Nvidia’s Networking Revenue Triples as Co-Packaged Optics Enter Mass Production
The chipmaker’s move to integrate optics directly onto switch chips addresses critical power bottlenecks in AI data centres, benefiting suppliers Taiwan Semiconductor Manufacturing and Lumentum.
Nvidia has entered full mass production of its Spectrum-X Photonics platform, marking the first time a co-packaged optics (CPO) Ethernet switch has been built for 200G-per-lane volume shipping. The technology integrates optical components directly onto the switch chip, a design shift intended to resolve the power and heat constraints that typically bottleneck large-scale artificial intelligence clusters.
The technical specifications of the new platform represent a significant departure from traditional pluggable transceivers. By soldering optics directly to the switch, Nvidia reports a 64-fold improvement in signal integrity and a fivefold reduction in network power consumption. The architecture also delivers 10 times better resiliency at scale, with optical loss dropping from approximately 22 decibels to around 4.
Commercial adoption is already underway, with CoreWeave, Lambda, and Oracle identified as the initial customers. Production ramped from May through July before reaching full volume, translating directly into financial results. Nvidia’s networking revenue surged 199% year-on-year to $14.8 billion in the fiscal second quarter of 2026, establishing networking as a distinct and rapidly expanding growth engine for the company.
The manufacturing of this infrastructure relies heavily on key suppliers. Taiwan Semiconductor Manufacturing handles the advanced silicon photonics fabrication, with packaging capital expenditure rising toward 20% of its planned $52 billion to $56 billion budget for 2026. This sector is expected to account for more than 10% of the foundry’s revenue this year, up from roughly 8% in 2025.
Lumentum Holdings has also secured multi-hundred-million-dollar CPO orders for delivery in the first half of calendar 2027. The supplier reported fiscal fourth-quarter revenue of $1.01 billion, more than doubling year-on-year, with adjusted earnings per share of $3.23. Lumentum provided next-quarter revenue guidance of $1.225 billion to $1.275 billion, exceeding Wall Street estimates.
Market analysts project substantial expansion for the technology sector. The Yole Group estimates the data-centre CPO market will grow from approximately $46 million in 2024 to $8.1 billion by 2030, representing a compound annual growth rate of 137%. While the market remains small currently, the trajectory underscores the strategic importance of Nvidia’s infrastructure shift.
