Optical transceiver market poised to exceed $110BN by 2031 - report

The annual market for optical transceivers, driven by an unprecedented investment in AI data center infrastructure, is now predicted to reach $112 billion within five years - up from a total of “only” $23 billion in 2025.

That’s according to the latest report from France-based analyst company Yole Group, which also details how AI-driven infrastructure requirements are accelerating technology transitions driven by demand for ever faster links.

“The rise of artificial intelligence is fundamentally changing the role of optical connectivity,” they conclude. “What was once considered a supporting technology has become a critical enabler of AI scaling.

“As AI models grow in scale and complexity, the amount of data exchanged between processors, servers, racks, and data centers is increasing dramatically, creating unprecedented demand for high-performance optical interconnects.”

Structural shift

Authors Martin Vallo and Lakshman Srinivasan describe the unfolding AI revolution as the biggest structural shift to impact the optical interconnect industry in four decades.

“AI is no longer simply increasing demand for optical transceivers; it is redefining the entire photonics industry roadmap,” reports Vallo, with Srinivasan adding:

“The optical transceiver market is entering a new growth cycle. As AI clusters become larger and more distributed, optical connectivity is evolving from a networking component into a strategic infrastructure technology, creating significant opportunities across the value chain.”

Right now, that is characterized by a rapid transition toward 800 Gb/s and 1.6 Tb/s speed optical interconnects in the datacoms sector, just as recently developed approaches such as co-packaged optics (CPO) and near-package optics (NPO) gain traction, while new concepts such as eXtra dense Pluggable Optics (XPO) emerge.

At the same time, supply chains remain constrained by limited availability of indium phosphide components and lasers in particular.

Yole says that for the datacom sector the latest analysis includes market segmentation by data rate and lane speed, as well as module forecasts split by optical technologies including VCSELs, directly modulated lasers (DMLs), externally modulated lasers (EMLs), and silicon photonics.

The report also features a review of emerging modulator technologies including those based on thin-film lithium niobate (TFLN), barium titanate (BTO), and organic materials.

Companies analyzed include emerging Chinese vendors Terahop, Eoptolink, and Accelink, alongside US-based incumbents like Coherent, Nvidia, and Lumentum.

• Optical Transceivers for Datacom and Telecom 2026  is available now via the Yole web site.