Ciena shutters broadband PON plans to focus on cloud and data center network opportunities
Key Highlights
- Ciena is investing heavily in optical, routing, and network management systems to support AI and cloud infrastructure growth.
- The company is shifting R&D focus from residential broadband to core optical and data center solutions, including out-of-band management technology.
- Ciena reported strong Q3 2025 revenues of $1.22 billion, driven by optical and routing platform sales, with future growth expected in AI and hyperscaler markets.
- Partnerships with hyperscalers and neo-scalers are key to Ciena’s strategy, enabling new AI infrastructure projects and expanding market opportunities.
- Workforce reductions of 4-5% are planned as part of the strategic shift, with continued support for existing broadband products.
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Here are other stories on Ciena:
· Ciena’s fiscal Q2 dominated by cloud provider demands
· Ciena’s CEO says the service provider is over its inventory digestion phase
Ciena sees a future where its traditional optical networking platforms can fulfill AI demands. To fulfill this mission, the company is going to divert investments into its PON broadband unit by emphasizing investments in optical, routing and network management systems.
This move will bring Ciena’s broadband push that began in 2022 when it acquired Tibit Communications and Benu Network, with a promise of creating virtual PON networking platforms to a close. Tibit brought its microplug optical line OLT technology, enabling rapid PON deployment in any environment, while Benu developed a portfolio of cloud-native software solutions, including a virtual Broadband Network Gateway (vBNG).
Speaking to investors during its fiscal third quarter 2025 earnings call, Gary Smith, CEO of Ciena, said the company is seeing its service provider customers, including data center providers, focus network investments where they can achieve scale to support and enable AI traffic growth, which reinforces new systems and interconnection opportunities and eventually inside the data center.
“To ensure we can take full advantage of those growth opportunities and as part of our regular review of our overall product portfolio, we recently made decisions to align our strategic investments on our Coherent Optical Systems, Interconnects, Coherent Routing and Innovative Solutions like our data center out-of-band management solution,” he said. “To that end, we will be redirecting additional R&D investment into these technologies and away from our residential broadband access portfolio, given the larger customer priorities for AI-driven and cloud network investments over the next several years.”
As a result of redirecting R&D investments into its core optical technologies and ceasing further development of our 25G PON broadband activities, Ciena is going to cut 4% to 5% of its workforce, that’s inclusive of the broadband investment shift. Ciena expects to record a noncash charge in its fourth quarter against in-process R&D with a carrying value of approximately $90 million.
Despite the change, Smith emphasized that “we will continue to sell and support our existing broadband access products.”
What is out-of-band management?
Out-of-Band Management (OOBM) is a method for accessing and managing network devices through a dedicated management channel, separate from the production network, ensuring data access even during network outages. This allows system administrators to access and control devices even when the main network is down, a device is powered off, or the operating system is unresponsive. OOBM, which is being championed by Ciena and other optical vendors, has become a key tool to maintain business continuity and minimize downtime in critical IT environments.
Hypercsalers and cloud drivers
Ciena’s thesis to shift its attention to coherent optics, routing, and its data center out-of-band management (DCOM) solution sets reflects the growth in hyperscaler customers.
The company estimates that hyperscalers in various forms, including neoscalers, account for about 50% of its business.
Smith said Ciena expects the customer mix “to be similar in 2026, but a large part of that service provider workload will be MOFN and cloud and AI Edge related.”
Likewise, the company is seeing more cloud providers continue to invest in AI, with many announcements over the past quarter, their intent to increase their expected spend on AI for future quarters and years beyond.
Ciena pointed to customer wins with cloud providers it brought on during the quarter.
The first win is for an AI infrastructure project related to training and the interconnection of geographically distributed regional GPU clusters. This North American-based project is a dedicated build is comprises Ciena’s RLS platform and the WaveLogic 6 Nano 800-gig ZR plug from its Interconnects portfolio.
Smith said, “Initial revenue shipments are underway, and we expect this to ramp to hundreds of millions of dollars over the next several quarters.”
The other customer win is for DCOM, an out-of-band management solution for inside the data center. Ciena co-developed the DCOM solution with a hyperscaler, which allows them to streamline the installation and management of their large-scale data center operations, improving scalability and reducing power and space.
“We also now have significant orders in-house for DCOM,” Smith said. “Overall, we have increasingly strong partnerships with all of the major hyperscalers, driving increased demand for our industry-leading technology in these AI infrastructure builds.”
Within the data center market, Ciena is seeing new opportunities outside of the top five hyperscalers in a group that’s become known as neo-scalers. This group comprises AI compute specialists, such as GPU-as-a-service providers, cloud and edge service providers and smaller data center and co-location providers.
“As they build and scale their own infrastructure, neo-scalers are strategically positioned to leverage AI traffic growth, distributed compute and automation, creating significant opportunities for Ciena globally over time and adding to the durability of the demand,” Smith said. “In fact, we've already secured multiple new wins with these cutting-edge neo-scalers, and we see this as a rapidly expanding new market for Ciena.”
Service provider growth runway
With the COVID supply chain and inventory issues largely behind the service provider industry, Smith said Ciena is seeing a long growth runway.
Out of Ciena’s top five customers this quarter, three were service providers. The company is finding new provider opportunities for its Managed Optical Fiber Network (MOFN), which are dedicated, high-capacity fiber networks built, managed, and maintained by a third-party telecom provider for a single enterprise, cloud service provider, or hyperscaler.
“The other dynamic around this shift of workloads as you start getting these AI workloads closer to the edge, you're really talking service providers,” Smith said. “And that, in addition to the MOFN opportunities, which we're seeing both in North America and globally, continue to expand.”
He added that “I would expect even though we're going to have outsized relative to service provider growth in cloud, I think the mix is going to be fairly similar in terms of direct next year.”
Optical and routing lead revenues
Ciena’s optical and routing division was the clear revenue star during the fiscal third quarter 2025.
Optical networking revenue was $815.5 million, up from $607 million in the same period a year ago. Likewise, Routing and Switching was $126 million, surpassing $92.7 million last year. Total networking platform revenue was $941.4.
Platform Software and Services and Blue Planet Automation Software and Services also saw gains in the quarter, with $90 million and $27.8 million. Finally, Global Services revenues were $160.2 million.
“Revenue of $1.22 billion exceeded the high end of our guidance, up 8% sequentially and nearly 30% year-over-year, with a strong showing in our RLS optical products and Routers and Switches,” said Marc Graff, CFO of Ciena.
For the fiscal third quarter 2025, Ciena reported revenue of $1.22 billion as compared to $942.3 million for the fiscal third quarter 2024.
Looking towards the fiscal fourth quarter, Ciena said it “expects to deliver revenue in a range of $1.24 billion to $1.32 billion.”
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Optical market sees Q2 recovery
Driven by the demand for disaggregated WDM and data center interconnect (DCI), a recent Dell ’Oro report revealed that the optical transport market grew 14 percent during the second quarter. In particular, the disaggregated WDM market outperformed expectations in the quarter, growing nearly 35 percent year-over-year due to strong demand across all of the individual technology segments: transponder units, optical line systems (OLS), and ZR/ZR+ optics for IPoDWDM. Huawei, Ciena, Nokia, ZTE, FiberHome, and Cisco were the top six vendors in the quarter.
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Sean Buckley
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