How Are Data Centres Driving Optical Transport Growth?

The optical transport equipment market has seen a sharp rebound, growing 14% year-on-year in the second quarter of 2025, according to new figures from Dell’Oro Group. 

The growth is tied closely to rising demand for disaggregated wavelength division multiplexing (WDM) and data centre interconnect (DCI) systems, both critical to supporting the expansion of AI and cloud services.

Market recovery after slowdown

The results mark a turnaround after six consecutive quarters of weaker sales.

“Following six quarters of soft sales in optical transport, it was great to see this market recover and post a strong double-digit growth rate,” says Jimmy Yu, Vice President at Dell’Oro Group.

“One area contributing to the strong growth for optical was the rising demand for disaggregated WDM, a concept that arose over a decade ago when both cloud providers and communication service providers wanted to have a more open, vendor-agnostic environment.

"One where a network operator had more choice in suppliers for transponders, optical line systems, and pluggable optics.”

Jimmy’s comments highlight how disaggregated infrastructure has become central to hyperscale data centre operators. 

By separating network elements such as transponders and line systems, data centres gain flexibility in sourcing and scaling, reducing dependency on single vendors while enabling rapid adoption of the latest technologies.

The role of disaggregated WDM

The report notes that the disaggregated WDM segment outperformed all other categories in the quarter, growing nearly 35% year-on-year.

Demand was strong across every key technology segment including transponder units, optical line systems (OLS) and ZR/ZR+ optics for IP over DWDM (IPoDWDM).

ZR and ZR+ are pluggable coherent optics that allow Internet Protocol (IP) routers to connect directly into dense WDM networks.

This innovation simplifies data centre interconnects by removing the need for standalone transponders in certain deployments, driving adoption among hyperscale operators seeking lower costs and higher efficiency.

Cloud providers lead demand

While communication service providers contributed to the market growth with a small increase in spending compared to the same quarter last year, cloud providers were by far the largest driver.

Dell’Oro’s figures show that direct cloud provider purchases of WDM systems grew 60% year-on-year. This surge reflects the massive investment in high-capacity interconnects linking data centres to support both cloud services and the growing compute requirements of AI.

For data centre operators, optical transport is now a strategic focus, as the ability to move data quickly and reliably between facilities underpins workload distribution, redundancy, and disaster recovery. 

With AI workloads consuming unprecedented volumes of bandwidth, interconnect capacity is becoming as critical as power and cooling.

Understanding the vendor landscape

The report also identifies the leading suppliers in the global optical transport market for the quarter. 

The top six vendors by revenue share were Huawei, Ciena, Nokia, ZTE, FiberHome and Cisco.

These companies represent a mix of global incumbents and regional players, all competing to supply equipment capable of meeting both hyperscale and carrier requirements. 

For data centres, vendor diversity is increasingly valued as part of disaggregated strategies, where operators seek to avoid vendor lock-in and prioritise flexible integration of multiple technologies.

Implications for data centres

For the data centre industry, the growth in optical transport underscores the critical role of network capacity in supporting digital infrastructure. 

The trend towards disaggregated WDM reflects the sector’s preference for open, modular systems that can be scaled rapidly in line with demand.

With cloud providers investing aggressively in interconnect capacity, and service providers returning to growth, optical transport has re-emerged as a high-growth segment of the infrastructure stack.

As AI continues to shape demand for low-latency, high-capacity connections, investment in optical transport technologies will remain a cornerstone of strategies for hyperscale, colocation and enterprise data centres.