Austin, Sept. 22, 2026 (GLOBE NEWSWIRE) -- The global Co-Packaged Optics Market Size was valued at USD 91.27 million in 2025 and is projected to reach USD 1,923.64 million by 2035, expanding at a CAGR of 35.70% during 2026–2035. The demand will be driven by training and inferencing loads from AI, growth in hyperscale data centers, use of silicon photonics technology and rising demands for increased bandwidth density and reduced power consumption.
The U.S. Co-Packaged Optics Market was valued at approximately USD 39.61 million in 2025 and is projected to reach approximately USD 834.82 million by 2035, growing at a CAGR of 30.25%. Growth is underpinned by the hyperscale AI infrastructure investment, advancements in CPO technology within the country and growing need for power-efficient and bandwidth-intensive optical networking in key U.S. data center facilities.
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Why this Market is Gaining Attention in 2026
AI Cluster Scaling is Raising Network Bandwidth Requirements
The Co-Packaged Optics phenomenon has been increasingly associated with fast-scaling AI training and inference compute. GPU clusters demand extremely high bandwidth and low latency communication, while traditional plug-in optics have approached physical limitations with respect to power dissipation and density of communication channels. By moving closer to the switch logic, optical engines are brought right next to switching chips or processors with CPO, which allows achieving much better efficiency, and higher-density communication with optics.
Silicon Photonics is Creating a Parallel Opportunity for CPO Providers
Increased use of silicon photonics technology is enhancing scalability, CMOS-compatibility and economics in terms of manufacturing of co-packaged optical modules. Wafer-level integration is also facilitating tighter integration of optical transceivers with switching ASICs.
This opens up prospects for semiconductor companies, optical components suppliers, foundries and packagers that can offer solutions based on large scale integrated photonic technology. Higher levels of investments in thermal management, advanced packaging and optical integration is hence accelerating the development of CPO ecosystem.
102.4 Tbps Switching and Optical I/O Expand the CPO Opportunity
The opportunity will also expand beyond the current 51.2 Tbps switching platform. Future AI switches that operate at speeds of 102.4 Tbps or higher will generate even greater demand for CPO because their bandwidth and power needs will surpass the limitations of conventional pluggable optics. CPO could also extend into optical interconnections between AI accelerators, such as GPUs, TPUs and other AI accelerators.
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Commercial Findings from the Co-Packaged Optics Market
By Integration Approach, 2.5D CPO Dominated and 3D CPO is the Fastest Growing: The 2.5D CPO was estimated to constitute 68% of the market share in 2025 due to the high level of integration maturity, assembly and test infrastructure, and the capability to work within the current packaging process. The 3D CPO, is predicted to exhibit the highest rate of growth due to the high bandwidth density and efficient energy consumption.
By Data Rate, Less-than-1.6T and 1.6T Dominated, while Greater-than-1.6T is the Fastest Growing: Less-than-1.6T and 1.6T data-rate segments collectively represented approximately 72% of the market in 2025, to their widespread adoption in existing-generation 51.2 Tbps switches. Greater-than-1.6T solutions are expected to record the fastest growth due to the transition of next-generation AI networking into 102.4 Tbps switching capabilities.
By Application, Data Centers & High-Performance Computing Dominated and Telecommunications & Networking is the Fastest Growing: In 2025, Data Centers & High-Performance Computing was expected to make up about 64% of the market share, as it is boosted by the early adoption of hyperscale CPO and the growing bandwidth demands of AI clusters. Telecommunications & Networking is expected to have the highest growth rate, backed by the rising need for optical backbone infrastructure of 800G/1.6T and 5G transport networks.
By End User, Cloud Service Providers Dominated and Telecom Operators are the Fastest Growing: Cloud Service Providers formed around 58% share of the Co-Packaged Optics Market in 2025, owing to increased investments in Hyperscale AI Infrastructure and deployment of large GPU clusters. Telecom Operators are considered to be the fastest growing end user segment in the RD segment analysis owing to increased adoption needs of high-capacity optical networking & Next Generation Telecom Infrastructure.
Regional AI Infrastructure Investment is Reshaping Co-Packaged Optics Demand: Asia Pacific leads the global market in 2025 thanks to their hyperscale data center infrastructure, optical components production, and investments in AI computing. North America is currently the most rapidly growing market, due to the U.S.'s hyperscale AI infrastructure spending, best CPO technology providers, and silicon photonics investments.
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Who Should be Watching the Co-Packaged Optics Market?
The market is increasingly relevant across the broader AI and optical networking ecosystem, including:
Hyperscale cloud providers → AI data center operators → switch ASIC developers → silicon photonics companies → optical component manufacturers → advanced packaging providers → telecom operators → GPU platform developers → high-performance computing operators
CPO technology suppliers have more than just traditional transceiver replacement opportunities to look at. Competitive advantage is being built not only through bandwidth density and power efficiency but also through silicon photonics, packaging, thermal management, interoperability, and next-generation AI switching platform enablement capabilities. The impact of CPO for hyperscalers and network operators may lie in cluster scalability, power consumption, and overall data center power budgeting.
CPO Ecosystem Development and Optical Integration Shape the 2026 Market
As AI infrastructure demands higher bandwidth and lower interconnect power consumption, semiconductor and optical component companies are strengthening commercial CPO ecosystems.
- In 2025, Broadcom introduced its third-generation co-packaged optics technology with 200G-per-lane capability for AI-scale networks, alongside improved thermal management and OSAT process enhancements.
- In 2025, Corning Incorporated announced a collaboration with Broadcom to supply advanced optical components for CPO infrastructure used in AI data centers and the Bailly switch ecosystem.
Market Challenge: Managing Thermal Density and Interoperability as CPO Integration Increases
In co-packaged optics, the optical engines which produce heat are located near the high-power switch ASICs, causing thermal hotspots for which a more sophisticated thermal management system is needed, including liquid cooling as well as thermal interface material.
The lack of complete standards for module interfaces, connectors and optical engines may also pose a challenge to multi-vendor interoperability. Thus, in such circumstances, CPO suppliers are facing more competition in the domains of thermal management, packaging robustness, compatibility with ecosystems and resilience of the supply chain.
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Key Competitors in the Market
Companies covered in the Co-Packaged Optics Market research include Broadcom Inc., NVIDIA Corporation, Intel Corporation, Marvell Technology Inc., Cisco Systems Inc., Ranovus Inc., Ayar Labs Inc., Coherent Corp., Lumentum Holdings Inc., II-VI Incorporated, Furukawa Electric Co., Ltd., Corning Incorporated, Celestial AI, Credo Technology Group Holding Ltd., Arista Networks Inc., Juniper Networks Inc., IBM Corporation, Lightwave Logic Inc., NewPhotonics Ltd., and Kyocera Corporation.
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