Mellanox Technologies, Ltd. MLNX has been securing notable customer wins on the back of its strength in Ethernet-based portfolio. Recently, the company announced that Alibaba BABA is leveraging its remote direct memory access (“RDMA”) over Ethernet or “RoCE” ConnectX Ethernet network adapters. The adapters have a data transfer speed of 25 Gbps (or Gigabits per second).
Mellanox’s Ethernet adapters offer low latency and high throughput levels required to accelerate various applications of production network of Alibaba’s Infrastructure Services.
Management remains elated on its 7th generation of RoCE-driven network adapters which are aiding Alibaba in supporting dynamic workloads in a cost-effective manner.
Notably, Mellanox stock has returned 46.2% year-to-date, compared with industry’s decline of 6.7%.
RDMA Tech: A Key Catalyst
RDMA technology offers low CPU load, high bandwidth and low latency attributes, which in turn bolsters network performance. RoCE network adapters utilize the full potential of RDMA, making it a preferred alternative over non-RDMA solutions.
Advanced storage media performance on various fabrics, cost-efficiency, scalability of node capacities and support through automation, are notable features which favor the deployment of Mellanox’s ConnectX network adapters among cloud storage customers.
CSPs Favor Ethernet Adoption
The need to access and process data at a faster speed due to data growth in data centers is increasing demand for high-speed Ethernet adapters among hyperscale cloud service providers (“CSPs”). Increasing bandwidth and growing capacity of data centers in this connected data-intensive era are other notable factors advancing the cause for high-speed Ethernet-based adapters.
Notably, per recent IDC estimates, the global datasphere will grow to 175 zettabytes (that is a trillion gigabytes) by 2025, from 33 zettabytes in 2018. This exponential growth is expected to favor adoption of Mellanox’s interconnect solutions driven by growing demand for higher network speeds for fast processing of data.
The company is one of the major suppliers of 25, 50, and 100GB Ethernet adapters, switches, and cables to the market today. In fact, per Crehan research estimates, Mellanox had a market share of 69% in the high-speed Ethernet adapter business in second-quarter 2018, leaving Intel INTC, Broadcom AVGO, Cisco and other peers trailing.
Further, on Oct 25, 2018, Mellanox announced that it has achieved a milestone of shipping greater than 2.1 million units of Ethernet adapters for nine months ended Sep 30, 2018.
In the third quarter of 2018, the company’s Ethernet business grew 59% year over year driven by robust adoption of company’s high-speed Ethernet network adapters and LinkX transceivers and cables.
Robust innovations in Mellanox’s Ethernet adapters, switches and cables boost adoption, in turn driving the top line.
Mellanox currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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