The Cloud SP Segment is projected to grow faster than the Telco SP segment over the forecast period. 400 Gbps technology adoption in wide area networks (WAN) and Data Center Interconnect (DCI) applications should continue to drive the growth in this segment.

ZR Optical Modules—long-distance optical modules that support distances of up to 120 km and are based on 400ZR specifications—will create new use cases for SP Core Routers. We project a gradual increase in the number of 400ZR modules used with 400GE port shipments over the forecast period.

China has recently embarked on an infrastructure spending spree to address the economic slowdown caused by the country's recurring COVID-19 related lockdowns. It is not yet clear how much China plans to spend on the new infrastructure plan. However, according to official Chinese government statistics, investment in infrastructure generally jumped by over 8 percent in 1Q 2022. Further, the Chinese policymakers who are directing the infrastructure overhaul appear to be emphasizing technology: specifically, new facilities for supercomputing, cloud computing and artificial intelligence. If this level and focus of government stimulus are sustained for the next four quarters, Chinese SPs are likely to accelerate and expand their spending on network investments.