Corning continued to battle service provider revenue headwinds in the first quarter, reporting Optical Communications sales of $930 million, down 17% year over year.
Despite the near-term revenue challenges caused by inventory issues with its largest service provider customers, Corning’s CEO, Wendell Weeks, remains upbeat.
During its first-quarter earnings call, Weeks told investors he expects the business to pick up even though fiber shipments are over 30% below trend.
“We fully expect that gap to close, adding more than 40% to our overall Optical Communication sales,” he said. “In conversations with our large carrier customers during the quarter, they reinforced their commitment to increasing fiber deployments in 2024 and beyond.”
He added that Corning is starting to see inventory issues settling out.
“In Optical Communications, carrier inventory drawdowns have been the primary source of our below-trend sales,” Weeks said. “Once carrier inventory returns to more normal levels and our customers resume purchasing to support their deployment rates, we expect to see our order book grow. And that's exactly what is happening.”
Besides the carrier market, Corning is seeing sales potential in the enterprise side of its Optical Communications unit. “In the enterprise portion of our optical business, we expected our recent wins for AI data centers will translate into orders and sales during the year,” Weeks said.
Eying BEAD opportunities
On the traditional carrier service provider market, Corning is eying the potential of how it will serve new broadband deployments in rural and other areas made possible through the Broadband Equity Access and Deployment (BEAD) program.
Corning has continued to make inroads to help rural providers. In 2023, Corning began a strategic collaboration with NTCA – The Rural Broadband Association, to help its members overcome today’s supply chain challenges.
A recent CBS News “60 Minutes” segment featuring U.S. Secretary of Commerce Gina Raimondo and Corning Chairman and Weeks spotlighted Corning’s collaboration with the White House to bring high-speed internet to underserved rural communities as part of the BEAD program.
Industry watchers forecast that stats will get funding approvals late this year, leading to spending in 2025.
“We expect BEAD-related projects for network builds in underserved areas to add to our addressable market for the next several years,” Weeks said. The industry expects funding approvals to begin late this year, leading to spending in 2025.”
He added, "Corning anticipates BEAD-related projects will significantly add to the company’s addressable market.”
AI’s potential
Besides the BEAD program, Corning sees potential in serving the growing market to support Artificial Intelligence (AI).
Corning is targeting opportunities in the data center providers that will support AI applications, requiring more fiber solutions.
“Generative AI is an especially attractive opportunity for us. It creates significant demand for passive optical connectivity solutions and strengthens our value proposition and competitive advantages,” Weeks said. “All data centers consist of a front-end network connecting racks of CPUs. To meet AI's computational demands, customers are building a new fiber-rich second network to connect GPUs, which increases our market opportunity.”
To effectively target new data center deployments, Corning continues to develop new fiber cable and connectivity solutions that enable faster deployments and higher-density solutions needed for fiber-rich networks.
The company recently introduced RocketRibbon® cable with Flow Ribbon Technology, which Corning claims reduces cable diameter by 60%.
Weeks said, “Smaller, denser cables are ideal for solving the AI-driven infrastructure challenges of carrier and data center customers.”
It also introduced its Multifiber Pushlok Technology, the latest addition to the company’s Evolv fiber-connectivity portfolio, which could be the answer. The new technology simplifies and accelerates fiber deployments.
We are innovating to enable faster deployments and higher-density solutions needed for fiber-rich networks, which support growth in broadband, 5G, and generative AI.
During the recent OFC trade show, Corning introduced RocketRibbon® cable with Flow Ribbon Technology, featuring a 60% reduction in cable diameter.
“RocketRibbon cable with Flow Ribbon technology can reduce cable diameter by 60%, with fibers per cable approaching 7,000,” Weeks said. A key part of delivering this innovation is our Contour optical fiber, which has a 40% smaller cross-sectional area than legacy fibers.”
He added, "Our ability to integrate innovations across fiber, cable, and connectors to create end-to-end solutions is a unique competitive advantage, and we're accumulating significant customer wins for upcoming AI data center builds.”
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