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Virtual Extensible LAN Market

Virtual Extensible LAN Market Size, Share, and Analysis, By Offering (Software, Hardware, and Services), By Application (Software-Defined Networking Overlays, Network Function Virtualizations, and Others), By End-User (Manufacturing, BFSI, Healthcare, and Others), By Region (North America, Europe, Asia-Pacific, and Rest of the World), And Regional Forecast 2024-2034

Published on: Jun-2024
Report Code: FG ICT 02022
No. of Pages: 170-350
Report Format: PDF

Virtual Extensible LAN Market is anticipated to exhibit a Compound Annual Growth Rate (CAGR) of 15.3% during the forecast span from 2024 to 2034. In 2023, the market size was assessed at USD 1.3 billion and is projected to reach USD 6.3 billion by the completion of 2034.

Product Overview

Virtual Extensible LAN, or VXLAN, refers to a process to create virtual networks on top of an existing physical network infrastructure. It works by encapsulating ethernet frames, which are the basic units of data in a traditional local area network, inside UDP packets, that can then be sent over an IP-based network. This allows users to extend a single Layer 2 network (like a LAN) across multiple physical locations, even if they are geographically distant. In addition, virtual extensible LAN uses a 24-bit VNI (VXLAN Network Identifier) to create up to 16 million separate virtual networks, thus overcoming the limitations of traditional VLANs. They are extremely useful in data centers and cloud computing ecosystems, as they enable efficient use of network resources by supporting multiple users on the same physical infrastructure and allowing workloads to be easily shifted between different physical locations without changing their network configurations.

Market Highlights

Virtual Extensible LAN Market is expected to grow at a compound annual growth rate (CAGR) of 15.3% from 2024 to 2034

Virtual Extensible LAN Market is projected to reach USD 6.3 billion over the forecast period, due to growing applications of cloud computing, virtualization technologies, and data center consolidation by multiple companies and service providers. The increase in demand for effective network virtualization solutions and the need for scalable network designs are responsible for boosting the adoption of VXLAN technology. Additionally, some of the main contenders in the VXLAN industry, such as Cisco Systems, VMware, Huawei Technologies, Arista Networks, Big Switch Networks, and Juniper Networks, are actively providing VXLAN solutions to address market needs. As a result, there is a growing demand for VXLAN across various industries like IT, BFSI, healthcare, and government sectors. These sectors are using VXLAN to boost their networking capabilities and enable smooth workload movement between data centers and cloud environments. Therefore, as businesses increasingly implement digital conversion and incorporate cloud services, the need for Virtual extensible LAN technology is projected to grow and spark innovation during the forecasted period.

Source: Fatpos Global

Virtual Extensible LAN Market Segmentation

Hardware segment will lead the industry owing to its importance among sensitive virtualized environments

Virtual Extensible LAN Market is divided by Offering into Software, Hardware, and Services. The hardware segment will likely dominate the virtual extensible LAN market as the application of VXLAN solutions requires special hardware components such as VXLAN-capable switches, routers, and network interface cards, which are important for simplifying the encapsulation of ethernet frame across IP networks. Businesses are expanding their virtualized infrastructures and data centers, as a result, they need powerful hardware solutions to manage increasing network traffic and ensure smooth connectivity among multiple sites. Besides, hardware-based solutions provide modern security features and access control mechanisms, which ensure secure operations in sensitive digital ecosystems. Consequently, although software and services play a significant role, the hardware segment will prevail due to the need for important infrastructures and the demand for secure virtual extensible LAN solutions.

Software-Defined Networking Overlays segment will dominate the market due to its ability to offer better control and programmability

Virtual Extensible LAN Market is divided by Application into Software-Defined Networking Overlays, Network Function Virtualizations, and Others. The software-defined networking (SDN) overlays segment is anticipated to dominate the virtual extensible LAN (VXLAN) market, owing to the increasing use of SDN architectures in providing better network programmability and control. SDN overlays, when paired with VXLAN technology, allow for smooth movement of workloads between various physical sites. Moreover, they help in network virtualization by bringing multiple segregated logical networks on a common infrastructure, thus improving the usage of resources. Therefore, it is expected that the requirement for SDN overlays using VXLAN technology will continue to grow, due to the increasing acceptance of SDN concepts and cloud computing across several businesses.

Source: Fatpos Global

Market Dynamics

Growth Drivers

Increasing Adoption of Cloud Computing and Data Center Virtualization

Increasing popularity of virtualization technologies in data centers and the rise of cloud computing services are fueling the adoption of VXLAN. Scalable and flexible network architectures are important in cloud environments to accommodate different types of workload provisioning and allocation of resources. As a result, VXLAN allows for the creation of virtual Layer 2 networks, which include multiple physical locations and assist in simplifying the workload movement. Similarly, data center virtualization requires combining various applications and services onto one infrastructure, which results in the need for network virtualization solutions such as VXLAN to ensure secure isolation and effective resource usage.

Rise of Multi-Tenant Environments and Network Segmentation Requirements

Growing popularity of multi-tenant environments like cloud service providers and large enterprises has driven the need for virtual extensible LAN technology. Within multi-tenant environments, various clients or departments use the same physical infrastructure, which requires secure network segmentation to maintain data isolation and adherence to security policies. Thus, virtual extensible LAN meets this requirement by allowing the formation of virtually separated virtual networks, each possessing its own distinct VXLAN network identifier (VNI). Consequently, this permits the simultaneous existence of several virtual networks on one common physical setup while protecting segregation and security partitions among them.


Performance and Scalability Challenges in the Virtual Extensible LAN Market Will Impact the Growth

Although the virtual extensible LAN Market offers major scalability benefits over standard VLANs, potential performance and scalability issues could occur as the number of VXLAN segments and machines increases. Furthermore, several obstacles that arise in the implementation of large virtual extensible LAN include large dimensions of the broadcast domain and high control plane overhead. Additionally, the increasing number of virtual machines and VXLAN segments, along with the encapsulation and decapsulation activities, could negatively impact the performance of the network. Therefore, to ensure the ideal performance and scalability in large-scale VXLAN implementations, accurate network planning, and advanced hardware characteristics are required to overcome these challenges.

Recent Developments

  • VMware has continued to enhance its NSX-T Data Center platform, including VXLAN-based network virtualization support. In 2022, they released version 3.2 with improved scalability, security, and multi-cloud capabilities.
  • Cisco has expanded its Application Centric Infrastructure (ACI) portfolio with VXLAN-based fabric overlays. In 2023, they introduced the Nexus 9000X Cloud Scale switches for large-scale VXLAN deployments.
  • Huawei has been focusing on integrating VXLAN support into its Cloud Fabric data center networking solutions and intelligent cloud-network solutions.
  • Arista has been actively developing VXLAN capabilities in its Arista EOS (Extensible Operating System) and Arista 7050X Series switches for large-scale data center and cloud deployments.
  • Juniper has incorporated VXLAN support in its Contrail Networking and Junos Operating System, enabling VXLAN-based overlay networking in its data center and cloud solutions.

Virtual Extensible LAN Market

Key Players:

  • VMware
  • Cisco Systems
  • Huawei Technologies
  • Arista Networks
  • Juniper Networks
  • Big Switch Networks
  • Dell Technologies
  • Hewlett Packard Enterprise (HPE)
  • Pluribus Networks
  • Nuage Networks (Nokia)
  • Pica8
  • Cumulus Networks
  • Extreme Networks
  • Brocade Communications
  • Citrix Systems
  • Other Prominent Players (Company Overview, Business Strategy, Key Product Offerings, Financial Performance, Key Performance Indicators, Risk Analysis, Recent Development, Regional Presence, SWOT Analysis)

Regional Analysis

Virtual Extensible LAN Market is segmented based on regional analysis into five key regions: North America, Latin America, Europe, Asia Pacific, and the Middle East and Africa. The North American region is leading the virtual extensible LAN market, while the Asia-Pacific region is catching up thanks to innovations in technology and high usage of cloud computing technologies. The reason behind North America's strong presence in the market is due to the existence of big technology firms and a focus on modernizing data centers. There has been an increase in the need for adaptable network virtualization solutions in the region, which has resulted in the adoption of virtual extensible LAN Market technology by businesses and service providers.

In addition, the Asia-Pacific region is keeping a close eye on North America due to the growth of cloud computing and the use of virtualization technologies in nations like China, Japan, India, and Southeast Asia. The market in this region is witnessing growth due to the emphasis on digital transformation and growing investments in advanced networking solutions across the Asia Pacific region.

Source: Fatpos Global

Impact of COVID-19 on the Virtual Extensible LAN Market

Virtual extensible LAN market experienced major growth due to the COVID-19 pandemic and served as a key driving force. The increase in remote work and digital transformation projects has resulted in a higher need for cloud computing and virtualization technologies. Virtual extensible LAN played an essential role in establishing secure remote access and simplifying the growth of online services by creating scalable virtual networks in data centers and cloud environments. Moreover, organizations adopted virtual extensible LAN primarily for its overlay features, which allow movement of workload and better resilience and redundancy. Thus, the pandemic highlighted the importance of flexible network structures, which led to high usage of VXLAN across various sectors as a way to secure network infrastructures for the future.

Virtual Extensible LAN Market is further segmented by region into:

  • North America Market Size, Share, Trends, Opportunities, Y-o-Y Growth, CAGR – United States and Canada
  • Latin America Market Size, Share, Trends, Opportunities, Y-o-Y Growth, CAGR – Mexico, Argentina, Brazil, and Rest of Latin America
  • Europe Market Size, Share, Trends, Opportunities, Y-o-Y Growth, CAGR – United Kingdom, France, Germany, Italy, Spain, Belgium, Hungary, Luxembourg, Netherlands, Poland, NORDIC, Russia, Turkey, and Rest of Europe
  • Asia Pacific Market Size, Share, Trends, Opportunities, Y-o-Y Growth, CAGR – India, China, South Korea, Japan, Malaysia, Indonesia, New Zealand, Australia, and Rest of APAC
  • Middle East and Africa Market Size, Share, Trends, Opportunities, Y-o-Y Growth, CAGR – North Africa, Israel, GCC, South Africa, and Rest of MENA

Virtual Extensible LAN Market Scope and Segments:



Study Period


Base Year


Forecast Period


Historical Period


Growth Rate

CAGR of 15.3% from 2024-2034


Value (USD Billion)


Main Segments List

By Offering

  • Software
  • Hardware
  • Services

By Application

  • Software-Defined Networking Overlays
  • Network Function Virtualizations
  • Others

By End-User

  • Manufacturing
  • BFSI
  • Healthcare
  • Others

By Region

  • North America
    • U.S.
    • Canada
  • Europe
    • Germany
    • U.K.
    • France
    • Rest of Europe
  • Asia Pacific
    • China
    • Japan
    • India
    • Australia
    • Southeast Asia
    • Rest of Asia Pacific
  • Latin America
    • Brazil
    • Mexico
    • Rest of Latin America
  • Middle East & Africa
    • GCC
    • South Africa
    • Rest of the Middle East & Africa

Frequently Asked Questions (FAQ):

Virtual extensible LAN Market size was valued at USD 1.3 billion in 2023 and is projected to reach the value of USD 6.3 billion in 2034, exhibiting a CAGR of 15.3% during the forecast period.

The Virtual Extensible LAN (VXLAN) market refers to the industry that provides solutions and products related to VXLAN technology, which is a network virtualization protocol that enables the creation of scalable and flexible virtual Layer 2 networks over Layer 3 infrastructures.

The Hardware segment and Software-Defined Networking Overlays segment accounted for the largest virtual extensible LAN Market share.

Key players in the Virtual Extensible LAN Market include VMware, Cisco Systems, Huawei Technologies, Arista Networks, Juniper Networks, Big Switch Networks, Dell Technologies, Hewlett Packard Enterprise (HPE), Pluribus Networks, Nuage Networks (Nokia), Pica8, Cumulus Networks, Extreme Networks, Brocade Communications (Broadcom), Citrix System, and Other Prominent Players.

Increasing adoption of cloud computing and data center virtualization, along with the rise of multi-tenant environments are the factors driving the virtual extensible LAN market.

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