Demand for optical modules in the fourth quarter

Optical module demand surged in Q4 2025, driven by hyperscale AI investments, 800GbE adoption, and ramping 1. 6TbE shipments, with quarterly datacom revenue up 87% year-over-year.

Datacom Market Trends

In the fourth quarter of 2025, datacom optical module demand experienced unprecedented growth, largely fueled by hyperscale cloud operators increasing capital expenditures for AI workloads. Quarterly datacom revenue rose 87% year-over-year, reflecting strong adoption of 400GbE and 800GbE modules, while 1. 6TbE modules began ramping, heavily weighted to Q4, with nearly 10 million units forecast for 2026.

Over 42 million high-speed datacom modules shipped in 2025, an 80% increase over 2024, with 800GbE modules being the primary growth driver. Hyperscalers such as AWS, Microsoft Azure, and Google Cloud contributed significantly to this surge, upgrading data center interconnects to support AI and cloud workloads.

Telecom Market Trends

The telecom optical module market also showed strong Q4 performance. Coherent and pluggable modules, including 400ZR/ZR+ and 800G pluggables, accounted for a substantial portion of deployed bandwidth, with telecom revenue up 35% over 2024. North American operators' spending growth in Q4 2024 and ongoing 5G network optimization contributed to continued demand for high-speed optical modules in fronthaul, midhaul, and backhaul applications.

Expansion of fiber-to-the-home networks and trunk transmission upgrades further supported module demand, particularly for 400G and 800G modules.

Key Drivers of Q4 Demand

Hyperscale A

I and cloud computing: AI training clusters and high-bandwidth workloads drove datacom module adoption. Transition to higher data rates: The shift from 100G to 400G and 800G modules accelerated in Q4, with 1. 6TbE starting volume shipments.

5G network expansion and optimization: Telecom operators continued upgrading infrastructure, increasing demand for coherent and pluggable modules. Supply chain and production capacity: Global production of 400G modules reached 10 million units by 2024, supporting Q4 demand, though lead times remained extended due to supply constraints.

Outlook

Demand for optical modules is expected to remain strong through 2026 and beyond, with datacom growth driven by AI and cloud workloads and telecom growth supported by 5G and fiber expansion. The adoption of 1. 6TbE modules and continued deployment of 800GbE and 400ZR/ZR+ modules will sustain high shipment volumes in upcoming quarters.

Overall, Q4 2025 marked a record-setting period for optical module demand, reflecting both technological upgrades and strategic investments by hyperscale and telecom operators.