Switches and routers remain the workhorses of the networking world. Viewed through that lens, 2024 offered a mixed bag of results for the networking market. There were numerous areas of decline, particularly in the enterprise market, according to some analysts. It was also an active year for switches and routers as the impact of AI on networking began to manifest and accelerate. Looking ahead, industry watchers project decent growth for Ethernet switches – data center, campus and branch – but with the caveat that the growth is coming after a soft 2024 in some segments.
2024 by the numbers
Worldwide Ethernet enterprise switch revenues declined 14.1% year-over-year in the second quarter of 2024 to $10.2 billion, according to a report from analyst firm Dell’Oro Group. And by IDC’s numbers, worldwide ethernet switch market declined by 7.9% year-over-year in the third quarter of 2024, hitting $10.8 billion in revenue. The router market declined even further with the total worldwide enterprise and service provider (SP) router market declining 17.4% year-over-year to $3.1 billion in the third quarter.
Despite the overall market correction, certain segments are showing promise. The data center portion of the Ethernet switch market grew 18% year-over-year in the third quarter. According to IDC, revenues for 200/400 GbE switches surged 126.3% in the same period, indicating strong interest in high-speed Ethernet switches for data centers.
Those trends coming out of the back half of 2024 bode well for the networking market’s prospect for 2025.
Cisco continues to dominate
Across both service provider and enterprise segments, Cisco continues to lead the market, at least by revenue.
John Dinsdale, chief analyst and research director at Synergy Research Group, told Network World that in the service provider router category, Cisco is the market leader by some distance. “Its share varies quite a bit quarter by quarter but is usually in the 33-40% range,” Dinsdale said. “Nokia and Huawei jostle for the number two slot, and the rankings often switch quarter by quarter. Juniper is number four in the market.”
Looking at the enterprise router segment, Dinsdale noted that Cisco is it; everyone else is relatively very small. Cisco’s dominance also extends into the Ethernet switch space, though it is facing increasing competition. Cisco’s share of enterprise switches varies quite a bit quarter by quarter but is usually in the 40-48% range, he says.
“Arista has grown rapidly over the last few years and is now the clear number two in the market– and it is growing quite a bit more rapidly that Cisco,” Dinsdale said. “Next biggest players in the market are Huawei and HPE. Other big vendors include H3C, Juniper, Extreme and white box vendors.”
The overall market in 2024 was a bit challenging for a number of reasons. Dinsdale noted that there were global supply chain issues, then sales leapt as they suddenly caught up with the backlog, and then sales dropped sharply as customers were ingesting large volumes of shipments.
“We are expecting the market to bounce back quite a bit in 2025 after the lows in 2024,” Dinsdale said.
2025 looks strong for enterprise switches, not so much for routers
2025 is looking to be a solid year of growth for multiple segments of the switch and router networking markets.
Brandon Butler, senior research manager, enterprise networks, at IDC told Network World that his firm’s non-data center (campus and branch) Ethernet switch market forecast for 2025 is for revenues to reach $21.4 billion, which is expected to be a 6.0% gain over 2024. The data center ethernet switch forecast is also robust with 2025 revenue projected to come in 11% higher than 2024, up to $22.7 billion.
Looking at the enterprise router market forecast for 2025, IDC is estimating revenue of $3.6 billion, up modestly by 1.5% from 2024.
Gartner presents a bit of a different viewpoint. Christian Canales, director analyst at Gartner, told Network World that on a global basis (and measured in end-user spending in constant currency), Gartner expects some limited growth — below 5% in 2025 over 2024 numbers — for the campus switching market. Those results follow a very soft 2024 in which spending declined more than 10% over 2023 (as currently forecasted, since fourth-quarter financial results are not yet out).
“For the data center switching market, demand has been more robust/healthy, largely fueled by demand from hyperscalers building massive data center infrastructure to support growing AI and generative AI service requirements,” Canales said. “We expect global spending on data center switches to increase just below 10% in 2025.
The impact of AI on data center networking infrastructure
Looking specifically at data center networking infrastructure, there is perhaps no bigger trend for 2025 than AI and accelerated computing.
“Accelerated servers require a new network—the AI back-end network—which is essential for connecting the various accelerators within an AI cluster, spanning multiple racks and, in some cases, multiple data centers,” Sameh Boujelbene, vice president at Dell’Oro Group, told Network World.
Boujelbene noted that historically, InfiniBand has dominated the AI back-end network market, holding more than 70% of the market share through 2024. However, Dell’Oro Group anticipates a significant shift toward Ethernet adoption in AI back-end networks starting in 2025 and continuing beyond.
“We expect shipments of 800 Gbps Ethernet switches to ramp up significantly in 2025, with initial shipments of 1600 Gbps switches expected by the end of the year,” Boujelbene said.
Source:: Network World