Adtran Holdings (NASDAQ:ADTN) released second-quarter financial results and hosted an earnings call on Tuesday. Read the complete transcript below.
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Summary
Adtran Holdings Inc. reported Q2 revenue of $281.1 million and a non-GAAP operating margin of 3.8%, impacted by a project delay from a single customer and supply constraints.
The company's optical business is a key growth engine, with optical networking revenue up 22% year over year, and there is strong diversification in revenue from enterprise, government, and cloud customers.
Adtran completed a refinancing of its credit facility, lowering borrowing costs and extending maturities, providing financial flexibility for its long-term strategy.
Despite the Q2 challenges, underlying demand remains strong, and the company is committed to its long-term operating margin target of 42%-43% gross margin and a 10% non-GAAP operating margin.
Future outlook for Q3 includes revenue guidance of $275 million to $295 million, with non-GAAP operating margin between 1.5% and 5.5%, driven by strong demand in Optical Networking Solutions.
Full Transcript
OPERATOR
Ladies and gentlemen, welcome to the Adtran Holdings Inc. second quarter 2026 earnings conference call. Please note that this call is being recorded. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question at this time, simply press star followed by the number one on your telephone keypad, and if you would like to withdraw your question, just press star one again. Thank you. Now I would like to turn the call over to Tom Stanton, Chairman and CEO of Adtran Holdings Inc. Tom, you may begin.
Tom Stanton, Chairman and CEO
Thank you, operator. Good morning, everyone. Although we are disappointed with the reported results of this past quarter, we believe they were driven by a specific set of factors. As we communicated in our preliminary results press release, a project delay from a single customer combined with unfavorable impacts from product and customer mix caused our results to fall short of our guidance. Despite these factors, demand across our end markets remains healthy, our strategic priorities remain on track, and our customer base continues to diversify.
We believe those underlying fundamentals position us well as we look ahead into 2027. As we shared in our pre-announcement, one of our customers adjusted the timing of a project which affected our results for the quarter. This customer remains committed to its deployment objectives, and we view this as a timing adjustment rather than a change in demand. Overall, customer demand remained strong during the quarter, but a challenging supply environment limited our ability to fulfill that demand, constraining shipments and resulting in an unfavorable mix.
To be clear, absent these incremental supply constraints, we would have met our original revenue guidance. Against this backdrop, Adtran delivered second quarter revenue of $281.1 million, consistent with our preliminary results, and non-GAAP operating margin of approximately 3.8%, also in line with our pre-announcement. While these results reflected the items I just discussed, several indicators of our strategic progress continued to strengthen during the quarter.
Our optical business continued to serve as a key growth engine, and our growth was broad-based across service provider, enterprise, government, and cloud customers, and reflects continued demand for higher-capacity optical infrastructure, AI-driven networking expansion, and secure connectivity. We are also generating tangible benefits from our diversification strategy. Revenue from enterprise, government, and cloud customers grew a strong 47% year over year and 19% sequentially, accounting for 25% of total company revenue in the quarter.
Within this customer segment, revenue from hyperscalers increased 97% year over year, underscoring the strength of our diversification strategy. This momentum is being driven primarily by our data center interconnect business. In parallel, we continue to expand engagements with hyperscalers and large-scale content providers for our upcoming Micromux Quattro and the LightWave 800 pluggable optics solutions. The results highlight our growing participation in attractive end markets beyond our traditional service provider base and reflect the opportunities created by continued investment in cloud and AI infrastructure.
As we broaden our customer adoption and expand our solutions footprint, we believe we are well positioned to benefit from these longer-term growth trends. Secure connectivity is another area where we continue to drive increasing customer demand. Our recently announced collaboration with EU Networks highlights growing demand for quantum-safe networking solutions and validates the strength of our multi-layer encryption portfolio and integrated cryptographic management capabilities.
As service providers and enterprises place greater urgency on addressing quantum-secure vulnerabilities within our service provider segment, we continue to unlock opportunities driven by vendor replacement programs, network modernization initiatives, broadband expansion efforts, and increasing security requirements. These trends are driving investment across transport and access networks and position us to benefit from large-scale broadband initiatives such as BEAD in the U.S., Project Gigabit in the UK, Germany's Gigabit Strategy 2030, and Italy's 1 Giga, alongside growing demand stemming from European network security and trusted vendor initiatives including the proposed EU Cybersecurity Act 2, or CSA 2. Now some specifics of our product categories. Optical networking revenue was $109.7 million, up 22% year over year and 13% sequentially. Access and aggregation solutions revenue was $86.9 million and was directly impacted by the customer timing dynamics I discussed earlier. Subscriber solutions revenue was $84.5 million, reflecting normal variability following a very strong first quarter. Subsequent to quarter end, we strengthened our financial foundation through the completion of a senior secured credit facility.
This refinancing lowers borrowing costs and extends maturities, providing additional financial flexibility as we execute our long-term strategy. In summary, the underlying drivers of the business remain intact and demand for our products is strong. Although the company's gross margin performance has continued to improve over the past three years, including being able to overcome the product and freight cost increases we have experienced over the last few quarters, Q2 results reflected a tightening of supply which resulted in unfavorable product mix as our ability to ship higher-margin products was impacted and ultimately lowered gross margins.
As the supply chain outlook remains uncertain, we continue to advance actions that will strengthen our margins and better align our performance with our long-term operating objectives of 42% to 43% gross margin. Amidst the current supply environment, we are maintaining strong operating expense control and remain committed to our 10% non-GAAP operating margin target. We continue to gain momentum in optical networking, further diversifying our customer base, and see a clear path forward towards improving profitability.
We remain confident in our strategy and our ability to create long-term shareholder value. With that, I'll turn the call over to Tim to review our financial results in greater detail and follow up with questions.
Timothy Santo, SVP and CFO
Thank you, Tom, and thank you all for joining us today. Revenue for the quarter was $281.1 million, representing growth of 6.1% compared to the second quarter of 2025. Geographically, U.S. revenue was $134.4 million, representing approximately 48% of total revenue, up 12% year over year. Non-U.S. revenue was $146.7 million, representing approximately 52% of total revenue and up 1% year over year. By product category, Optical Networking Solutions revenue was $109.7 million, or 39% of total revenue, increasing 22% year over year and 13% sequentially.
Access and aggregation solutions revenue was $86.9 million, or approximately 31% of total revenue, while down 5% year over year and 4% sequentially. U.S. access and aggregation revenues were up a healthy 13% year over year, partially offsetting the non-U.S. customer order timing described earlier. Subscriber solutions revenue was $84.5 million, or 30% of total revenue, up 1% year over year and down 14% sequentially following a strong first quarter.
Turning to margins, non-GAAP gross margin was 40.7% compared to 41.4% in the second quarter of 2025 and 43% in the first quarter of 2026. Gross margin reflected the factors Tom discussed earlier, primarily the combination of product mix, customer mix, and higher product costs. Non-GAAP operating expenses were $103.9 million compared to $103.3 million in the first quarter of 2026 and $101.7 million in the second quarter of 2025, as we continue to actively manage operating expenses-related costs against inflationary pressures.
Non-GAAP operating income was $10.6 million, resulting in non-GAAP operating margin of 3.8%, compared to $8.0 million and 3% on a year-over-year basis; however, down from $19.9 million and 6.9% on a sequential basis. Non-GAAP tax expense during the quarter was $2.6 million, reflecting an effective non-GAAP tax rate of 33.7%. Non-GAAP net income attributable to Adtran Holdings was $3.4 million, or $0.04 per diluted share, compared to breakeven results in the second quarter of 2025 and $11.0 million in the prior quarter.
Turning now to the balance sheet and cash flow, we continued to make progress improving our working capital metrics during the quarter with $245.2 million of net working capital at quarter end. Inventory was $208.8 million with days inventory outstanding of 107 days, down 3 days sequentially. Trade accounts receivable were $205.8 million with DSO of 67 days, down 1 day sequentially. Accounts payable were $169.3 million with DPO of 65 days, also down 1 day sequentially.
These improvements contributed to operating cash flow of $25.9 million during the quarter and free cash flow of $8.7 million. We ended the quarter with $79.2 million of cash and cash equivalents, net repurchases of Adtran Networks SE shares, and dividend payments made during the quarter of $22.6 million. This compared to $88.3 million at March 31, 2026. Also of note, we recently completed the refinancing of our credit facility led by J.P. Morgan.
This new facility replaces our prior credit agreement while maintaining total revolver capacity, reducing borrowing costs by 200 basis points, and extending our maturity to 2031. Turning our outlook to the third quarter, we expect revenue to be between $275 million and $295 million and non-GAAP operating margin to be between 1.5% and 5.5%. Our outlook reflects the current expectations regarding customer deployment timing, supported by continued strength in the Optical Networking Solutions business and healthy demand across cloud, enterprise, and government markets.
This concludes our prepared remarks. However, before turning the call back to Tom, I'd like to note that we will be participating in the Rosenblatt Virtual Technology Summit on August 17th and the B. Riley TMT Conference in New York on September 10th. We hope to see many of you there, and with that I'll turn the call back to Tom.
Tom Stanton, Chairman and CEO
Thanks very much, Tim. Okay, at this point we're ready to open up for any questions people may have.
OPERATOR
We will now begin the question and answer session. If you would like to ask a question at this time, just press star followed by the number one on your telephone keypad. And if you would like to withdraw your question, press star one again. We will pause for a moment to compile the Q&A roster. And our first question comes from the line of Irvin Liu with Evercore ISI. Irvin, please go ahead.
Irvin Liu, Analyst at Evercore ISI
Hi. Thank you for the question. Tom, can you help us understand the nature of the project delay at the single large customer? Is this more of a financial or strategic decision on their end, and what gives you assurance that this is demand deferred and not demand destroyed?
Tom Stanton, Chairman and CEO
Well, the biggest assurance that we have—and of course we do talk to them on a very, very regular basis—but the biggest assurance that we have is they've come out and recommitted to their plan, including the timing of their plan, and it's a very visible, very easy-to-check-on number. And those plans haven't changed. I think really what maybe a high-level way to look at it is they have multiple plans now in flight. Some of them include the normal footprint expansion that we have been involved in for a few years now.
Some of it has to do with Huawei replacement or vendor replacement, which is kicking off. Some of it has to do with upgrades and speed, and then some of it has to do with expanding that footprint expansion to an even greater extent than they had initially planned. All of those are in flight. What we're seeing right now is kind of a repositioning of priorities within those different buckets. And we may see one of the other ones kick in—we expect to see one of the other ones kick in—sooner than originally planned.
This is all just kind of getting all the plans in place before they move forward, and they have enough inventory to continue to deploy at their committed rate as they kind of reposition these plans. Did that make sense? I know it's a long, drawn-out answer,
Irvin Liu, Analyst at Evercore ISI
Tom, thank you. And then for my follow-up, I guess it's good to see your commitment to your 10% operating margin target and you're currently at low to mid-single digits due to product mix headwinds in addition to component and freight cost headwinds. But can you discuss any sort of margin mitigation strategies you might have and walk us through the path from low to mid-single-digit operating margins currently to perhaps lower double-digit margins longer term?
Tom Stanton, Chairman and CEO
Maybe the easiest way to think about that—of course the bigger driver in all of this is revenue. We had envisioned, on our basically historical profile, getting into that double digits right around the low three hundreds, say somewhere between 310 and 320. And that assumes a gross margin in the 42% to 43%. That gross margin this quarter—and I will say it was this quarter, and I don't want to at all minimize the fact that it was low—but we've had over two years, almost three years now, of raising gross margins pretty much every quarter.
Over any significant length of time you can just see the trend moving upwards, and that's benefited us. And of course that allows that revenue number to be lower. When I think about 310 to 320, that's kind of in the midpoint of where our margin has been. But the environment is tougher. Really the way that it impacted us this last quarter was it got rid of some of our flexibility. So we saw the decline with our large customer—we saw the decline in a large customer—and we had plenty of demand.
The problem is the pluggables are really hot right now. Those are not high-margin products. We shipped a significant amount of those. We could have shipped a whole lot more if we had access to them. And some of the higher gross margin products were also just limited in supply. So our flexibility got impacted this quarter. I think that flexibility problem is not a fixed next-quarter problem, so we've kind of factored that into our numbers. Now what we're doing: one is we can of course raise prices.
I don't want to over-rotate on that knowing that the—there was a mix problem more so than anything else. But we have already executed on our price increases and we continue to keep our pricing in check with what we think the supply environment is going to be when those products ship. So we'll continue to execute on that. We have started doing some redesigns, and that's just to give us more supplier flexibility. I think the gross margin piece—it's not that I worry so much about gross margin because I don't think we're in a really bad place.
I think we do have a mix issue, but we need to make sure that we can continue supply no matter what happens. So we have kicked off redesigns in order to effectively mitigate supply issues, which ultimately will improve gross margins. And then, as we had talked about maybe a year ago or so, we continue to move on reducing our opex in our COGS-related areas. So we're seeing some benefit in gross margin, although it was hard to actually see through that this quarter.
Irvin Liu, Analyst at Evercore ISI
Got it. Thank you.
Tom Stanton, Chairman and CEO
Okay, that did.
OPERATOR
Thank you. And our next question comes from the line of Ryan Kunz with Needham & Company. Ryan, please go ahead.
Ryan Kunz, Analyst at Needham & Company
Great, thanks. Maybe just follow up on the last question and your comment about supply impacts on higher gross margin products. I think we've all been assuming that memory has been a big concern, mostly impacting the CPE side of the business. And maybe we saw some of that in the quarter, with customers running inventory hotter or maybe even some pull-forward before price increases that drove the big uptick in Q1. So maybe you can kind of unpack the customer-prem side gross margin trend as well as your comment around higher gross margin products were impacted on supply.
Thank you.
Tom Stanton, Chairman and CEO
Yeah, sure. So it is more than memory—I hope I'm not the first one to tell you guys that—but it has gotten tighter in other areas. Optical amplifiers are definitely tight. There are certain pieces of silicon that are fairly nebulous that are getting very tight. So it is a broader-based set of problems. There are some areas where even PC boards are getting tight. What's really important—the way that it impacts us—is we still tend to book a lot of what we ship within the quarter, and that ability to flex up for incremental demand, which we definitely saw this quarter, especially in optical, our ability to flex up has really diminished.
And so our forecasting is more important. I would say the hardest thing at this point—so I'm sure we've talked about in the past—memory was one of those things. I wasn't so much worried about the pricing of memory; I could pass a lot of that on. What I couldn't do, though, is make supply that wasn't there. So it was all about getting memory. At least in our supply chain, memory today is not the biggest issue. There are issues that now have eclipsed that.
And memory, although incredibly expensive, the supply isn't as problematic as it was, let's say, six months ago or three months ago.
Ryan Kunz, Analyst at Needham & Company
Got it. That's really helpful. Okay. And maybe as a follow-up, your comment around optical and strength you're seeing in enterprise and cloud—what sort of use cases are you seeing there? Is this mostly for your line systems? You talk about pluggables. Can you give color on product mix there within the enterprise and cloud use cases? Be really helpful, thank you.
Tom Stanton, Chairman and CEO
Yeah, so definitely on OLSS as well as just standard pluggables, I would say across the board it was high. I will tell you OLSS, or our line systems, were a little more difficult to ship because of the constraints that we just talked about. Pluggables is, generally speaking, upgrading of bandwidth. And as you know, we have some hyperscaler content there, and we're seeing a significant uptick in that activity as people are trying to upgrade their networks.
So I think it's all just about bandwidth increases—not so much footprint, but just bandwidth increases.
Ryan Kunz, Analyst at Needham & Company
Got it. Really helpful. Thank you very much.
OPERATOR
All right, our next question comes from the line of George Nutter with Wolfe Research. George, please go ahead.
George Nutter, Analyst at Wolfe Research
Hi, guys. Thanks a lot. I was just trying to get a better sense for where you guys are on the balance sheet. I know there was some talk about the real estate transactions. Kind of wondering where you are on those. Any update would be great. Thanks.
Tom Stanton, Chairman and CEO
You want to grab that?
Timothy Santo, SVP and CFO
Yes, will do. Morning, George. You know, the best news there is Huntsville is very hot. The first 600 or so individuals for Space Command will have seats and housing by the end of this year. We've seen a large uptick in military, defense, and other contracts being awarded to the Huntsville area, and that has driven up significantly the interest in our property. Beyond that, George, when we have something to announce, we will announce it. But, you know, we're continuing to hold out for the best deal and the best opportunity for the company.
Tom Stanton, Chairman and CEO
Let me just add a little, because I also am very nervous about trying to pre-forecast something, but our showings on that property have gone up substantially over the last couple of months.
Timothy Santo, SVP and CFO
That's right.
George Nutter, Analyst at Wolfe Research
Great, thank you.
OPERATOR
All right, And our next question comes from the line of Bill Deselem with Titan Capital. Bill, please go ahead.
Bill Deselem, Analyst at Titan Capital
Thank you. You put out a press release this morning relative to Tokenet and them beginning a trial. Would you talk a little bit about that? And the spirit at which I ask this is, I don't recall Adtran Holdings being in Japan historically. So provide some backdrop there, if you would, please.
Tom Stanton, Chairman and CEO
Yeah, to be honest with you, I don't have that press release in front of me, but we do sell into Japan. And this was in the optical space that we have sold for some period of time. And I wish I did have that press release in front of me, Bill, but—oh, okay—yeah, so that... That is—there is also—Japan is an interesting area because they were one of the first to build out GPON, and the population base is pretty much covered. And they are, I would say, leading the charge in moving to 50 gig.
We have a lot of people that are trialing 50 gig and want to have kind of marketing capabilities around 50 gig. I would say, from a country perspective, Japan is probably at the forefront of literally looking at making that transition more wholesale. And this is just that.
Bill Deselem, Analyst at Titan Capital
Great, thank you. And then relative to the supply issues and the customer schedule adjustment, how does all of this affect 2027? I guess another way to ask that is 2H26—is that a long enough period to adjust component supply, supply chain, and make these various adjustments that you need to, to be back on track, or is this a longer sort of adjustment period?
Tom Stanton, Chairman and CEO
Let me answer that a couple different ways and I'll try to be as direct as I can. So one is, you know, the root cause of the situation was really born from a dynamic within a particular customer, which we think will be worked out before the end of the year. So if it weren't for that root, we would not be talking about this. But then it did highlight in going through the quarter once that effect kind of permeated through the company, it did highlight the fact that flexibility within the rest of the product set is getting tighter and tighter.
So I want to first put it in the right frame. I don't see that tightness going away in the near term. I do know, and probably many people on this call know that there is talk about additional capacity, especially in the higher nanometer process, which is kind of where our products are, let's say 12 and up coming online next year, which would alleviate some of these issues that we're talking about. But I think we're just in the tighter supply chain environment and the best way for us to be able to mitigate that, that tightness is literally just better forecast, more order coverage.
And you know, I preach that to our customers every time I can. You need to get your orders in, right? We need to be able to have visibility to it and secure supply. And I do think the customers are getting. It's amazing. It's taken a long time, but I do think customers are getting it. But I can tell you what it mitigate a particular chip today, but I can tell you it'll be a different chip or a different process problem six months from now. So I just think we're living in a tight period right now and I can't tell you it's going to disappear next year or, you know, in, you know, what quarter it would disappear if it does disappear next year.
I think it's all about discipline internally. We have, as we've talked about, you know, we've gotten some more key components in our inventories now to make sure that we can mitigate the problems that are known. But like this quarter, there was issues that were not an issue last quarter. So we have to get better at forecasting where those future issues will be, not just the ones that we're currently facing. So that's not a good answer, but that's kind of the environment we're in now.
Yeah, it does imply that. And I will tell you that that that has been happening already. You just haven't seen it so much. And the reason is, is we've been able to draw down old inventory back in the from the supply chain crisis down to a point to where we're kind of mitigating that increase. But you can think about it as old inventory versus new inventory, and that new inventory is directly related. Our inventories would be going down more if we weren't adding these kind of key components.
So but at some point in time, that old inventory is going to not be so old anymore and you'll see an uptick in that inventory. But I don't think that's a, I don't think it'll be material to the numbers.
OPERATOR
Our next question comes from the line of Dave Gang with B. Riley Securities. Dave, please go ahead.
Dave Gang, Analyst at B. Riley Securities
Good morning. Thank you. First question is wondering if you can provide what book-to-bill was and more interested in optical book-to-bill, if you can provide those.
Tom Stanton, Chairman and CEO
We really don't do book-to-bill as a metric that we actually publish. It was, I will tell you, optical was probably the, I'm guessing here, but probably the strongest area. And it was, let's just say all the numbers were either at one or above one.
Dave Gang, Analyst at B. Riley Securities
Got it. And then regarding the revenue miss. Obviously it was a project delay, but sounds like if you had enough components that you would have made up that revenue. Was that the message? Basically, you're saying that demand is so strong that it would have made up that 12 million revenue shortfall if you had enough components.
Tom Stanton, Chairman and CEO
Yes, without a doubt. I mean, no hesitation at all. If we had, if we had plenty of material, we would not be talking about the downtick.
Dave Gang, Analyst at B. Riley Securities
And what about the current third quarter. Can you talk about that project delay, where you are? And also, I mean, you talked quite a bit about supply situation, but how that's going to play out in third quarter. Obviously, we're looking for sort of a flattish quarter sequentially.
Tom Stanton, Chairman and CEO
Yeah. So we don't see an uptick in the customer that we're talking about right now. And to be honest with you, we just don't see a change in the procurement environment. So we think things are going to, you know, stay in the kind of status quo that they're in right now, maybe even get a little bit tighter. In certain areas, we are fighting for more supply. I mean, literally calling. We have people calling every day trying to get more of whatever it is that we have on order or don't have on order. So that's just kind of seeing through that. That mix of what's going to be available and what's not going to be available is kind of what our forecasting process has turned into. And so, yeah, it's just assuming the environment doesn't change.
Dave Gang, Analyst at B. Riley Securities
Well, I think, you know, I was juggling a couple of things. Obviously you've seen that this FCC planning to ban Chinese transceivers. Just wondering if you were sourcing transceivers or pluggables from Chinese vendors and if so, how quickly can you pivot to American vendors?
Tom Stanton, Chairman and CEO
We do do some pluggables from China, let's say transceivers from China. We also source from other places. And I don't know, I'm not versed enough to give you a direct answer to that. So that's something that we can cover at, you know, you can call in, we can talk more about it.
Dave Gang, Analyst at B. Riley Securities
But yeah, so clearly a fluid situation. I'm sure there are a lot of questions there. My last question is, any update on LPO activities? Any qualification or. Right.
Tom Stanton, Chairman and CEO
Yeah, well, it's still. We're not talking about qualification yet. It is still on track, as I talked about before. We would get units in right around the half or, you know, second quarter, get them to customers. We do have a significant. I will tell you another piece of this which we haven't really talked much about, which is the Quattro. And we've got multiple customers, including multiple hyperscalers, that are very interested in that product as well. That one actually delivers earlier. So I would expect to see trial units before, let's say, sometime in the first quarter.
We have people right now that are trialing kind of alpha units and that seems to be going well. So I think both of those, both of them are on track, but both of those are, are getting some traction. So that seems to be going well.
Dave Gang, Analyst at B. Riley Securities
Thank you.
OPERATOR
Okay, our next question comes from the line of Tim Savaso with Northland Capital Markets. Tim, please go ahead.
Tim Savaso, Analyst at Northland Capital Markets
Yeah, good morning. You mentioned a growth metric around the cloud portion, talked about 25% of revenue being from government enterprise. I think it was something in the 90s in terms of cloud growth. I just want to go back and confirm that and also try to get a sense of, you know, within that 25% of revenue, how large is then the cloud piece? And I'll follow up from there.
Tom Stanton, Chairman and CEO
Let me. If I have that, I don't think I have the number, but I do kind of generally know where we are in that space. So the specific number that we gave was, I think it was 97% growth in hyperscalers. And so we look at cloud as being broader than hyperscalers because that would include typically large content cloud providers. So hyperscaler specifically was 97%. And that's not a surprise. I mean, I think we kind of signaled in our last call that that area we expected to be solid this year and continue to grow.
And it seems to be that. That seems to be the case. And what was the second part of your question, Tim?
Tim Savaso, Analyst at Northland Capital Markets
I was just trying to get a sense of, you know, within that category, whether, however you want to describe it, how significant is that? I assume that's a relatively small percent of that 25%, you know, of the broader category.
Tom Stanton, Chairman and CEO
But it's not, it's, it's my sense and just from remembering is it's somewhere between 30 and 50%. It's getting to be a big piece of that pie.
Tim Savaso, Analyst at Northland Capital Markets
Of that, of that 25%. Okay, excellent. Yep, I got it. And just a quick one, any 10% customers in the quarter? And also as you look out to the Q3 guide, what's happening there? From a segment perspective, it sounds like you don't expect access and aggregation to rebound, given the customer push. Then you've got a little sequential growth there. I mean, I guess the overall question is do you expect to see optical continue to grow?
Tom Stanton, Chairman and CEO
Direct answer is absolutely yes. I mean, I talked a little bit about the order flow there and yes. So I mean that's, we expect that to grow. You know, subscriber is one of those. That's probably the most difficult thing to forecast because it is very much demand driven and people buy chunks of inventory and then they go away for a while. So you'll see, you'll always see more volatility, I'll say, typically see more volatility in that subscriber piece, so that one's less firm in our numbers and knowing exactly where it's going to end up.
Access and ag. You're right, we don't expect a rebound because that single customer is such a large piece of that content. I will tell you that access in Europe, notwithstanding that customer, was actually pretty strong and we continue to expect that strength in the third quarter. But optical is going to be the biggest and I can confirm there were no 10% customers this quarter.
Tim Savaso, Analyst at Northland Capital Markets
Great. Thanks very much.
OPERATOR
Okay, our next question comes from the line of Michael Genovese with Rosenblatt Securities. Michael, please go ahead.
Michael Genovese, Analyst at Rosenblatt Securities
Thanks. Hey, Tom, I want to ask more about pluggables. So I want to clarify a couple things. On the call, when you mentioned the mix shift earlier and that you were selling more pluggables, could you just talk about what business specifically that was in, and what kind of pluggables? And selling more pluggables as opposed to, I guess, embedded systems and optical. Is that, you know, for DCI and long haul and metro? Is that what you were talking about?
Tom Stanton, Chairman and CEO
Yes, but you know, most specifically, I will tell you, we probably had the strongest 100ZR quarter we've ever had. So that should tell you kind of what we're talking about.
Michael Genovese, Analyst at Rosenblatt Securities
Okay, that makes sense. And then you just mentioned earlier the quad, you know, because we were, you know, I guess asking about the LTO product, which I think has a different name, and then the quad. Could you talk more about the difference between those two products?
Tom Stanton, Chairman and CEO
Yeah. So the other product that we've talked about that got a lot of press was the Lightwave 800. The quad is actually a 4 by 100. It's in the Micromux family. So it's a 4 by 100, a mux that's very, very efficient. I don't know if there's anything out on the market today that's like that. So, you know, plugs right into a router and gives you multiplexing capability at a very low cost.
Michael Genovese, Analyst at Rosenblatt Securities
So if I'm, okay, sorry. If I'm not mistaken though, the Lightwave 800 is different from these products because it's a new market of inside the data center for you as opposed to between data centers where most of your business is now. Is that a correct, is that a correct understanding?
Tom Stanton, Chairman and CEO
Yes. The Lightwave 800 is intra data center. Which, yeah, we have not played in that space. We don't have a Micromux product either, by the way. I mean, so both of these are kind of incremental to the piece that we have traditionally done. But I would say the Lightwave is a farther reach.
Michael Genovese, Analyst at Rosenblatt Securities
Yes. Okay. And the timing though is the Micromux is earlier in 27 and the Lightwave is mid 27. Is that, is that correct?
Tom Stanton, Chairman and CEO
The Micromux is going to be out earlier. So I would, with our, we should be trialing units end of this year or early next year. And then the current schedule for the lightweight is getting units trialing middle of next year — we're saying into Q2 — and then production towards the end of the year or the first part of the following year.
Michael Genovese, Analyst at Rosenblatt Securities
Okay, great. And then just the final question from me, I guess maybe it's a two-part question, but, you know, with the transceivers for inside the data center, you know, this is a very large market. Right. It's a new TAM that you're going into. And I'm kind of used to seeing deals there being, you know, like you don't get 25 or even $50 million deals. They, you know, every time I see somebody win a transceiver deal, it's at least 100 million and it could be a billion.
You know, I'm just wondering if the larger deal sizes as you start to work on that market make sense to you — if that sounds reasonable — and then just, you know, your ability to sell into that market and to have a sales force that interacts with that side of the customer and to kind of, you know, it's a big TAM. But basically, your confidence of Adtran Holdings that they can execute in that market from a sales — I mean, the product specs look great.
But if we can assume you can make the product, are you confident that you can sell the product? Yes.
Tom Stanton, Chairman and CEO
So, Michael, you may not — we sell to most of these customers already now. We sell different products, but most of them have — for instance, like I mentioned before, hyperscaler was the fastest-growing area in our enterprise segment, and he was a significant contributor. So they know who we are. I would say, without a doubt. You know, we've even sold access products to one of the hyperscalers that was really into access. So they know who we are. I don't think there's a trust problem with thinking that we can scale and that we build quality products. We have increased our sales force into that area to make sure that we're covering all of the bases. We've already done that. We're trying to get all the pieces in the right place. It's not like they won't have heard us, and I doubt if there'd be any issue with worries about scalability with us in relation to the numbers that you're talking about.
You are correct. I think my job is to not get us too overhung out there. We need to be able to deliver what we need to be able to deliver, but the numbers are typically bigger than the numbers that we're talking about.
Michael Genovese, Analyst at Rosenblatt Securities
Great. Okay. Thanks so much.
Tom Stanton, Chairman and CEO
Appreciate it. All right. At this, I see that we're at the end of the call list, so I appreciate everybody for joining us today, and we look forward to talking to you next quarter.
OPERATOR
This concludes today's call. You may now disconnect.
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