Ciena Corporation (NYSE:CIEN) stock plunged nearly 17% on Thursday as investors weighed the company’s fiscal second-quarter results and outlook after a strong 12-month rally in the stock.
After climbing more than 530% over the past year, Ciena entered the quarter with lofty expectations tied to the AI data center buildout. As a result, even a strong earnings beat and improved outlook were insufficient to satisfy investors looking for additional upside catalysts.
The networking equipment company reported fiscal second-quarter revenue of $1.57 billion, up from $1.13 billion a year earlier and ahead of analyst estimates of $1.51 billion. Adjusted earnings rose to $1.64 per share from $0.42 a year ago, topping Wall Street expectations of $1.46 per share.
Profitability also improved. Adjusted gross margin expanded to 44.9% from 41.0%, while adjusted operating margin increased to 19.5% from 8.2%, driven by engineering cost reductions, product mix improvements and pricing optimization.
AI Demand Continues To Accelerate
Chief Executive Officer Gary Smith said demand tied to artificial intelligence is driving stronger spending by cloud providers and telecom customers, supporting backlog growth and expanding opportunities in wide-area networking and data center connectivity.
Smith said Ciena now expects its addressable market to nearly double to about $50 billion by 2029 as customers invest in high-capacity, low-latency infrastructure to support AI training, data ingestion, and inference workloads.
The company also secured what Smith described as the industry’s first multirail deployment order from a major hyperscaler for its RLS HyperRail platform. He said discussions are ongoing with additional hyperscalers, neoscalers, and service providers.
Ciena’s data center out-of-band management platform, known as DCOM, helped drive an 88% year-over-year increase in routing and switching revenue. Smith said the company received initial DCOM orders from a second hyperscaler and is advancing lab qualifications with a third.
The company also won a large hyperscaler contract for high-performance coherent optical modules and continues to see strong demand for 400G and 800G pluggable technologies.
“Our long-term strategy to be the global leader in high-speed connectivity – both across the WAN and in and around the data center – is tightly aligned to the structural, multi-year opportunities created by AI-driven demand, positioning us to capitalize on market dynamics and drive sustained, profitable growth,” Smith said.
Backlog Strength Supports Higher Outlook
Chief Financial Officer Marc Graff said backlog increased by more than $600 million from the prior quarter to $7.7 billion, providing visibility into fiscal 2027 demand. He added that Ciena is investing in manufacturing capacity and supply-chain resilience to support future growth.
For the fiscal third quarter, Ciena expects revenue of $1.575 billion to $1.675 billion, compared with analyst estimates of $1.554 billion. The company forecasts adjusted gross margin of 45%, plus or minus 50 basis points, and adjusted operating margin between 19% and 20%.
Ciena also raised its fiscal 2026 revenue outlook to a range of $6.2 billion to $6.4 billion from its previous forecast of $5.9 billion to $6.3 billion. Analysts currently expect revenue of $6.18 billion. The company maintained its adjusted gross margin outlook of 44.5% to 45% and expects adjusted operating margin of 19%, plus or minus 50 basis points.
Ciena Price Action
CIEN Price Action: Ciena shares were down 14.93% at $527.77 at the time of publication on Thursday, according to Benzinga Pro data. Even after the decline, Ciena shares remain up more than 530% over the past year.
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