Corning CEO: Scale-up and Scale-out Optical Interconnects Will Become a Billion-Dollar Market

Corning has identified the trends of data center scale-up (vertical expansion) and scale-out (horizontal expansion) as the core growth drivers of its Photonics MAP under the Springboard initiative, with these two opportunities projected to generate billion-dollar revenue streams by 2030.

What is data center scale-up?

Data center scale-up focuses on increasing computing power, memory, and processing capacity within a single server rack, node, or computing unit, rather than adding standalone machines to the network. Currently, data centers primarily use copper cables, but fiber optics are beginning to enter scale-up networks.

Corning CEO Wendell Weeks stated during the Q2 earnings call that as the transition from copper cables to fiber optics accelerates, Corning will play a pivotal role in scaling up: “Currently, scale-up networks are 100% copper-based, but optics are beginning to penetrate these networks. This introduces an entirely new optical network. While the timeline for adoption and penetration is uncertain, the opportunity for growth in optical content is substantial.”

Optical Scale up Momentum

Weeks pointed out that Nvidia’s recent release of the Vera Rubin Ultra configuration – scaling up to 576 GPUs in 8 independent racks – is an example of this trend. Each rack has 72 Rubin Ultra GPUs, interconnected through copper cables, and expanded between racks through direct optical connections. This is a hybrid system solution transitioning to optics.

As Corning meets the growing demand for scale up data center optics, the company will also focus on introducing optics into the “box interior” to support new CPO and NPO technologies. Corning has established a position in the CPO field through cooperation with optical component suppliers such as Broadcom, and is a qualified supplier of fiber infrastructure for Broadcom Bailly CPO switches.

LightCounting and other research institutions support Corning’s scale up judgment, and it is expected that CPO will become the best choice for scale up network connections.

Corporate customers and financial performance of optical communication

Driven by strong optical communication and enterprise sales, Corning Q2 sales increased by 17% year-on-year to $4.74 billion. Optical communication sales increased by 32% to 2.07 billion US dollars, with net profit accounting for 21% of sales. Enterprise sales increased by 65% year-on-year, and sales related to AI data centers almost doubled.

Recently, Amazon announced a multi-year, multi billion dollar agreement with Corning to supply fiber optic, fiber optic, and connectivity solutions for Amazon’s data center infrastructure across the United States. Nvidia and Corning have established a long-term partnership to expand the manufacturing capacity of optical connections in the United States by 10 times and increase fiber optic capacity by more than 50%.

CFO Edward Schlesinger stated that Q3 sales are expected to increase by approximately 16% year-on-year to $4.9-5 billion, with core earnings per share growing by approximately 28% to $0.85-0.89.