Ciena’s CEO says the service provider is over its inventory digestion phase
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Also, here's coverage of other key stories on Ciena:
· Ciena’s CEO says he expects North American carrier spending to improve
· AT&T tests 1.6 Tbps on existing Northeast long-distance fiber network
Ciena saw a new wave of growth during its first quarter earnings period, signaling that the carrier spending freeze that plagued optical equipment vendors has cleared.
Gary Smith, CEO of Ciena, said that customers are again investing in scaling their networks, specifically for the anticipated increase in cloud traffic and new AI workloads, including Managed Optical Fiber Networks (MOFN) opportunities with the cloud providers.
Ciena reported that Service Provider revenue in the first quarter increased 14% year-over-year, comprising approximately 51% of total revenue.
Driven by growth in optical networking, switching, and routing, Ciena reported first-quarter revenues of $1.07 billion.
“The supply and demand dynamics that we experienced in previous periods continue to come into balance, and we believe service provider inventory digestion impacts are largely now complete,” he said. “Accordingly, we saw our ongoing improvements in Q1 in revenue and orders with North America leading the way and international markets continuing to show positive progress.”
Cloud steps up
As service providers purchase more optical equipment, Ciena is seeing that the driver for many is to accommodate the growing cloud service environment.
More of its cloud customers are leveraging Ciena’s Managed Optical Fiber Networks (MOFN). Through its strategic relationships, Ciena enables service providers to design and build a dedicated optical network tailored to the hyperscaler’s unique architecture and technology needs.
Service providers can offer tailored solutions for hyperscaler networks by leveraging Ciena’s data center interconnect (DCI) platforms, open line systems (OLSs), and coherent optics.
“Service Provider customers are again investing to scale their networks, specifically for the anticipated increase in cloud traffic and new AI workloads, including for MOFN opportunities with the cloud providers,” Smith said. “We've now seen a couple of quarters with an improving service provider trend line, and we believe these positive service provider spending dynamics will continue moving forward.”
Ciena continues to enhance its cloud customer relationships. The vendor’s direct cloud revenue comprised 32% of the total revenue with five cloud providers and our top 10 customers for the quarter.
“AI is the key driver of scaling and provisioning these high-speed networks to support increased bandwidth demand and enable the monetization of AI today and well into the future,” Smith said. “We expect these to be large, long-term investment plans over many years to come, as evidenced by the strong CapEx plans and strategic commentary that most cloud providers have recently announced relating to networks.”
Optical, routing/switching drive revenue growth
Driven by gains in optical, routing, and switching, Ciena reported a first-quarter revenue of $1.07 billion.
Ciena’s optical unit reported revenues of $728 million, up from $695.8 million in the same period last year.
James Moylan, Ciena's CFO, said much of the momentum in Optical resulted from customer adoption of its WaveLogic 6 Extreme platform. WaveLogic 6 provides 1.6 Tbps, single-carrier wavelengths for metro ROADM deployments while enhancing coverage for 800G connectivity. It also enables fit-for-purpose 800G pluggable to meet diverse customer and application requirements from 10 km to 1000 km.
“We have 25 total customers for WaveLogic 6 Extreme, including large service providers like Lumen, Etisalat, Korea Telecom, Southern Cross, and Vocus, as well as several of the major cloud provider customers that are planning to standardize on this technology,” he said, adding that “pluggable momentum was strong in Q1, putting us well on track to at least double our revenue this year from fiscal 2024.”
Revenue in Routing and Switching was $93 million, up 17% sequentially. Ciena now has 390 customers using its Adaptive IP platform, including nearly 40 added during the first quarter.
Moyland said, “We are winning new customers for our coherent routing solution, including international service providers and enterprise customers.”
Ciena also saw growth in its platform software and services segments, including Navigator, whose revenue rose 6% yearly to $95.1 million. Likewise, Blue Planet's quarterly revenue nearly doubled yearly to $26 million.
For the fiscal second quarter, Ciena expects revenue to range from $1.05 billion to $1.13 billion.
“We are very encouraged by the strength in our business and the continuation of positive demand dynamics across our segments,” Moylan said. “And we are very confident in our well-established position in high-speed connectivity as both our Service Provider and Cloud Provider customers invest at scale and monetize their networks in the AI era.”
He added, "though it's still early in the year, we are increasingly confident that we can deliver revenue growth toward the high end of our 8% to 11% guidance range for fiscal 2025.”
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Sean Buckley
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