Dell’Oro Group reports router market reset and 2025 recovery
Dell’Oro Group finds the router market reset in 2024 and began a V-shaped recovery in 2025, with core router revenues up over 40% year‑over‑year in the first nine months, affecting Wide Area Network (WAN) and Data Center Interconnect (DCI) planning.
Market Overview
The analyst reports the market dropped nearly 20% in 2024 after an inventory surplus persisted beyond the first half of the year and purchases by CSPs and cloud providers declined.
At the reset point, cloud providers accelerated investments in Artificial Intelligence (AI) data centers and Agentic AI, and core router revenues grew more than 40% year‑over‑year in the first nine months of 2025.
Key Findings
Cloud providers expanded AI data center builds and began interconnecting Graphics Processing Unit (GPU) centers with large bandwidth, prompting increased demand for WAN capacity and DCI.
The analyst notes the market shifted from decline to a V-shaped recovery driven by the need to move data outside the data center wall.
Segment or Supplier Performance
System houses experienced a two‑quarter Link Aggregation Group (LAG) before new orders converted to revenue, which contributed to a steeper decline than expected in 2024.
Core routers led the recovery with more than 40% year‑over‑year revenue growth in the first nine months of 2025.
Technology or Trend Analysis
Scale-Across DCI
Cloud providers are interconnecting GPU data centers using data center switches and ZR+ optics to form large virtual data centers, and the analyst questions whether some builds will instead use routers when span lengths exceed switch limits.
AI-Ready Infrastructure
Early adopters are upgrading infrastructure for Agentic AI to improve access speeds to cloud AI compute, and the analyst asks whether this will become mainstream in 2026 or 2027.
Fronthaul
The analyst remains cautious about router fronthaul before 6G despite increased activity around eCPRI and asks whether fronthaul build-outs will occur prior to 6G.
Forecast or Analyst Outlook
The preliminary view for 2026 is that growth rates will remain high and the market momentum from 2025 will continue, with a possibility that 2026 results will surpass expectations.
However, the analyst identifies three open questions—Scale-Across DCI choices, AI‑ready infrastructure adoption timing, and fronthaul build-outs—that will influence outcomes.
Conclusion
The analyst summarizes that the router market moved from a deep 2024 decline to a 2025 recovery tied to AI DCI and WAN demand, and that 2026 results depend on technical and deployment choices. This Analyst Signals brief reflects a neutral, fact-based summary of the original research note.