Worldwide Service Provider Router Revenues Continue to Rise

According to a recent report by IDC, the service provider router and carrier Ethernet switch industry has witnessed a successful first quarter of 2017. The success is primarily attributed to strong demand from cloud service providers and the digital transformation imperative. Revenues for the worldwide Ethernet switch market (Layer 2/3) were $5.66 billion, up 3.3% year over year.

Routers are telecom infrastructure devices used to deliver data packets from one network to another. These are located at gateways, places where two or more networks connect. Per the IDC estimate, in 2017, the aggregate market size of the service provider router and carrier Ethernet switch will surpass the 2016 figure of over $13 billion.

Phenomenal demand for 100 Gbps Ethernet ports was the main driving force for this record breaking revenue achievement. China played a major roll as cloud service providers of this country were busy installing backbone and data-center interconnect networks during the reported quarter. Several industry analysts have estimated that the global router market will reach $72 -- $73 billion by 2022.

Massive growth in mobile device usage has heightened transportation of data traffic substantially. In order to manage this burgeoning demand for photo, video and online data services, telecom operators are required to install more routers to ensure smooth transfer of data packets.

In the U.S., the majority of demand for service provider router and carrier Ethernet switch are from large cloud service operators like Amazon Web Services of Amazon.com Inc., Microsoft Azure of Microsoft Corp. and Alphabet Inc.

At present, Cisco Systems Inc. CSCO is the undisputed leader of worldwide Ethernet switching industry commanding 55.1% market share. It is followed by Huawei Technologies, Hewlett Packard Enterprise Co. HPE, Arista Networks Inc. ANET and Juniper Networks Inc. JNPR holding 6.3%, 6%, 5.1% and 4.3% market share, respectively. Arista currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank  stocks here.  Both Hewlett Packard and Juniper carry a Zacks Rank #3 (Hold) while Cisco has a Zacks Rank #4 (Sell). 

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