OFC 2026 Preview: Scale-Across Initiates a New Super Cycle for Optical Modules

OFC 2026 Preview: Scale-Across Initiates a New Super Cycle for Optical Modules

Against the backdrop of the continuously exploding demand for AI computing power, the optical communication industry is entering a new cycle of prosperity. As OFC 2026, the global optical communication conference, approaches, several organizations are beginning to reassess the long-term requirements for optical network infrastructure.

According to Windrunner Trading Desk, Bank of America Securities pointed out in its latest forward-looking report that AI infrastructure is driving optical network demand into a new “super cycle.” The core driving force is not solely the expansion of computing power, but rather the evolution of data center architecture from “Scale-Up” to “Scale-Across.” This transformation is significantly increasing the demand for optical interconnections between data centers.

Bank of America predicts that the global optical transmission market will maintain growth above 10% in 2026–2027; among which 800G coherent optical modules and ZR/ZR+ pluggable optical modules will be the fastest-growing segments.

Optical Networks Become the Next Bottleneck

Over the past two years, AI infrastructure investment has mainly focused on GPUs and computing power servers. However, as scale expands rapidly, network bandwidth is gradually becoming the new performance bottleneck.

Bank of America points out that the current explosion in demand for optical communications arises primarily from three main drivers:

First, increased bandwidth requirements for traditional data centers. Even in non-AI data center scenarios, cloud vendors continue to enhance network capacity; for example, Microsoft has significantly increased procurement for front-end network devices.

Second, a new wave of hyperscale data center construction. According to Bank of America’s calculations, from 2026 to 2028, cloud vendors will add several gigawatts (GW) of data center capacity, with the equipment investment scale for each 1GW data center reaching about $55 billion.

Third, the demand for interconnection between data centers brought by Scale-Across architectures. As AI training scales up, it is increasingly difficult to accommodate all computing power in a single data center. Computing clusters are beginning to be deployed across multiple data centers, driving a surge in high-bandwidth optical interconnect demand.

This means that AI infrastructure is transitioning from “computing power driven” to “computing power + network coordination driven.”

Scale-Across: The Key Turning Point in AI Cluster Architecture

Traditional AI clusters mainly relied on the Scale-Up model, continuously increasing GPU numbers within a single data center.

But as model scale exceeds trillions of parameters, this architecture faces two major constraints: power and cooling bottlenecks in data centers and the rising complexity of network topology.

Therefore, major cloud vendors are shifting to Scale-Across architectures—distributing AI computing resources across multiple data centers, forming a unified computing pool through high-speed optical networks. Under this architecture:

AI training tasks can be flexibly scheduled between different data centersNetwork bandwidth demand increases significantlyData Center Interconnect (DCI) becomes core infrastructure

According to Bank of America's forecast, the Scale-Across AI network market will grow 11-fold to $80.8 million in 2026, becoming one of the fastest-growing fields in AI network infrastructure, directly driving an explosion in demand for optical modules.

Optical Module Technology Roadmap: Welcoming the 800G Era

Against the backdrop of surging optical interconnect demand, optical module technology is rapidly upgrading.

The current mainstream technology routes include:

1. Copper cable connection (<10 meters) is suitable for short-distance cabling within cabinets, at the lowest cost.

2. IMDD optical modules (10 meters–10 kilometers), used for internal data center networks.

3. Coherent optical modules (>10 kilometers), for long-distance connections between data centers.

The core demand for AI infrastructure comes from the third type—coherent optical interconnects. In recent years, 400G ZR optical modules have been the mainstream solution, but the market is rapidly upgrading to 800G.

Dell’Oro data shows that 400G ZR modules occupy 93% of the market in 2025, dropping to 61% in 2026, while 800G’s share will climb to 35%.

More importantly, the scale of the 800G market is expected to grow nearly tenfold in 2026. Bank of America predicts that between 2025 and 2030, compound annual income growth for 800G ZR/ZR+ optical modules will reach 83%, making this the most important growth engine for the optical communications industry.

Pluggable Optical Modules: Structural Change in Network Architecture

Another major change in AI-era optical networks is the proliferation of pluggable optical module architectures.

Traditional telecom networks typically purchase integrated optical system equipment, while cloud vendors have taken an entirely different path:

  • Separating routers/switches from optical modules
  • Directly inserting optical modules in ZR/ZR+ form into devices
  • Making the network architecture more modular

This pattern’s advantages are lower cost, lower power consumption, and greater flexibility in network architecture. Thus, pluggable optical modules have already become the mainstream solution for hyperscale data center interconnect.

2025 will be a critical turning point for coherent pluggable optical modules, with ZR optical module market growing 36%, and the overall optical transmission market growing 18%.

Industry Landscape: Cisco and Ciena Compete for New Cycle Windfall

In this cycle of optical network upgrades, Bank of America believes two companies stand to benefit most.

1. Ciena: Leader in Cloud Optical Networks

Ciena currently holds about 30% market share in optical transmission. Its core advantages include:

  • WaveLogic series DSP technology
  • A leading position among cloud customers
  • RLS optical line systems

Bank of America expects Ciena will further expand its share in the 800G optical module market. Its WaveLogic 6 Nano chips use 3nm DSP technology and have obvious advantages in power consumption. In addition, Ciena has developed the DCOM data center management system for Meta, expected to bring more than $100 million in revenue in 2026. Bank of America gives Ciena a “buy” rating with a target price of $355.

2. Cisco: First-Mover Advantage in the 800G Cycle

Cisco has only about 6% market share in optical transmission systems, but is stronger in pluggable optical module competition.

In the 400G ZR optical module market:

  • Marvell holds about 52%
  • Cisco about 35%
  • Ciena about 13%

But in the 800G market:

  • Cisco currently holds over 50%
  • Ciena about 29%

Bank of America believes Cisco, leveraging its router and switch ecosystem, retains an important position in AI data center network upgrades. Bank of America gives Cisco a “buy” rating with a target price of $95.

After AI Compute Power, Networks Become the Next Super Cycle

In the past two years, the AI industry chain has focused on GPUs and computing power servers.

But as model scale continues to expand, compute power density and data traffic explode in parallel, and network infrastructure is becoming a new critical bottleneck.

In Bank of America’s view, this means the AI investment cycle is moving from a “compute power cycle” into a “dual cycle of compute power + network.”

During this process: Scale-Across architecture, Data Center Interconnect (DCI), and 800G/1.6T optical modules will together drive the optical communications industry into a new long-term upward phase.

OFC 2026 may well mark the starting point of this new optical module super cycle.

 

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The above content is from Windrunner Trading Desk.

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