Spending from Cloud Service Providers (SPs) on Ethernet data center switches declined for the first time in three years, according to a new report from Dell'Oro Group. Additionally, of particular significance this quarter, Arista achieved a milestone by securing the top revenue position in the Ethernet data center switch market for the first time ever, closely rivaling Cisco.
“In line with our expectations, Ethernet data center switch sales continued to decelerate in 4Q 2023, showing anemic growth at a very low single-digit rate,” said Sameh Boujelbene, Vice President at Dell’Oro Group. “The deceleration in revenue growth was primarily attributed to the Cloud segment, marking its first decline since 4Q 2020. We attribute this decline to the ongoing digestion cycle at certain large Cloud SPs as well as a shift in focus to AI infrastructure buildouts where InfiniBand still dominates at certain hyperscalers. Arista recorded the highest revenue share gain during the quarter, claiming the leading revenue position for the first time ever,” added Boujelbene.
Additional highlights from the 4Q 2023 Ethernet Switch – Data Center Report:
- Revenue growth exhibited a mixed pattern across regions. North America and APAC outside of China experienced a downturn, largely attributed to challenging year-over-year comparisons, indicating the onset of a digestion cycle in these regions. Conversely, EMEA maintained growth, albeit with a notable deceleration compared to the preceding three quarters. China saw a surge in revenue following four consecutive quarters of sluggish growth.
- Shipments of 200 Gbps, 400 Gbps, and 800 Gbps switches constituted just over 20 percent of total port shipments in 2023. We expect 400 Gbps and 800 Gbps adoption to accelerate in 2024 and 2025, as some of the AI workloads will start favoring Ethernet. We discuss the potential future adoption of Ethernet in AI infrastructure in our recently published “AI Network for AI workload” report.
