Networking Watch · October 8, 2026
Arista takes Ethernet inside the AI rack, IDC records an $18.9 billion switching quarter, HPE turns Juniper into AI racks, and 1.6T optics move toward interoperability.
Core Research Question
Is networking becoming the main competitive battleground of AI infrastructure, and will open Ethernet displace proprietary interconnects inside and between racks?
1. What Networking Watch Tracks
Networking Watch is the intelligence layer for the networks connecting AI, cloud, and enterprise computing. It covers AI networking and data-center fabrics, enterprise campus and WAN, hyperscale networks, optical and connectivity infrastructure, the companies building them, the deals reshaping the market, and the economics underneath. It follows the connectivity layer; Infrastructure Software Watch follows the software that controls it.
Each story follows one structure: the development, companies and technologies, market context, why it matters, and what to watch. This first edition has one theme: the AI buildout is turning networking from a supporting category into a primary competitive battleground, and the fight is between proprietary and open Ethernet-based architectures.
The CODEW angle: Networking is one of the core infrastructure stories underneath the massive AI buildout, and the data this week shows it is also where the money is moving fastest.
2. Arista Takes Open Ethernet Into the Rack With Scale-Up Architectures
The development. On October 7, Arista Networks announced an open Ethernet rack-scale portfolio for AI, built with AMD, Arm, Broadcom, d-Matrix, Meta, Microsoft and Qualcomm. Etherlink SU-144 connects up to 144 accelerators in a single hop within a rack and up to 1,024 across racks, in three physical designs, including an orthogonal chassis supporting 100 to 400 kW liquid cooling. For scale-out, 7060EX7 switches deliver 102.4 Tbps each with integrated liquid-cooling manifolds, and the racks support ESUN, Nvidia's NVLink and NVLink Fusion, and PCIe. Arista says next-generation XPO and open co-packaged or near-packaged optics lift capacity from 1.6 Pb/s per rack to 6.5 Pb/s and cut data-center footprint by nearly half, claims based on its own figures.
Companies and technologies. ESUN (Ethernet for Scale-up Networks) is the open alternative to NVLink inside the rack, and Ultra Ethernet-based Ethernet handles scale-out. Arista told Fierce Network it stayed out of scale-up until now because NVLink dominated that domain. Competitors include Nvidia, Broadcom-based white-box and rival switch vendors, Cisco, HPE, and Juniper.
Market context. IDC credits Arista with 18.7% of data-center Ethernet switch revenue and 13.4% of the total market in 2Q26. Coverage notes this is a design announcement, and ship dates were not stated in the material we reviewed. Arista will demonstrate it at the OCP Global Summit on October 12 to 15.
Why it matters: Scale-up is the last proprietary stronghold in AI networking. If open Ethernet works inside the rack, Nvidia's control of the network narrows, and non-Nvidia accelerators become easier to deploy at scale.
What to watch: OCP demonstrations, delivery dates, and which hyperscalers commit to ESUN-based racks.
3. IDC: Ethernet Switching Hits $18.9 Billion as AI Drives Record Spending
The development. IDC's tracker, published September 11, shows the worldwide Ethernet switch market reached $18.9 billion in the second quarter, up 43.4%. The data-center segment grew 64.5% to $12.3 billion on AI training and inference build-outs, and the router market rose 22.8% to $4.5 billion. The Americas led switching growth at 50.4%.
Companies and technologies. Nvidia's Spectrum-X, which pairs Spectrum switches with BlueField DPUs and LinkX cables, is the main reason it overtook peers in data-center switching. IDC attributes part of non-data-center growth to higher prices from memory component costs, which means revenue is rising faster than unit volumes.
Market context. It is the second consecutive quarter above 40% growth, and early demand signals for 1.6T ports are emerging, per IDC. The table below summarizes the numbers.
| Total Ethernet switch market | $18.9B, up 43.4% YoY |
| Data-center segment | $12.3B, up 64.5% YoY; 800G was 41.2% of revenue, up from 35.9% in 1Q26 |
| Campus and branch | $6.6B, up 15.7%, driven by refresh, Wi-Fi 7 and higher component prices |
| Nvidia | $2.5B, up 181.1%; 20.4% of data-center revenue, #1 branded vendor |
| Cisco | $5.4B total, up 36.2%; 28.7% share overall, #1; $2.2B in data center |
| Arista | $2.5B, up 37.6%; 18.7% of data-center revenue |
| Huawei / HPE | Huawei $1.5B, up 28.6%; HPE (with Juniper) up only 1.6%, 6.1% share |
Why it matters: AI networking is now the largest driver of data-center network spending, and the fastest vendor growth sits with silicon-and-systems players, not legacy enterprise switching.
What to watch: Third-quarter data in December, 1.6T port share, and whether component pricing continues to inflate enterprise revenue.
4. HPE's Networking Investor Day: Juniper Integration Meets AI Racks
The development. At its September 30 Networking Investor Day, HPE raised its Juniper cost-synergy target to $800 million in annual run-rate savings by fiscal 2028, up from at least $600 million at close and $450 million when the deal was announced. It also guided networking revenue to a high-teens CAGR from fiscal 2026 to 2029 with mid-to-high 20s operating margins, and announced a $1.2 billion order from Vultr, its first for AMD Helios AI racks.
Companies and technologies. Each Helios rack combines 72 AMD Instinct MI455X GPUs, EPYC "Venice" CPUs and Pensando Vulcano NICs, with six HPE Juniper QFX5252 scale-up Ethernet switch trays connecting the GPUs. HPE says Helios is a more than $1 billion networking opportunity over two years, with tray orders above $200 million, and that it is the only networking vendor in Helios so far. HPE did not disclose how much of the $1.2 billion is networking.
Market context. HPE's Juniper acquisition closed in July 2025 after a Justice Department settlement. Its networking segment grew 148% to $2.69 billion in fiscal Q2, largely from the merger, yet IDC shows HPE's Ethernet switch revenue up just 1.6%, with about 70% in campus and branch, so the growth story is data-center and routing rather than a share gain in switching.
Why it matters: HPE is turning an acquisition into a full-stack AI rack offering, and the Vultr order shows neoclouds value one supplier for compute, switching, and cooling.
What to watch: The networking share of Helios orders, further neocloud wins, and HPE's synergy delivery against the $800 million target.
5. 1.6T Ethernet Interoperability Meets the Optical Supply Chain
The development. The Ethernet Alliance ran a multi-vendor 1.6T interoperability demonstration at ECOC in Málaga on September 21 to 23, showing 1.6T OSFP connectivity, 1.6T operation on 224G SerDes with link training, and an 800G lossless AI link using Link Layer Retry and Credit-Based Flow Control. IEEE P802.3dj, which includes 1.6Tb/s Ethernet specifications, is advancing, and the Alliance's Technology Exploration Forum, "The AI Future: Ethernet," runs October 7 and 8 in Mountain View.
Companies and technologies. Participants include Amphenol, Cisco, HPE, Huawei, Keysight, Synopsys, TE Connectivity and Teledyne LeCroy. Amphenol showed 1.6T optical modules at 224G per lane working alongside deployed 112G copper, and Cisco highlighted 51.2T Silicon One systems with linear pluggable optics. A panel looked beyond today's 200G-per-lane toward 400G signaling.
Market context. Optical suppliers are tying themselves closely to Nvidia: reports say Nvidia invested $2 billion each in Lumentum and Coherent this year, and Coherent has said scale-out co-packaged optics revenue should begin in the second half of 2026, with scale-up following in 2027, per secondary coverage of investor calls. A Siemens EDA blog cites Nvidia figures that co-packaged optics can cut 1.6T link power from 30 W to 9 W, a vendor claim; the same piece notes CPO still lacks a fully interoperable ecosystem.
Why it matters: Interoperability is what makes 1.6T deployable, and optics, not switch silicon, may be the pacing item for the next speed step.
What to watch: IEEE P802.3dj progress, outcomes from the Technology Exploration Forum, and first CPO deployments in the second half of 2026.
6. The Networking Coverage Map
The series covers eight pillars. This edition emphasizes AI and data-center networking, optics and economics:
| AI networking | Arista scale-up and scale-out racks; Nvidia Spectrum-X share; 800G mix at 41.2%. |
| Data-center networking | IDC data-center switching $12.3B; Arista, Nvidia, Cisco, and HPE Juniper positioning. |
| Enterprise networking | Campus and branch $6.6B; Wi-Fi 7 and security-driven refresh (limited coverage today). |
| Cloud and hyperscale | Vultr Neocloud order; hyperscaler demand behind IDC growth (limited coverage today). |
| Networking companies | Cisco, Arista, Nvidia, HPE Juniper, Huawei profiled via IDC. |
| Optical and connectivity | 1.6T interoperability, 224G SerDes, CPO timelines, Nvidia optical investments. |
| Market and corporate moves | HPE-Juniper integration and $1.2B Vultr order. |
| Infrastructure economics | $18.9B switch market, memory-driven pricing, 800G port mix. |
The CODEW angle: The common thread is the move from proprietary to open Ethernet inside and between racks, with optics and pricing deciding how fast it happens.
The CODEW Angle
Networking is no longer just an IT infrastructure category. It is one of the core infrastructure stories underneath the AI buildout.
IDC puts quarterly Ethernet switching at $18.9 billion and growing above 40%, while 800G ports now make up two-fifths of data-center switch revenue. Arista and HPE are both pushing Ethernet into the rack, the domain Nvidia's NVLink has held, and optics suppliers are racing toward 1.6T and co-packaged designs.
The next editions will track whether open Ethernet scale-up gains real deployments, how the optical supply chain handles 1.6T, and how enterprise and hyperscale networking evolve alongside it.
Sources
→ IDC: Ethernet switch market surges 43.4% to $18.9B in 2Q26
→ Arista: Announces rack-scale architectures for scale-up and scale-out AI fabrics
→ Investing.com: Evercore ISI reiterates Arista rating on AI networking expansion
→ Fierce Network: Arista gets into scale-up game as accelerator landscape diversifies
→ HPE Form 8-K: Networking Investor Day
→ SiliconANGLE: Five takeaways from HPE's Networking Investor Day
→ Fierce Network: HPE lands first AMD Helios order in $1.2B Vultr deal
→ Ethernet Alliance: 1.6T Ethernet moves closer to reality in ECOC 2026 demo
→ OnMSFT: Nvidia optics partners say co-packaged optics rollout remains on track
→ Siemens EDA: Five key trends of co-packaged optics in 2026
The CODEW Stat
$18.9B Ethernet switch market · +43.4% YoY · 41.2% of data-center revenue at 800G · $1.2B first Helios order
Switch-market figures are IDC's 2Q26 tracker; the Vultr order value is as announced by HPE.
Editorial Note
Networking Watch is the fast-moving intelligence layer tracking the companies, infrastructure, standards, products and market developments shaping modern networking: AI and data-center fabrics, enterprise and hyperscale networks, optical connectivity and networking economics. It is distinct from Infrastructure Software Watch, Semiconductor Watch and Cloud Watch.
This edition draws on IDC, company announcements, SEC filings, the Ethernet Alliance and trade press as of October 8, 2026. Educational content only. Not investment advice. Product performance and footprint claims, including Arista's and Nvidia's, are vendor figures not independently verified by The CODEW. Optical investment and timeline details are drawn from secondary coverage of company statements. Market data are IDC estimates and may be revised.
Reviewed by Erwin Castro
on
Thursday, October 08, 2026
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