WAN evolution

As its backlog expands, Ciena sees the WAN opportunity developing along several vectors: traditional WAN being impacted by AI, AI WAN (including data center interconnect), and the data centers themselves, which scale up and scale data center operations.

With the acceleration and projected increase in spending on network infrastructure across these segments, Smith said Ciena forecasts “the total addressable market for our business will effectively double over the next 3 years, growing from approximately $25 billion today to approximately $50 billion by 2029.”

Ciena is seeing strong adoption of its intelligent line systems like RLS, where it has roughly 70% market share.

Besides serving cloud providers and service providers in the network backbone and cloud providers for DCI in the AI WAN, RLS is being deployed for scale-across applications. Further, the next generation of RLS Hyper-Rail is Ciena’s second-generation RLS, co-created with the hyperscalers and purpose-built to distribute AI training workloads across data centers over longer distances.

“With customer orders ramping, we remain on track for initial customer standardization for RLS Hyper-Rail by the end of 2026, and scaling to material revenue as we move throughout 2027,” Smith said.

In its interconnect portfolio, Ciena is growing its connectivity solutions to address surging bandwidth demands inside and around the data center and the performance limits of current short-reach technologies.

“Starting with our WaveLogic 5 Nano pluggable optics, we are seeing strong market adoption as we continue to ramp into production volume,” Smith said. “In Q3, we shipped more than twice the volume of 800 ZR plugs than in the previous quarter.”

Ciena is also making progress with short-range electrical and optical solutions.

Nitro, a linear analog copper cable (ACC) redriver for active copper cable solutions, is gaining customer traction. The platform is designed to help data center providers extend cable lengths by up to three times the capability of passive options with minimum power requirements and no added channel latency.

Additionally, Ciena is making progress with its own co-packaged optical (CPO) platform, Vesta. Following its acquisition of Nubis Communications, Ciena unveiled Vesta 200 6.4T CPX, a low-power pluggable CPO solution, in February. As a new growth sector, Ciena forecasts it will begin reporting CPX revenue in 2027 and ramp into 2028.

“We received sample orders from several anchor customers in the ecosystem for Vesta, our open co-packaged optical or CPX solution,” Smith said. “This represents another important step toward commercializing our open ecosystem approach to short-reach data center optics. And we believe this is gaining meaningful industry momentum. Most importantly, with potential customers.”

Neoscaler momentum

While a large portion of Ciena’s revenues (50%) is from large hyperscalers, the company is seeing more neoscaler customer momentum.

Neoscalers—also called neoclouds—are specialized cloud infrastructure providers that focus almost exclusively on renting out high-end graphical processing units (GPUs) for artificial intelligence (AI) workloads.

Ciena is seeing more neoscalers, which cover a wide range of business models, become interested in its solutions, including MOFN.

“We are very focused on the neoscaler space,” Smith said. “They are leaning very much into networking now, securing networks on MOFN deals, and they are beginning to put their own fiber in when they can get it.

He added that as Ciena goes through 2027 and 2028, neoscalers will “become an increasingly important part of our business.”

Optical leads revenue mix 

Led by its Optical Networking segment, Ciena reported Fiscal Q3 2026 earnings of $1.67 billion, coming in at the top end of its guidance. This was a 37% year-on-year increase and another quarterly record.

Total combined optical networks revenue, including interconnects, grew more than 45% year-on-year, supported by over 55% growth in its RLS and Waveserver systems. Interconnects more than doubled year-on-year, while its direct cloud provider revenue grew over 80%.

Another key factor was, of course, data centers. Ciena’s in- and around-the-data-center percentage of revenue has quadrupled year-to-date, well ahead of its committed 3x growth from the beginning of the year.

Marc Graff, Ciena's CFO, said, “We had 2 customers that each contributed more than 10% of revenue.”

The company exited the third quarter with an $800 million increase in backlog to $8.5 billion. Already one month into the quarter, Ciena has booked nearly as much demand as all of the third quarter and expects to end the year with more than $10 billion in backlog.

For the last quarter of the year, Ciena expects to deliver revenue of $1.75 billion, plus or minus $50 million, raising the full-year midpoint to $6.42 billion, up $120 million from last quarter. “With this revenue guide, we expect to increase our market share in the combined optical systems and plug market by about 4 points to approximately 30%.

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