Dell’Oro Group reports 15% growth in Optical Transport market

The Optical Transport market grew 15% year over year in 3Q25, leading Dell’Oro Group to raise its 2025–2026 outlook; renewed bandwidth demand matters for capacity planning and Data Center Interconnect (DCI) deployments.

Market Overview

The report shows Dense Wavelength Division Multiplexing (WDM) (DWDM) long-haul capacity shipments had grown below the historical 25%–30% rate for nine quarters before rising above 25% in mid-2025. DCI accounted for most bandwidth growth, driven by large cloud deployments.

Key Findings

Dell’Oro Group raised its full-year outlook for 2025 and 2026 after bandwidth returned and the market posted a 15% Y/Y gain in 3Q25. “we believe this non-DCI growth is particularly significant because it suggests that CSPs’ inventory correction is complete and their network bandwidth is starting to grow again,” the analysts said.

Segment or Supplier Performance

Disaggregated WDM represented nearly 40% of Optical Transport market revenue in the first nine months of 2025, while the remaining roughly 60% came mainly from large integrated systems. Non-DCI Dense Wavelength Division Multiplexing (DWDM) long-haul revenue rose 14% Y/Y in 3Q25, indicating demand beyond cloud DCI deployments.

Technology or Trend Analysis

Disaggregated WDM categories

Disaggregated WDM separates transponders from optical line systems, uses open interfaces, and favors small form-factor chassis aligned with a pay-as-you-grow model. The report tracks three major categories: Transponder Units; Optical Line Systems; and IPoDWDM ZR/ZR+ where ZR/ZR+ optical plugs are placed in routers or switches.

Forecast or Analyst Outlook

The analysts expect DCI-driven bandwidth trends to continue through 2026 and say cloud providers will expand Artificial Intelligence (AI) data centers across multiple buildings about 100 km apart, requiring 800ZR+ optics and optical line systems to Test Access Points (TAP) into different electricity grids for Graphics Processing Unit (GPU) clusters. The report projects continued market growth into 2026 and an elevated role for disaggregated WDM in DCI networks.

The report highlights renewed bandwidth demand, rising DWDM shipments, and the expanded role of disaggregated WDM for cloud and service providers. This Analyst Signals brief reflects a neutral, fact-based summary of the original research note.