The global optical transport equipment market is set for a major rebound in 2026, fueled by surging investments in AI data centers and data center interconnect (DCI) infrastructure. According to a new report from Dell’Oro Group, the optical transport market is forecast to grow 16 percent in 2026, crossing $18 billion in manufacturer revenue for the first time since 2000.
The strong outlook reflects accelerating demand for high-capacity optical networking infrastructure required to support AI workloads, hyperscale cloud expansion, and massive data traffic growth between AI data centers.
Jimmy Yu, Vice President at Dell’Oro Group, said the research firm raised its full-year 2026 forecast from 10 percent growth to 16 percent after a strong first quarter performance. The optical transport market recorded an estimated 20 percent year-over-year revenue increase during Q1 2026, primarily driven by demand for DCI deployments.
The rapid expansion of AI infrastructure is creating unprecedented demand for optical connectivity solutions, especially wavelength division multiplexing (WDM) systems and IP over DWDM (IPoDWDM) ZR/ZR+ optical pluggable modules. These technologies are becoming critical for enabling ultra-high-speed data transmission between AI clusters, hyperscale cloud facilities, and distributed computing environments.
Dell’Oro Group noted that direct purchases associated with data center interconnect applications surged approximately 40 percent year-over-year in Q1 2026. The growth highlights how hyperscale operators and cloud providers are aggressively expanding network infrastructure to support generative AI training and inference workloads.
However, supply chain constraints remain a key concern for the industry. Optical equipment suppliers are experiencing growing order backlogs as lead times continue to lengthen amid rising AI-driven demand. According to Dell’Oro, supply availability could become the primary limiting factor preventing even faster market expansion in 2026.
The report also revealed regional performance differences across the global Optical Transport market. North America, Europe, and the Middle East and Africa (MEA) regions delivered year-over-year growth in Q1 2026, supported by hyperscale data center investments and telecom network modernization projects. In contrast, Asia Pacific and Latin America reported declines during the quarter.
Vendor competition in the optical transport systems market remains concentrated among a handful of major suppliers. On a trailing four-quarter basis, the leading vendors accounting for more than 80 percent of combined revenue share were Huawei, Ciena, Nokia, and ZTE.
In the fast-growing IPoDWDM ZR/ZR+ optical pluggable module segment, the leading suppliers were Marvell and Cisco through its Acacia optical business.
The report underscores how AI infrastructure spending is reshaping the telecommunications and optical networking industry. As hyperscalers and enterprises deploy larger AI clusters, demand for scalable, low-latency optical transport networks is expected to remain one of the strongest growth drivers for the telecom infrastructure sector throughout 2026 and beyond.
BABURAJAN KIZHAKEDATH