Data center switch revenue growth anemic in Q4: Coronavirus will create more headwinds: report

cloud data center
Look for the market softness in the data center switch market to continue in the first half of this year, according to Dell'Oro Group. (Pixbay)

According to a recent report by Dell'Oro Group, the worldwide data center switch market grew by a measly 1% year over year in Q4, which marked the slowest growth rate in six years. While data center switch revenue was down in North America and Europe, China's revenues grew by double digits year over year in the fourth quarter.

The decline in the switch market growth was partially due to some of the hyperconverged service providers, namely Facebook, easing back on their capex last year. Arista Networks in particular saw a dip in its revenues last year as cloud customers reduced their capex by extending the use of their network assets, which delayed the purchase of new equipment.

RELATED: Arista's stock stumbles on lower Q4 guidance due to softening of business from a cloud 'titan'

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“In line with our expectations, the top four U.S. cloud service providers posted mixed performance. Google and Amazon’s strong growth was partially offset by weakness from Facebook and Microsoft,” said Sameh Boujelbene, senior director at Dell’Oro Group. “Additionally, ongoing macroeconomic uncertainties in North America and Europe continued to weigh on network spending from Tier 2/3 cloud service providers and large enterprises.

"However, what’s intriguing this quarter is the growth witnessed in China despite macroeconomic headwinds in the region. We believe part of this growth could reflect inventory buildup as well as some government projects to stimulate the economy."

Dell'Oro Group expects the switch market softness to continue in the first half of this year, which includes the potential impact from the coronavirus on both demand and supply.

RELATED: Cisco gears up Telia Carrier for 400-Gig backbone

While Arista, Cisco, Juniper Networks and Dell have all started early 400G shipments, larger scale deployments have been, for the most part, pushed back to next year, according to recent earnings reports by some of those vendors.

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