Networking vendor Ciena projects the AI networking market will reach $50 billion by 2029.
Ciena is experiencing significant growth opportunities driven by artificial intelligence-driven demand expanding across network infrastructure. During its fiscal second-quarter earnings call, president and chief executive officer Gary Smith said the company continues to benefit from AI-led demand from both hyperscalers and service providers. The company projects that its addressable market could approximately double to roughly $50 billion by 2029 as AI drives investment across WAN and data center networks.
Large hyperscalers are increasing their capital spending on networking infrastructure as they seek to monetize AI compute investments. "Since we spoke to you last in March, the largest hyperscalers have increased their 2026 capital expenditures with indications of continued expansion into 2027 and beyond," Smith said. According to Smith, hyperscalers are prioritizing the monetization of constrained compute investments, which is directing a larger share of spending toward networking infrastructure. "Given the priority to monetize somewhat constrained compute investments, we expect an increasingly larger proportion of that spend will be directed towards network infrastructure," Smith said. Additionally, service providers are reinvesting in network infrastructure after several years of restrained spending, creating new opportunities across long-haul, metro, and managed optical fiber networks.
Ciena's next-generation intelligent line system, RLS Hyper Rail, is addressing growing capacity and efficiency requirements. The platform was developed with multiple hyperscalers and is designed to support data center interconnect networks and AI inferencing. According to Smith, the company announced the industry's first multirail order from a leading hyperscaler for the platform. RLS Hyper Rail supports multiple fiber pairs operating in parallel over hundreds of kilometers using advanced amplification technology and is designed to deliver higher density as well as improved space and power efficiency. The company is engaged in discussions with additional hyperscalers, neocloud providers, and service providers evaluating the platform. Ciena also reported continued momentum for its Data Center Out-of-Band Management (DCOM) solution, which contributed to 88% year-on-year revenue growth in the routing and switching segment during the quarter, and the company has received initial orders from a second hyperscaler customer beyond Meta while progressing through lab qualifications with a third. Additionally, Ciena secured a new win with a major hyperscaler for its high-performance coherent modules and continues to see strong demand for its 400G and 800G pluggable optics products, remaining on track to more than double pluggable revenue compared with 2025.
To support anticipated demand, the company is investing in manufacturing and supply-chain capacity. Chief financial officer Mark Graf stated that "We are focusing our resources to secure supply and manufacturing capacity to deliver for both our customers and our owners." Ciena remains on track to spend between $250 million and $275 million in capital expenditures this year, including investments in future growth opportunities and supply readiness.