More than $100 billion will be spent on campus switches over the next five years, according to Dell’Oro Group, which is raising its outlook for the 2023 revenue growth while, at the same time, revising its forecast for 2024 to show a steeper decline than projected in its prior forecast.
“Given the sustained high level of backlog combined with the unexpectedly rapid improvement in supply, we have raised our revenue forecast for 2023 to show a high-single digit growth in this market. It is worth noting that this projection comes despite a tough comparison with 2022 during which the market experienced a robust double-digit growth,” said Sameh Boujelbene, Vice President at Dell’Oro Group. “As we head into 2024, however, the top-of-mind question is whether we should expect a correction in the market following two extraordinary years in sales performance and, if so, how steep that correction might be. We examined historical trends and interviewed various system vendors, Value-Added Resellers and System Integrators and are currently forecasting a high-single digit decline in the campus switch market in 2024.
“While challenges such as backlog normalization, capacity digestion, and spending optimization may temporarily impact market growth in 2024, we expect a fast recovery and long-term growth in the following years. This growth trajectory will be propelled by several tailwinds, including an accelerated pace of digital transformation, a greater portion of high-priced Power-Over-Ethernet (PoE) devices, and the need for faster network speeds,” added Boujelbene.
Additional highlights from the Ethernet Switch – Campus 5-Year July 2023 Forecast Report:
- 2.5/5.0 Gbps is expected to drive 15 percent of the campus switch sales by 2027.
- PoE ports are forecast to comprise more than half of the total campus switch port shipments by 2027.
- Despite some short-term headwinds, China is expected to gain three points of revenue share over our forecast period.
- The IT/OT convergence is expected to increase over our forecast horizon, but adoption may take time given the very long 10-30 year lifecycle of industrial networking equipment.
- The introduction of Artificial Intelligence capabilities will continue to play a key role in vendors’ competitive positioning in the market.