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Ciena Sees Strong Demand and Revenue Growth

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Ciena stock experienced a 4.4% increase to $47.76 in Thursday’s trading session following the release of their fiscal fourth-quarter earnings report. The optical-networking company reported revenue of $1.13 billion for the quarter, surpassing the Street consensus of $1.09 billion, and showing a significant 16% increase compared to the same period last year. On an adjusted basis, Ciena earned 75 cents per share, exceeding the Street consensus of 69 cents. CEO Gary Smith attributed these positive results to “positive market dynamics, particularly with cloud customers.”

Fiscal Year Performance and Outlook

Ciena’s strong financial performance was not limited to the fourth quarter alone. The company posted revenue of $4.39 billion for the full fiscal year, marking a substantial 21% growth. Adjusted profits for the year stood at $2.72 per share, with GAAP earnings at $1.71 per share. This exceptional top-line growth is unusual for Ciena, which historically has seen around 7% growth, but it was a result of catching up with demand that had been delayed due to component shortages caused by the pandemic.

Looking ahead to the January quarter, Ciena projects revenue in the range of $980 million to $1.06 billion. This falls slightly below the Street consensus of $1.05 billion, but the company remains optimistic about future growth opportunities. Ciena anticipates adjusted gross margin in the mid-40%, an improvement from the 43.7% reported in the October quarter.

Future Outlook and Growth Strategies

Ciena is positioning itself for continued success and expects revenue growth between 1% and 4% for the fiscal year ending in October 2024. This forecast implies revenue of $4.5 billion, slightly lower than the consensus estimate of $4.6 billion. CEO Gary Smith expressed confidence in the company’s ability to outperform the market and gain market share. Ciena predicts a long-term annual growth rate of 6% to 8% through 2026.

Overall, Ciena’s latest earnings report demonstrates their strong performance, driven by robust demand from cloud customers. With a solid financial foundation and a focus on expanding their market presence, Ciena is poised for continued success in the optical-networking industry.

Ciena’s Shifting Revenue Landscape

Ciena, a leading provider of telecom equipment, reported a notable change in its revenue makeup for the quarter. While the company did not disclose the names of the customers, it revealed that two cloud vendors accounted for over 10% each, contributing to a combined 29.7% of overall revenue. This represents a shift from previous years, where AT&T and Verizon Communications held the top spots as Ciena’s largest customers.

Remarkably, Ciena’s non-telecom business reached an all-time high, representing 52% of revenue for the quarter. Particularly impressive was the substantial growth in revenue from cloud providers, which more than doubled compared to the same period last year.

In a recent interview, Ciena’s CEO, Smith, emphasized the expanded relationships with major players in the cloud computing industry. As cloud vendors strive to enhance connectivity speeds for end users, Ciena has experienced a remarkable increase in order growth with these customers, exceeding 50% during the quarter. Smith remains optimistic about the persistent demand growth from cloud players for the foreseeable future.

Conversely, there has been relatively muted demand from the telecom sector. This aligns with similar reports from other telecom-equipment providers such as Cisco Systems and Nokia. Smith highlights the unique circumstances faced by North American carriers who are working through a backlog of equipment ordered during the pandemic when component availability was limited. It is expected to take around another year for the supply chain to stabilize as telcos integrate the additional hardware.

Concluding the quarter on a positive note, Ciena boasted $1.25 billion in cash and investments, along with repurchasing $188.8 million of common stock during this period.

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