Research Note

May 2024 Optics for AI Clusters remained the only hot area of the market in Q1 2024

May 2024
 

Abstract

LightCounting releases a research note on the early financial results for Q1 2024

Telecom service providers reported declines in revenues and capex, in sharp contrast with the majority of cloud companies. Out of the top 15 telecom operators tracked by LightCounting, 11 reported Q1 financial results, disclosing an average of 3% and 11% declines in revenues and capex, respectively, compared to Q1 2023. The financial results look a bit brighter in terms of local currencies: NTT and Telefonica reporting 2-5% revenue growth. In local currency, China Mobile’s capex is estimated to have grown 6%, China Telecom’s capex was down 1% and China Unicom’s declined 18%.

The three US telecom operators exhibited near flat revenues for their ongoing businesses: AT&T’s and Verizon’s revenues were flat compared to Q1 2023 while Comcast’s was up 1%. These companies sharply reduced their spending: AT&T’s capex was down 13%, Comcast's declined 4%, Verizon’s was down 27% compared to Q1 2023.

Ericsson and Nokia reported 20-30% declines in their Q1 sales both year-over-year and sequentially. Huawei reported 37% growth in sales, but most of it probably comes from its consumer and cloud segments rather than from networking infrastructure. ZTE’s sales were up 5%, compared to Q1 2023, but down 12% sequentially.

Semiconductor IC vendors reported mixed results, with MACOM showing growth, but Microchip and Maxlinear still in negative territory. Large vendors (Intel, AMD) showed some sequential growth, but were still down year-over-year. Their general expectation is that they are close to the bottom of a cycle and growth will return in the second half of 2024.

Spending by Google and Microsoft reached new records, up 91% and 66% y-o-y, respectively. Most of the funds must have been invested in AI infrastructure, including optical connectivity. Amazon’s spending was up 5%, while Apple and Meta spent less in Q1 2024 on a y-o-y basis.

Innolight’s Q1 2024 revenue was up 164% y-o-y and 21% sequentially. Eoptolink reported a 10% increase sequentially and was up 85.5% year-over-year. Coherent’s networking segment revenue was up 18% sequentially and 12% y-o-y. Lumentum’s sales were sequentially flat and down 4.4% compared to Q1 2023. Lumentum’s Cloud and Networking segment was up 9% q-o-q and 7% y-o-y driven by record cloud data center revenue and the contribution from its Cloud Light acquisition. All these vendors expect more growth in the current quarter and the rest of 2024.

The Figure below shows the year-over-year growth in revenues and spending for the Top 5 Mega Datacenter operators that recently reported their Q1 2024 results.


The early financial results for Q1 2024 and outlook for Q2 and beyond are discussed in detail in the Research Note published today, available to subscribers at: https://www.lightcounting.com/login.

Complete analysis of Q1 2024 results and financial trends for the CSPs, network equipment, optical components, and semiconductor segments of the communications industry will be published on June 14, 2024, in LightCounting’s next Quarterly Market Update.

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