After reporting a stellar second quarter of 2023 in today’s quarterly earnings call, executives at Ciena Corp. (NYSE: CIEN) signaled they anticipate a change in momentum for the rest of the year: North American Tier 1 service providers have joined cloud service providers in pushing out orders for optical transmission systems. The company has adjusted their overall revenue guidance for the year, from growth of 20% to 22% to growth of 18% to 22%.
Gary Smith, president and CEO of the company, told participants on this morning’s call that the market has entered what he described as “a transitionary period” now that supply chain constraints have eased. “Consequently, this is driving a near-term shift in customer ordering and shipment dynamics and behavior,” he said. “Previously, we had discussed some pushouts of orders by our cloud provider customers as they reprofile their spend to align with their budgets. In recent weeks, we've begun to see similar behavior by certain of our large North American service provider customers.
“And to be really clear, customers are not canceling orders. They are pushing some existing orders into subsequent quarters to better align with their budgets and scheduling capabilities,” Smith continued. “And this is purely a matter of timing. It is not the result of capex cuts, rather it is one of operating within their existing capex and logistical capabilities. Therefore, we continue to expect to exit fiscal 2023 with a backlog that is at least double our historical levels on an absolute basis.”
Smith did not offer a firm estimation of how long this order adjustment activity among customers will last. He did allow that some orders might shift into 2024.
In the more immediate term, the company guided third quarter 2023 revenues of $1.00 billion to $1.08 billion. This range represents a sequential reduction from the $1.13 billion Ciena reported this morning for 2Q23 but an increase over the $868.0 million earned in 3Q22.
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