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 JD.com JD, a Chinese e-commerce company, is leveraging its ConnectX Ethernet network adapters.
The move enables JD cloud to develop applications, network function virtualization, and enhance the efficiency of Software-Defined Networking (“SDN”) by leveraging ConnectX adapters with Accelerated Switching and Packet Processing (“ASAP2”) technology.
The adapters have a data transfer speed of 25 to 100 Gbps (or Gigabits per second) which in turn bolsters cloud deployments. Mellanox’s Ethernet adapters offer low latency and high throughput levels required to accelerate various applications of production network of JD cloud data center. Management remains elated with the deployment of its advanced ASAP2 technology which is aiding JD.com in supporting dynamic workloads in a cost-effective manner.
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.
Shares of Mellanox have gained 58.2% in the last year, substantially outperforming the industry’s rally of 7.4%.
What Investors’ Need to Know
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 anticipated 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.
In fact, the company’s Ethernet adapters have been also deployed in production network of Alibaba's (BABA) Infrastructure Services.
In the fourth quarter of 2018, the company’s Ethernet business grew 21% year over year on account of robust adoption of the company’s high-speed Ethernet network adapters and LinkX transceivers and cables.
The need to access and process data at a faster speed due to data growth is fueling increased demand for high-speed Ethernet adapters.
Mellanox is benefiting from solid demand of its Gigabit EDR solutions in machine learning, artificial intelligence, high-performance computing, database and storage.
Further, robust demand for Mellanox’s InfiniBand solutions is a key catalyst. The company has also won several contracts from the likes of NetApp, the University of Toronto and NASA Ames Research Center, which further reflects sturdy demand for its solutions.
We believe the company’s enhancements in its product portfolio with robust capabilities; inorganic additions and expanding customer base favor company’s growth prospects.
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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