The optical transport equipment market is poised for a significant resurgence over the next five years, with global revenues expected to climb to $19 billion by 2029, according to a new forecast from industry research firm Dell’Oro Group. This marks a notable turnaround after the sector endured a 9% contraction in 2024, driven by supply gluts and broader economic headwinds.
Dell’Oro’s latest five-year forecast, released in July 2025, highlights the critical role cloud service providers will play in driving this rebound, especially as they ramp up investments to meet escalating demand for artificial intelligence (AI) workloads and inter-data center connectivity. The report forecasts a compound annual growth rate (CAGR) of 5% across the overall optical transport market through 2029.
A key driver of this growth will be the rapid expansion of data center interconnect (DCI) infrastructure, which the report projects will grow at twice the pace of the broader optical transport market. Jimmy Yu, Vice President at Dell’Oro Group, noted that increased capex from hyperscalers will be directed toward a range of DCI technologies, including Dense Wavelength Division Multiplexing (DWDM) systems for long-distance transmission, optical line systems (OLS), and coherent pluggable optics such as ZR and ZR+ for IP-over-DWDM (IPoDWDM) applications.
“The acceleration of AI data center construction is pushing cloud providers to invest heavily in connecting facilities across regions and continents,” said Jimmy Yu. “We expect this to significantly boost demand for high-capacity, low-latency optical transport equipment, particularly in long-haul and metro networks.”
Cloud Demand Fuels Optical Surge
Among the report’s standout findings is a projected 15% CAGR for DWDM long-haul equipment deployed for DCI use cases, driven almost exclusively by hyperscale cloud operators. In parallel, the adoption of ZR/ZR+ optics – pluggable modules integrated into routers and Ethernet switches for IPoDWDM – is forecast to grow at an average annual rate of 20%, ultimately accounting for around 12% of total optical transport revenues by 2029.
The research also anticipates a continued shift toward disaggregated WDM systems, as both communication service providers and cloud hyperscalers pursue more flexible and cost-efficient network architectures. While transponder unit demand has dominated market growth over the past decade, Dell’Oro predicts that future expansion will center on coherent optics and optical line systems.
The full Dell’Oro Optical Transport 5-Year Forecast Report offers a granular view of global market dynamics, including vendor revenue breakdowns, unit and wavelength shipments up to 2.4 Tbps, average selling prices, and segmentation across DWDM long-haul, WDM metro, DCI, disaggregated systems, and multiservice platforms. The insights provide a strategic lens for vendors and network operators navigating the increasingly data-driven landscape of cloud and AI infrastructure.
