AI Networking and Optics: NVLink, Ethernet, CPO — 2026-10-31

Top developments

Arista Surpasses $3B Quarter, Challenging InfiniBand Monopoly

Arista Networks reported its first-ever $3 billion quarterly revenue, driven by accelerating demand for Ethernet-based AI data center gear. The company has raised its 2026 revenue outlook, explicitly tying the forecast to stronger adoption of open Ethernet fabrics over Nvidia’s proprietary InfiniBand stack. This shift highlights the growing competitive pressure on Nvidia’s scale-out network monopoly as hyperscalers seek cost-effective, open alternatives.

Chinese Optical Giants Lock In Orders Through 2028

Innolight (Zhongji Innolight) and Eoptolink (Xinyi Sheng) have secured orders for optical transceivers extending through 2027, with some key customers providing demand guidance for 2028. Both companies are currently scaling up production of 800G modules, which remain the primary delivery volume, while 1.6T products are entering a ramp-up phase expected to accelerate in Q4. The companies are also preparing for the next generation of co-packaged optics (CPO) and near-package optics (NPO) to support future AI cluster expansions.

Eoptolink Posts Record Profits, Stock Volatility Persists

Eoptolink reported a net profit of 11.3 billion RMB for the first three quarters of 2026, with inventory levels rising to 17.4 billion RMB as the company prepares for the next wave of AI orders. Despite strong fundamentals, market volatility caused a significant drop in market capitalization for major optical module suppliers, including Innolight and Eoptolink, amid broader sector adjustments. Analysts note that the surge in inventory reflects confidence in sustained demand for high-speed interconnects required by AI infrastructure.

Local view

Chinese Media Highlights Supply Chain Certainty

Local Chinese financial outlets, including 21st Century Business Herald and Sina Finance, are focusing heavily on the "certainty" of orders as a key metric for optical module companies. Reports emphasize that while stock prices fluctuate due to macro sentiment, the underlying business is robust, with major clients like Microsoft, Google, and Meta locking in capacity for 800G and 1.6T modules. The narrative suggests that the market is undervaluing the long-term visibility provided by these long-term supply agreements.

Context & numbers

Market Growth and Technology Shifts

The global AI data center networking market is projected to reach significant valuations by 2035, with the U.S. market alone expected to grow from $13 billion in 2025 to $83 billion by 2035. A key driver is the transition to higher port speeds; shipments of 800G and above optical transceivers are expected to exceed 60% of total shipments in 2026. Additionally, the industry is watching the ramp-up of 1.6T transceivers, which are currently in sample shipment and projected for volume ramping in the second half of 2026.

On the radar

Upcoming Earnings and Product Milestones

• Arista Networks Q3 Earnings: Scheduled for November 3, 2026. Investors are watching for further guidance on Ethernet adoption rates and supply chain constraints.
• CPO Stock Volatility: Co-packaged optics (CPO) concept stocks in China saw a late-session rally on October 28, with companies like Jiepu Technology and Tianfu Communication gaining significantly, indicating heightened speculation around the next generation of interconnect technology.