Co-packaged optics market is driven by rising AI-driven bandwidth demand, hyperscale data center expansion, and the need for energy-efficient optical interconnects, with strong adoption across Asia-Pacific.
Hyderabad, Jan. 29, 2026 (GLOBE NEWSWIRE) — According to a new report by Mordor Intelligence, the co-packaged optics market is witnessing accelerated adoption as next-generation data centers and AI-driven workloads push the limits of conventional optical architectures. The co-packaged optics market size is projected to grow from USD 0.16 billion in 2026 to reach USD 0.75 billion by 2031, registering a robust CAGR of 35.92% during the forecast period (2026–2031). This rapid market growth is driven by increasing bandwidth density requirements, reduced power consumption needs, and the convergence of photonics and advanced semiconductor packaging. As cloud service providers, hyperscale data centers, and telecom operators invest in scalable network architectures, the co-packaged optics industry is emerging as a critical enabler of next-generation optical interconnect solutions.
Co-Packaged Optics Market Trends and Drivers
Energy Efficiency Driving Co-Packaged Optics Adoption
Sustainability commitments and tighter regulations are pushing hyperscale data centers to prioritize energy efficiency in network design, making power optimization a strategic concern rather than a technical preference. Integrating optical components directly into switching platforms helps operators reduce power losses and support higher computing density without breaching site power limits, turning efficiency gains into a compelling investment driver for co-packaged optics adoption.
AI and Machine Learning Workloads Accelerating Optical Adoption
The rapid expansion of AI and machine learning workloads is placing unprecedented pressure on data-center networks, where even minor congestion can slow training cycles and raise operational costs. Technology leaders such as NVIDIA and Cisco are responding by aligning switching platforms with optical architectures that better support low-latency, high-throughput communication. These moves signal growing confidence in co-packaged optics as a practical solution for AI-focused infrastructure, driving near-term demand from large-scale GPU clusters and reinforcing its role as a key growth driver in advanced data-center environments.
Table of Contents (Partial) – Co-Packaged Optics Industry
1. INTRODUCTION
- 1.1 Study Assumptions and Market Definition
- 1.2 Scope of the Study
2. RESEARCH METHODOLOGY
3. EXECUTIVE SUMMARY
4. MARKET LANDSCAPE
- 4.1 Market Overview
- 4.2 Market Drivers
- 4.2.1 Ramp-up of 51.2 T switch silicon requiring 1.6 T CPO
- 4.2.2 Hyperscale data-center energy-efficiency mandates
- 4.2.3 Surge in AI/ML cluster bandwidth demand
- 4.2.4 Transition to 800 G/1.6 T pluggables hitting thermal limits
- 4.2.5 and more
- 4.3 Market Restraints
- 4.3.1 Manufacturing complexity and heterogeneous-integration yield
- 4.3.2 Interoperability and standards immaturity
- 4.3.3 and more
- 4.4 Value Chain Analysis
- 4.5 Regulatory Landscape
- 4.6 Technological Outlook
- 4.7 Impact of Macroeconomic Factors
- 4.8 Latency-Sensitive Traffic Impact
- 4.9 Porter’s Five Forces Analysis
- 4.9.1 Threat of New Entrants
- 4.9.2 Bargaining Power of Buyers
- 4.9.3 Bargaining Power of Suppliers
- 4.9.4 Threat of Substitutes
- 4.9.5 Intensity of Competitive Rivalry
- 4.10 Investment and Funding Analysis
5. MARKET SIZE AND GROWTH FORECASTS (VALUE)
- 5.1 By Data Rate
- 5.1.1 < 1.6 T
- 5.1.2 1.6 T
- 5.1.3 3.2 T
- 5.1.4 6.4 T and Above
- 5.2 By Component
- 5.2.1 Optical Engine
- 5.2.2 Electrical IC
- 5.2.3 Laser Source
- 5.2.4 Connector and Packaging
- 5.2.5 and more
- 5.3 By Integration Approach
- 5.3.1 On-board Optics
- 5.3.2 Co-packaged Optics
- 5.4 By End-use Application
- 5.4.1 Hyperscale Cloud Data Centers
- 5.4.2 Enterprise Data Centers
- 5.4.3 Telco Central Offices
- 5.4.4 and more
- 5.5 By Geography
- 5.5.1 North America
- 5.5.1.1 United States
- 5.5.1.2 Canada
- 5.5.2 South America
- 5.5.2.1 Brazil
- 5.5.2.2 Rest of South America
- 5.5.3 Europe
- 5.5.3.1 Germany
- 5.5.3.2 United Kingdom
- 5.5.3.3 France
- 5.5.3.4 Netherlands
- 5.5.3.5 Rest of Europe
- 5.5.4 Asia-Pacific
- 5.5.4.1 China
- 5.5.4.2 Japan
- 5.5.4.3 South Korea
- 5.5.4.4 India
- 5.5.4.5 Rest of Asia-Pacific
- 5.5.5 Middle East and Africa
- 5.5.5.1 Middle East
- 5.5.5.1.1 Israel
- 5.5.5.1.2 Turkey
- 5.5.5.1.3 GCC
- 5.5.5.1.4 Rest of Middle East
- 5.5.5.2 Africa
- 5.5.5.2.1 South Africa
- 5.5.5.2.2 Rest of Africa
6. COMPETITIVE LANDSCAPE
- 6.1 Market Concentration
- 6.2 Strategic Moves
- 6.3 Market Share Analysis
- 6.4 Company Profiles (includes Global level Overview, Market level overview, Core Segments, Financials, Strategic Information, Market Rank/Share, Products and Services, Recent Developments)
- 6.4.1 Ayar Labs Inc.
- 6.4.2 Broadcom Inc.
- 6.4.3 Cisco Systems Inc.
- 6.4.4 IBM Corporation
- 6.4.5 Intel Corporation
- 6.4.6 Ranovus Inc.
- 6.4.7 TE Connectivity Ltd.
- 6.4.8 Furukawa Electric Co., Ltd.
- 6.4.9 Hisense Broadband Multimedia Technology Co., Ltd.
- 6.4.10 and more
7. MARKET OPPORTUNITIES AND FUTURE OUTLOOK
- 7.1 White-space and Unmet-need Assessment
For details on other market segments and the full table of contents, visit – https://www.mordorintelligence.com/industry-reports/co-packaged-optics-market?utm_source=globenewswire
Co-Packaged Optics Market Share by Region
The Asia-Pacific region is gaining momentum as supportive industrial policies and tightly connected supply chains accelerate the commercialization of co-packaged optics. Close collaboration between governments, manufacturers, and research bodies is helping reduce complexity and improve production readiness. This environment allows optical technologies to move more quickly from development into real-world deployments across data center and network infrastructure.
In North America, hyperscale cloud operators continue to drive adoption, supported by technology leaders such as Intel and NVIDIA. These companies are advancing co-packaged optics by aligning silicon innovation with AI and high-performance computing needs, strengthening end-user demand. Europe complements this growth by focusing on open standards and energy efficiency, encouraging broader adoption while supporting long-term sustainability goals.
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