Spending patterns in the optical market are increasingly shaped by hyperscalers rather than traditional telecom operators – says Ciena, Nokia, and Dell’Oro on an RCR webinar.
In sum – what to know:
DCI demand surges – Dell’Oro said spending on data center interconnect optical equipment grew 40% in 2025 and is expected to rise another 40% in 2026 as AI infrastructure expands.
Hyperscalers drive growth – While telecom capex remains relatively flat, cloud providers continue increasing infrastructure investments, making hyperscalers the primary source of growth in the optical networking market.
Networks evolve rapidly – Nokia said growing AI traffic is accelerating the deployment of additional fiber and driving a shift toward architectures optimized for power, cost, and large-scale AI connectivity.
Artificial intelligence is driving a new phase of growth in the optical networking market, with hyperscale cloud providers increasing infrastructure spending and creating new demand for data center interconnect (DCI) technologies.
Speaking during an RCRTech webinar, Jimmy Yu, vice president at Dell’Oro Group, said spending patterns in the optical market are increasingly being shaped by hyperscalers rather than traditional telecom operators.
According to Yu, cloud provider capital expenditures have grown sharply since the emergence of generative AI, while telecom spending has remained relatively flat. Dell’Oro expects telecom capex to decline by about 2% in 2026, while major cloud providers continue expanding investments in AI infrastructure.
That investment is translating directly into higher demand for optical transport equipment used to connect data centers. Yu said spending on DCI optical equipment increased 40% in 2025 and is expected to rise another 40% in 2026. He also noted that DCI equipment now represents roughly one-third of global optical transport spending and approximately 60% of spending in North America.
Yu described the impact of AI on optical networking as a “step function” increase in demand, driven not only by traditional data center traffic but also by new AI workloads and large-scale interconnections between AI clusters. He highlighted growing interest in what the industry refers to as scale-across connectivity, which links AI infrastructure across multiple data centers.
Meanwhile, Rob Shore, head of optical network solution marketing at Nokia Network Infrastructure, said the resulting traffic growth is creating new challenges for network operators and infrastructure providers.
During the webinar, Shore cited projections showing inter-facility traffic growing by about 23% annually, while traffic inside data centers is increasing by roughly 65% per year. At the same time, operators are planning significant fiber deployments to support growing bandwidth requirements.
According to Shore, the industry is also facing practical constraints related to power consumption and fiber capacity. As a result, network operators are increasingly focusing on architectures that optimize cost and power efficiency rather than simply maximizing the amount of traffic carried on a single fiber.
He noted that AI-related deployments are driving a shift from networks built around hundreds of fibers between locations to architectures that may require thousands of fibers. Shore referenced examples of deployments involving as many as 13,000 fibers between sites.
The changing requirements are also influencing technology choices. Yu highlighted growing demand for disaggregated wavelength division multiplexing (WDM) technologies, including transponder units, optical line systems, and coherent pluggable optics. Dell’Oro expects spending in these segments to roughly double by 2028.
Taken together, the presentations suggest that AI is becoming one of the most important growth drivers for the optical networking industry. As hyperscalers continue investing in AI infrastructure, demand is expanding beyond traditional data center connectivity and creating new requirements for fiber deployment, optical transport equipment, and network design.
To access the full webinar, click here.
