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AI is triggering a multiyear re-architecture of network infrastructure, says Ciena, driving higher bandwidth demand and making optical connectivity increasingly critical from long-haul networks to data center fabrics, with its addressable market set to double by 2029.
In sum – what to know:
AI re-architects networks – Ciena expects AI to drive sustained increases in bandwidth connectivity demand and network traffic across traditional WAN, AI WAN and data center environments.
Optics move central – Higher capacity, speed, density and lower power requirements are making optical connectivity increasingly important for AI architectures, from long-haul networks to short-reach data center connections.
Market doubles – Ciena expects its total addressable market to grow from approximately $25 billion today to approximately $50 billion by 2029.
Ciena sees artificial intelligence driving a multiyear investment cycle in network infrastructure, with optical connectivity becoming increasingly central as AI workloads expand across wide-area networks, data center interconnects, and the data center itself.
Speaking during Ciena’s earnings call, the company’s president and chief executive officer Gary Smith said that Ciena continues to see accelerating customer demand and order flow, with the firm projecting that it will exit fiscal 2026 with more than $10 billion in backlog.
Smith framed the opportunity as part of a broader re-architecting of network infrastructure driven by the rapid expansion of data center infrastructure and AI workloads.
“We remain in the very early stages of a multiyear, highly durable network investment era. This is springboarding and caused by the large and growing investments in data center infrastructure,” Smith said.
AI, he added, is building on earlier waves of communications investment driven by the internet and cloud, but at a substantially larger scale. “As a result, AI is currently driving and will continue to drive significant increases in both bandwidth connectivity demand and network traffic growth,” Smith said.
That demand is increasing the importance of optical connectivity, particularly as AI infrastructure requires higher capacity, faster speeds, and greater density while also seeking improvements in reliability, space, power, and cost.
“Because of the increasing demands for higher capacity, faster speed, greater density, improved reliability, reduced space, and lower power and cost, optics have become the indispensable element for next generation AI architectures,” Smith said.
Ciena divides the opportunity into three primary markets: the traditional wide-area network, which includes the network backbone, edge and operations; what it calls AI WAN; and the data center itself.
In the traditional WAN, AI is creating challenges ranging from fiber availability in the backbone to quality-of-service requirements at the network edge and greater automation requirements as network operations become more complex. The market includes optical connectivity for long-haul, subsea, metro and regional applications.
The AI WAN encompasses data center interconnect and WAN backbone connectivity used to scale across data centers. Ciena said this infrastructure is currently being used for distributed AI training and is expected subsequently to support inference.
Here, Smith highlighted power requirements associated with growing GPU compute capacity and the energy required to train large language models at scale. He also pointed to the need to deploy modems at much greater scale and at lower prices.
Inside the data center, AI is increasing data rates and bandwidth requirements across scale-up and scale-out fabric connectivity. Ciena expects new optical technologies to be required to deliver greater capacity and density for short-reach, low-power connections.
Against that backdrop, Ciena expects its total addressable market to effectively double over the next three years, growing from approximately $25 billion today to approximately $50 billion by 2029. Smith said the company also expects its share of that market to increase.
Ciena is positioning its coherent optical technology as a key part of that opportunity. Smith highlighted the company’s WaveLogic 6 Extreme platform, which he said remains the only 1.6-terabit high-performance modem on the market 18 months after launch.
The company is also seeing strong adoption of its intelligent line systems. Ciena said its disaggregated optical line systems business has approximately 70% market share, and its next-generation RLS HyperRail is designed to increase the density of existing optical amplifier infrastructure.
Ciena is also extending its optical portfolio into and around the data center through its interconnects business. Ciena said adoption of its WaveLogic 5 Nano pluggable optics is strengthening, with shipments of 800ZR plugs in the third quarter more than doubling from the previous quarter.
