Arista Acquires VeloCloud, Strengthens SD-WAN Layout in AI Era

Another merger and acquisition in the telecommunications industry has settled. Arista Networks officially announced last Tuesday the acquisition of VeloCloud, an SD-WAN business unit under Broadcom, with the aim of restructuring its SD-WAN product line to meet the complex demands of the AI network era. Although the specific terms of the transaction have not been disclosed, there were reports in May this year that VeloCloud’s asset valuation could reach as high as $1 billion.

Strengthening the Shortcomings of SD-WAN

VeloCloud is an asset acquired by Broadcom when it acquired VMware in 2023, and has long held an important position in the managed SD-WAN service market. According to Roy Chua, Chief Analyst at AvidThink, Arista’s current core strengths are focused on data center routing, switching, and cloud networking. Its existing SD-WAN products “perform well but lack breakthroughs”.

Arista CEO Jayshree Ullal stated that by integrating VeloCloud’s technology, the company will add support for 1G/10G/25G Ethernet ports, dual connectivity for 5G and Wi Fi, as well as “integrated security and wireless options” and other features. She emphasized in her blog that the rise of AI has completely changed the definitions of “users” and “sites” in wide area networks (WANs) – sites may exist on mobile terminals such as laptops, smartphones, and airplanes, and AI agents will collect data across these nodes (including public clouds), bringing “unprecedented complexity” to WAN networks.

In the era of AI, customers need more than just traditional SD-WAN, “Ullal pointed out.” As the impact of generative AI traffic on WAN in data centers (whether on premises or in the cloud) intensifies, the network islanding model will become unsustainable. “

Broadcom’s strategic choices

Industry observers believe that the spin off of VeloCloud by Broadcom is not surprising. J. Jack Gold, founder of Gold Associates, stated that SD-WAN is not a high growth area, and Broadcom’s current strategic focus is on cloud and virtualization businesses.

Enter the new battlefield of SASE

Mauricio Sanchez, Director of SD-WAN and SASE Research at Dell’Oro Group, analyzed that VeloCloud not only strengthens Arista’s enterprise WAN business, but also opens the door to a larger secure access service edge (SASE) market. Arista may even further enter the Security Services Edge (SSE) market, which is expected to generate over $10 billion in revenue by 2025.

But Sanchez also warned that in order to maintain its advantage in the AI network competition, Arista must allocate resources carefully: “Enterprise WAN and SASE are aimed at completely different procurement decision-makers. When Arista enters these adjacent markets, it needs to avoid resource dispersion or missing out on core AI opportunities – this balancing act will test its execution discipline. “

This acquisition marks a key step for Arista to expand from the traditional data center network to the broader edge computing field. As AI reshapes network architecture, whether Arista, with the support of VeloCloud technology, can catch up in the SD-WAN and SASE markets will become the next focus of attention in the industry.