Adtran's Q2 hyperscaler DCI results underscore its revenue diversification strategy
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Adtran is finding that its revenue diversification strategy is bearing fruit for its Optical Networking segment as it focuses more effort on attracting hyperscale data center providers.
Driven by gains in data center interconnect (DCI), Adtran’s second-quarter hyperscaler revenue increased 97% year over year.
Tom Stanton, CEO of Adtran, told investors during its second-quarter earnings call that its hyperscaler results “underscore the strength of our diversification strategy.”
“This momentum is being driven primarily by our data center interconnect business,” he said. “In parallel, we continue to expand engagements with hyperscalers and large-scale content providers for our upcoming Micromux Quattro and the Lightwave 800 pluggable optics solutions.”
The company’s overall second-quarter results reflect its move into emerging segments outside its traditional service provider customer base and the growing momentum behind cloud and AI infrastructure investments.
Besides data center providers, Adtran is seeing an uptick in enterprise, government, and cloud sales. “Revenue from enterprise, government, and cloud customers grew a strong 47% year-over-year and 19% sequentially, accounting for 25% of total company revenue in the quarter,” Stanton said.
Pursuing intra-data center opportunities
Within the data center segment, Adtran is positioning itself to be a supplier of optics for inside the data center with its MicroMux Quattro and LiteWave800.
The vendor’s moves will help address the single biggest problem facing modern data centers: power and energy scarcity, driven heavily by the rapid rise of artificial intelligence (AI) and high-density computing.
The MicroMux Quattro is a compact, pluggable aggregation device that converts a single 400GbE QSFP-DD port into four independent 100GbE ports. MicroMux Quattro plugs into a router and provides what Adtran claims is a low-cost multiplexing capability. Trial units for the 4x100 multiplexer are expected to be available in late 2026 or early 2027.
Likewise, the LightWave800 is a low-power 800 Gbps linear pluggable optics (LPO) module launched in March 2026. It is engineered for short-reach, intra-data-center connectivity to support heavy AI and machine learning workloads. Adtran expects to begin trials of LightWave800 in the middle of next year and production by the end of the year or early in the following year.
“We continue to expand engagements with hyperscalers and large-scale content providers for our upcoming Micromux Quattro and the Lightwave 800 pluggable optics solutions,” Stanton said.
And while these products will be new, Stanton is confident Adtran can deliver these platforms on time as needed by the hyperscaler data center community. “We sell to most of these customers already, and now we sell different products,” he said. “Hyperscaler was the fastest-growing area in our enterprise segment, and it was a significant contributor. So, they know who we are.”
Optical leads the revenue mix
Adtran’s second quarter revenues were driven by strong results in its optical networking solutions unit. The company reported optical networking solutions revenue of $109.7 million, or 39% of total revenue, up 22% year over year and 13% sequentially across multiple customer segments.
“Our optical business continued to serve as a key growth engine; our growth was broad-based across service provider, enterprise, government, and cloud customers,” Stanton said.
Access and aggregation solutions revenue was $86.9 million, or about 31% of total revenue, down 5% year over year and 4% sequentially.
Access and aggregation revenues were up a healthy 13% year over year, partially offsetting customer order timing. Stanton noted that a “project delay from a single customer, combined with unfavorable impacts from product and customer mix, caused our results to fall short of our guidance.”
Subscriber solutions revenue was $84.5 million, reflecting what Stanton said was “normal variability following a very strong first quarter.”
Adtran’s overall second quarter revenue was $281.1 million, up 6.1% year-over-year.
“Although we are disappointed with this past quarter's results, we believe a specific set of factors drove them,” Stanton said. “As we communicated in our preliminary results press release, a project delay from a single customer, combined with unfavorable impacts from product and customer mix, caused our results to fall short of our guidance.”
He added that “overall demand remained strong during the quarter, but a challenging supply environment limited our ability to fulfill that demand, constraining shipments and resulting in an unfavorable mix.”
Turning to the third quarter, Adtran expects revenue to be between $275 million and $295 million. “Our outlook reflects the current expectations regarding customer deployment timing, supported by continued strength in the optical networking solutions business, healthy demand across cloud, enterprise and government markets,” said Tim Santo, CFO and VP of finance for Adtran.
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Sean Buckley
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