Ciena is seeing ongoing opportunities in the cloud services market, a factor evident in its second-quarter fiscal 2025 revenues with several large-scale customer wins.
The vendor’s ongoing cloud presence comes as enterprise spending on cloud infrastructure services increased to $94 billion worldwide, according to Synergy Research Group. This was up $17.5 billion or 23% from the first quarter of 2024.
Speaking to investors during its fiscal second-quarter earnings call, Gary Smith, CEO of Ciena, said that the results, including $1.13 billion in revenue, “reflect continued strong demand across all customer segments, geographic regions and our diversified portfolio.”
“Revenue from cloud providers stood out as a key driver in Q2,” he said. Specifically, we achieved a record direct cloud provider revenue in Q2, which comprised 38% of total revenue, growing 85% year-over-year and reaching more than $400 million in a single quarter for the first time. This highlights the accelerating investments in AI infrastructure and our leadership in addressing this demand. Indeed, three of our top five customers this quarter were cloud providers, underscoring their sustained investments in AI infrastructure and network expansion.”
Looking forward, Smith forecast that “we are on track for cloud provider orders to double in fiscal 2025 over last year as we benefit from the breadth and depth of our customer base in this critical segment.”
DCI potential grows
As Ciena continues to expand its cloud customer presence, the vendor is witnessing a surge in interconnect business activity and demand, including new awards with three additional major cloud providers this quarter alone.
In particular, Ciena is seeing growing adoption and demand for its 400ZR and 800ZR coherent pluggable solutions, as well as its 1.6T coherent light solution, which it will sample by the end of calendar 2025, with commercial availability in the first half of calendar 2026.
Within the cloud provider market, Ciena is also pursuing new opportunities to address the growth of distributed data centers. To support the massive scale and power requirements of AI training and inference traffic, data centers must become more distributed.
Historically, these traffic flows were primarily confined within the data center, but they are now extending across multiple data centers over greater distances, requiring high-capacity, low-latency links.
“As cloud providers expand their data center architectures with scale-up and scale-out AI-related deployments, we are broadening and deepening our relationships with them,” Smith said. “We're addressing new data center-related applications, a strategy we've publicly discussed over the last few months, and where we've recently secured two wins. The first is a very strategic win, and it involves an application connecting regional GPU clusters, which has been a topic of discussion in the industry for some time."
Ciena is also seeing growing interest in its coherent 800-gig pluggables and RLS photonic lines. While it did not specify the specific provider, Ciena was selected by a global cloud provider, which is investing in geographically distributed regional GPU clusters.
“We will start to recognize revenue from this incremental opportunity later this fiscal year and ramp into 2026,” Smith said. “We expect to see more of these types of opportunities emerge, as cloud providers evolve their data center network architectures to support their strategies. The second win is for a focused application inside the data center for out-of-band network management. These networks operate separately from the main data traffic network and provide remote access to monitor and manage data center systems.”
What also bodes well for Ciena is its work to co-create solutions with cloud service providers. Smith said this dynamic “gives us increased visibility and confidence as we go forward.”
Likewise, Ciena’s service provider business is also seeing improvement following a period of underinvestment due to an industry-wide inventory glut.
“We are seeing growth and strength across the board with service providers in core optical transport, routing and switching, software and services to address the connectivity needs of their customer base and to support cloud providers' growing bandwidth demands,” Smight said. “As a result, our business with Tier One North American service providers gained momentum in Q2. And we also had several new customer wins in both the Americas and international regions, including Europe.”
He added that service provider customer momentum was driven by two factors: new fiber builds, as well as Managed Optical Fiber Networks (MOFN)
“With all the record performance of direct DCI in the quarter, we also achieved a record for MOFN activity in the first half of fiscal 2025, which further demonstrates really how we're supporting the strong nexus between service providers and cloud providers,” Smith said.
Optical, routing drive Q2 results
Driven by optical and routing sales, Ciena reported second-quarter revenues of $1.13 billion. This included two customers with 10% or more market share, one cloud provider, and one service provider.
In the networking platforms segment, Ciena reported optical networking sales of $773.6 million, up from $560.2 million in the same period in the previous year. However, Routing and Switching revenues were $92.7 million, down from $116 million in the fourth quarter of fiscal year 2024.
Within the optical segment, Ciena achieved positive results from its WaveLogic technology, driven by various customer wins. WaveLogic five Nano pluggables continued ramping, now shipping to 178 customers, including both cloud providers and service providers. “Our WaveLogic technology remains a strong competitive advantage,” Smith said. “We added 24 new WaveLogic six Extreme customers in Q2, bringing the total to 49 within just two quarters of general availability.”
He added that Ciena saw similar momentum with its WaveLogic 5 Extreme and Nano. “WaveLogic five Extreme and Nano also performed well with continued adoption among cloud customers and service providers,” Smith said. “We added 10 new WaveLogic five Extreme customers in Q2 for a total of 344 customers overall.”
The company maintained its position in software and services. Ciena reported that Platform Software and Services revenues remained flat compared to last year, while Blue Planet Automation Software and Services rose to $28 million. Global Services also reported positive results in the quarter, with revenues of $146.2 million, up from $134.7 million in the same period last year.
“Blue Planet had a record performance in Q2, achieving its highest ever quarterly revenue at just under $30 million,” Smith said. “This milestone reflects the success of our deliberate transformation efforts over the past couple of years. Positioning Blue Planet better to serve our customers' digital transformation needs and journey.”
Like other vendors, Ciena has been working to navigate the ever-changing tariff situation.
Jim Moylan, CFO of Ciena, who will retire later this summer, said that Ciena “responded in real time with mitigation strategies to minimize the impact both on our customers and our P&L.”
“Under this current tariff structure, we expect the total cost of tariffs to be approximately $10 million per quarter,” he said. “We expect to mitigate most of the quarterly impact as compared to Q2. Therefore, we believe the net effect on our bottom line in future quarters will be immaterial.”
Looking forward, for the fiscal third quarter, Ciena expects to report revenue in a range of $1.13 billion to $1.21 billion.
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Sean Buckley
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