar-year 2023, according to a recent report from Crehan Research Inc. This is the second consecutive half- year period in which revenues have more than tripled, result in merchant-built Ethernet SmartNICs now comprising over 20% of total merchant-built server-class Ethernet NIC market revenue (see accompanying chart).

“Up until recently, the SmartNIC market ramp was driven by a couple of the largest hyper-scale cloud service providers building their own proprietary SmartNICs for in-house deployments,” said Seamus Crehan, president of Crehan Research. “But now, with the ramp of merchant-built SmartNICs, we are moving toward broader market and customer adoption of these products.”

Crehan’s report shows that Intel’s IPUs were the largest single contributor to the SmartNIC market increase, helped by Google Cloud deployments of these products in its C3 instances for VMS and hyperdisk block storage and, more recently, in its A3 GPU supercomputer for generative AI and large language models. Intel’s strong IPU growth helped propel its total server-class Ethernet NIC revenue market share (Foundational/Performance NICs and SmartNICs) to the top position for merchant-built server-class Ethernet NICs. AMD/Pensando has also experienced strong growth in existing and new DPU deployments, from customers including Goldman Sachs, IBM Cloud, Microsoft Azure, NetApp, and Oracle Cloud. Nvidia was another vendor with a robust DPU increase, but instead of Ethernet, most of that increase resulted from the company's InfiniBand DPUs supporting very strong growth in its HGX Hopper and Ampere GPU-based systems.

"Despite the recent big increase in merchant-built Ethernet SmartNIC/DPU/IPU revenues, we are still in the early stages of this market, with many different

competing vendors and architectures," Crehan said. "Consequently, market shares can change significantly in a short amount of time, as evidenced by Intel’s IPU share gains."


Microsoft posts 29% growth in Azure sales

Citing growth in cloud services, Microsoft reported quartler revenue of $56.5 billion, an increase of 13% (up 12% in constant currency), net income of $22.3 billion, up 27% (up 26% in constant currency), with diluted earnings per share was $2.99 and increased 27% (up 26% in constant currency).

“With copilots, we are making the age of AI real for people and businesses everywhere,” said Satya Nadella, chairman and chief executive officer of Microsoft. “We are rapidly infusing AI across every layer of the tech stack and for every role and business process to drive productivity gains for our customers.”

“Consistent execution by our sales teams and partners drove a strong start to the fiscal year with Microsoft Cloud revenue of $31.8 billion, up 24% (up 23% in constant currency) year-over-year,” said Amy Hood, executive vice president and chief financial officer of Microsoft.

Business Highlights

Revenue in Productivity and Business Processes was $18.6 billion and increased 13% (up 12% in constant currency), with the following business highlights:

  • Office Commercial products and cloud services revenue increased 15% (up 14% in constant currency) driven by Office 365 Commercial revenue growth of 18% (up 17% in constant currency)
  • Office Consumer products and cloud services revenue increased 3% (up 4% in constant currency) and Microsoft 365 Consumer subscribers grew to 76.7 million
  • LinkedIn revenue increased 8%
  • Dynamics products and cloud services revenue increased 22% (up 21% in constant currency) driven by Dynamics 365 revenue growth of 28% (up 26% in constant currency)

Revenue in Intelligent Cloud was $24.3 billion and increased 19%, with the following business highlights:

  • Server products and cloud services revenue increased 21% driven by Azure and other cloud services revenue growth of 29% (up 28% in constant currency)

Revenue in More Personal Computing was $13.7 billion and increased 3% (up 2% in constant currency), with the following business highlights:

  • Windows revenue increased 5% with Windows OEM revenue growth of 4% and Windows Commercial products and cloud services revenue growth of 8%
  • Devices revenue decreased 22%
  • Xbox content and services revenue increased 13% (up 12% in constant currency)
  • Search and news advertising revenue excluding traffic acquisition costs increased 10% (up 9% in constant currency)


Advanced Photonics Coalition targets ecosystem building blocks

A new Advanced Photonics Coalition was announced at the OpticaPhotonic-Enabled Cloud Computing Industry Summit, which was hosted at Juniper Networks’ Aspiration Dome in Sunnyvale, California.

Picking up on the previous Consortium for On-Board Optics (COBO), APC aims to foster cooperation across all corners of the ecosystem.

“Our mission is for optical fabs to be leading and creating the world's best technology in terms of reliability, validation, and trust. This allows for the creation of building blocks for Silicon Photonics ICs that are put together in an assured way using foundry Process Development Kit to accelerate production.”


Alphabet's Google Cloud posts $8.41 billion in sales in Q3

Alphabet reported quarterly revenue of $77 billion, up 11% over the same period last year.

Google Cloud accounted for $8.411 billion, compared to $6.868 billion a year ago.

Sundar Pichai, CEO, said: “I’m pleased with our financial results and our product momentum this quarter, with AI- driven innovations across Search, YouTube, Cloud, our Pixel devices and more. We’re continuing to focus on making AI more helpful for everyone; there’s exciting progress and lots more to come.”

Ruth Porat, President and Chief Investment Officer; CFO said: “The fundamental strength of our business was apparent again in Q3, with $77 billion in revenue, up 11% year over year, driven by meaningful growth in Search and YouTube, and momentum in Cloud. We continue to focus on judicious capital allocation to deliver sustainable financial value.”


Verizon's Q3 revenue dips .6%, dividend increased

Verizon reported total operating revenue of $33.3 billion for Q3, a decrease of 2.6 percent from Q3 2022. Net income was $4.9 billion, a decrease of 2.8 percent from Q3 2022.

"We continued to make steady progress in the third quarter with a clear focus on growing wireless service revenue, delivering healthy consolidated adjusted EBITDA and increasing free cash flow," said Verizon Chairman and CEO Hans Vestberg. "Our financial discipline, combined with our healthy balance sheet, enabled us to increase our dividend for the 17th consecutive year, which is the longest current streak of dividend increases in the U.S. telecom industry."


  • Total broadband net additions of 434,000, representing the fourth consecutive quarter that Verizon reported more than 400,000 broadband net additions. Total broadband net additions included 384,000 fixed wireless net additions, an increase of 42,000 fixed wireless net additions from third-quarter 2022. Verizon now has approximately 10.3 million total broadband subscribers, including nearly 2.7 million subscribers on its fixed wireless service.
  • 72,000 Fios Internet net additions, an increase from 61,000 Fios Internet net additions in third-quarter 2022. 
  • Total wireless service revenue2 of $19.3 billion, a 2.9 percent increase year over year.
  • Postpaid phone net additions of 100,000, and retail postpaid net additions of 581,000.
  • Total retail postpaid churn of 1.15 percent, and retail postpaid phone churn of 0.90 percent.
  • Wireless service revenue increased 2.9 percent year over year. This increase was driven by growth in retail postpaid Average Revenue Per Account (ARPA), partially offset by a decline in retail postpaid phone connections and prepaid connections.
  • Total Verizon Business revenue was $7.5 billion in third-quarter 2023, a decrease of 4.0 percent year over year. Lower wireline revenue and lower wireless equipment revenue was partially offset by higher wireless service revenue.
  • Business wireless service revenue was $3.4 billion, an increase of 2.9 percent year over year. This growth was driven by continued strong net additions and pricing actions implemented in recent quarters. 
  • Business reported 330,000 wireless retail postpaid net additions in third-quarter 2023, including 151,000 postpaid phone net additions. This was the ninth consecutive quarter that Business reported more than 125,000 postpaid phone net additions. Business continues to grow volumes and expand its relationships with customers strengthening its position as a wireless market share leader.


Orange Q3 revenues up 1.8%

Orange Group reported revenues for the third quarter of 2023 were 10,999 million euros, an increase of 1.8%, or 194 million euros, year on year (compared with +2.6% in 2Q and +2.0% in H1). 

Revenue growth in the quarter was driven by retail services [2], which grew by 3.8%, or 304 million euros (+4.3% in 2Q and +3.6% in H1). This increase, in absolute terms, was more than double the decline in revenues from wholesale services, which continued to decrease, falling 6.7% or -123 million euros (-4.1% in 2Q and -5.9% in H1).

In France, continued growth in retail services excluding PSTN (+3.4%) and in mobile equipment sales (+3.0%) offset the anticipated decline in wholesale services revenues. Revenues thus continued their improvement, falling -0.5% (-1.3% in 2Q and -1.8% in 1Q).

In Europe, revenues from retail services continued to grow, up 2.3%, thanks to the value strategy and in spite of an unfavorable baseline effect related to progressive price increases during 2022. 

Africa & Middle East continued to post very strong growth of 12.2%, driven by double-digit increases in its four growth engines (+17.8% for mobile data, +17.0% for fixed broadband, +28.2% for Orange Money and +20.3% for B2B across the board).

Growth in IT & Integration services revenues in the Enterprise sector accelerated to 9.3% (+8.8% in 2Q and +7.1% in H1) and more than offset the structural decline in the Voice and Data legacy businesses. Enterprise revenues increased 0.6%, reflecting stable mobile revenues, with the growth in services being offset by the decrease in equipment sales.

Ceragon Networks to acquire Siklu

Ceragon Networks agreed to acquire Siklu, a provider of multi-Gigabit “wireless fiber” connectivity in urban, suburban and rural areas, for an enterprise value of $13-15 million. 

As consideration to Siklu’s shareholders, Ceragon will issue approximately 1.5 million ordinary shares. Ceragon is expected to assume financial liabilities of approximately $10-12 million, of which approximately $2.5 million are classified as long-term debt.

Ceragon is expected to generate approximately $25-$29 million in incremental 2024 revenue from this acquisition. The acquisition is expected to be accretive to the consolidated gross margins of Ceragon as Siklu’s margins are at levels significantly higher than Ceragon’s historical margins. Ceragon management expects the combination to improve Siklu’s results by leveraging Ceragon’s working capital management capabilities, as well as expanded profitability following synergies. Inclusive of these business improvements, management anticipates the transaction to be accretive to non-GAAP earnings by the second half of 2024.

Doron Arazi, Ceragon CEO, said “We expect this combination to accelerate our growth strategy, by improving our key financial metrics and reducing customer concentration in the short and long run. We have identified near-term opportunities to bring Siklu products to regions and customers where Ceragon has an established presence, and, for the longer term, to combine Ceragon products to create a more comprehensive offering primarily to private networks and small service providers in general, and leveraging Siklu’s millimeter-wave leadership position in North America to increase our presence in this key market in particular.”