Nvidia Overtakes Cisco in Data Centre Switching as Acacia Optics Capture AI Demand

A Competitive First in Data Centre Networking

For the first time, Nvidia has surpassed Cisco Systems in data centre switching revenue, according to market analysis tracking the latest network infrastructure spending cycle. The milestone reflects a structural reallocation of capital: hyperscalers and enterprise AI deployments are directing networking budgets toward platforms designed specifically for GPU cluster communication, where Nvidia holds the product advantage through its InfiniBand interconnects and Spectrum-X Ethernet platform acquired with Mellanox in 2020.

Cisco's traditional strength sits in campus and enterprise core switching, markets that are growing slowly relative to the accelerating AI data centre buildout. Its switching portfolio was engineered for general-purpose traffic patterns, while the east-west communication demands of large GPU clusters favour Nvidia's purpose-built solutions. The displacement at the data centre tier is therefore structural rather than cyclical.

Acacia as a Counterweight

Cisco's Acacia division occupies a different layer of the same infrastructure stack and is seeing the opposite trend. Acacia makes high-speed optical transceivers, and its 800G products are shipping into the interconnect layer that connects AI servers within and between racks. That demand is driven by the same AI infrastructure cycle displacing Cisco's switching business, giving Acacia a commercial role in the upgrade cycle independent of Cisco's competitive position in switching.

Orders for 800G optical modules have given Acacia a clearer near-term revenue line as hyperscalers roll out next-generation AI clusters, partially cushioning the revenue pressure from switching share loss. The optics market is additive: Cisco is not the incumbent being displaced there, and Nvidia's networking expansion does not directly threaten Acacia's product category.

What Changes for Cisco

The switching milestone matters most as a signal of trajectory. Cisco retains dominant share in enterprise campus and branch networking, where Nvidia has no footprint, but the data centre segment has historically commanded premium margins and strong recurring software revenue through Cisco's networking software subscriptions. Sustained share loss there weighs on the long-term margin profile even if Cisco's overall networking revenues remain substantial.

Acacia's contribution offsets part of the impact but operates at lower scale relative to the full switching business. The net effect on Cisco is a mix shift: less exposure to the highest-growth segment of networking (AI cluster interconnects at the switching layer), offset by growing exposure to a different high-growth segment (AI cluster optics).