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Key Takeaways Ciena and Nokia are benefiting from rising AI-driven demand for networking infrastructure.Ciena reported record revenues, expanded margins and raised its fiscal 2026 outlook.Nokia raised its AI and Network Infrastructure growth outlook as optical and IP demand accelerated. Ciena Corporation (CIEN - Free Report) and Nokia (NOK - Free Report) are benefiting from the rapid adoption of artificial intelligence (AI), which is driving strong demand for high-speed networking infrastructure. As hyperscalers and service providers expand AI deployments, both companies are strengthening their optical networking, routing and switching portfolios to support higher-capacity, low-latency connectivity. Ciena is leveraging its broad networking portfolio and deep customer relationships, while Nokia is expanding its AI and cloud business through optical and IP networking solutions.Both companies are also introducing new AI-focused networking technologies and increasing investments to capture the growing opportunity. Ciena continues to expand its AI-driven portfolio with solutions such as RLS Hyper-Rail and DCOM, while Nokia has launched next-generation hyperscale optical solutions and AI-ready mobile networking products, alongside raising its Network Infrastructure growth outlook.
Let’s analyze their fundamentals, growth opportunities, market challenges and valuation to assess which one presents a stronger investment opportunity.
The Case for CIENCiena is benefiting from robust AI-driven demand for networking infrastructure, supported by its technology leadership, diversified product portfolio and long-standing customer relationships. In the second quarter of fiscal 2026, the company reported record revenues of $1.57 billion, up 40% year over year. Adjusted gross margin expanded to 44.9%, while adjusted earnings per share climbed to $1.64, nearly four times the prior-year level. Management stated that these results were delivered despite ongoing supply constraints. Backed by a growing backlog and offerings spanning networking systems, interconnects, software and services, Ciena remains well positioned to address rising connectivity needs across wide area networks and data centers.
The company continues to benefit from increasing investments by hyperscalers and service providers in networking infrastructure. Management indicated that hyperscalers have expanded their capital expenditure plans for 2026, with further investments expected beyond 2027, while service providers are resuming spending on optical infrastructure after a prolonged slowdown. Demand is being fueled by AI applications requiring high-capacity, low-latency and high-speed connectivity for model training, data ingestion and inference. Ciena expects these trends to significantly expand its addressable market to nearly $50 billion by 2029, covering both traditional WAN opportunities and fast-growing data center networking markets.
Ciena is further strengthening its competitive position through new product adoption and expanding customer engagements. The company secured the industry's first multi-rail order for its RLS Hyper-Rail platform from a leading hyperscaler and is actively working with additional hyperscalers, neoscalers and service providers that have shown strong interest in the solution. Its Data Center Out-of-Band Management (DCOM) platform drove 88% year-over-year growth in the Routing and Switching business, while Ciena also secured orders from a second hyperscaler, progressed qualifications with a third and won a major contract for coherent modules.
Demand for its 400G and 800G pluggables remains strong, with management expecting pluggable revenues to more than double from 2025. Customer collaboration is also increasing, as clients engage earlier in network design, helping shape Ciena's product roadmap and improving demand visibility. During the quarter, direct cloud customer revenues increased 70% year over year, service provider revenues rose 28%, India service provider revenues more than doubled and backlog expanded by more than $600 million sequentially to $7.7 billion, providing visibility into fiscal 2027.
The favorable demand environment has also strengthened Ciena's financial outlook. The adjusted operating margin improved to 19.5%, free cash flow reached $219 million and cash and investments totaled $1.4 billion. Management attributed the stronger profitability to engineering cost reductions, pricing optimization and disciplined working capital management. Reflecting solid first-half execution, the company raised its fiscal 2026 guidance and expects revenues of approximately $6.3 billion, plus or minus $100 million, an adjusted gross margin of 44.5%-45% and an adjusted operating margin of around 19%.
However, Ciena continues to face supply constraints as customer demand outpaces available component supply, requiring ongoing investments to secure manufacturing capacity and maintain execution. The company also operates in a highly competitive networking market and remains exposed to customer concentration risk.
The Case for NOKNokia is gaining from accelerating AI-driven demand and strengthening momentum across its network infrastructure business. The company reported 49% year-over-year growth in AI and cloud net sales, supported by strong demand from AI and cloud customers and €1 billion in new orders, primarily driven by Optical Networks. Management stated that rising AI adoption is increasing demand for data center interconnect, routing, switching and transport networks, creating a multi-year structural growth opportunity. Nokia also raised its AI and cloud addressable market growth outlook to a 27% CAGR for 2025-2028 from the previously expected 16%, while increasing its network infrastructure market growth outlook to 14% from 9%, reflecting stronger customer demand and higher AI-related infrastructure investments.
The company is also benefiting from expanding investments in Optical and IP Networks as AI deployments drive higher networking requirements. The company introduced a next-generation hyperscale multi-rail solution that significantly increases fiber density without expanding physical infrastructure and unveiled a new optical architecture designed to simplify deployments while reducing customers' total cost of ownership. Nokia also reported growing engagement with AI and cloud customers in switching and routing, secured new design wins, expanded its IP Networks pipeline and increased investments in optical manufacturing capacity. Reflecting these trends, management raised its 2026 Network Infrastructure growth outlook to 12-14% from 6-8% and increased its Optical and IP Networks growth forecast to 18-20% from 10-12%.
Nokia is strengthening its mobile network portfolio through AI-focused innovation and product development. The company introduced a new generation of AI RAN-ready radios featuring improved power efficiency and lower weight while continuing development of AI RAN solutions with NVIDIA, with field trials expected by year-end. Management also highlighted strong customer demand for cloud-native core software, new security capabilities and end-to-end automation as operators modernize their networks. At the same time, Nokia expects AI-related design wins in IP networking to translate into additional orders over the coming quarters, supporting future growth opportunities.
However, Nokia continues to face supply constraints as AI-related demand exceeds available capacity. Management noted that semiconductor supply limitations and the need to expand optical manufacturing capacity remain challenges as the company scales production. The company is investing in manufacturing capabilities, supply chain expansion and additional production capacity to capture growing demand, but acknowledged that the broader optical ecosystem continues to experience more demand than supply.
Nokia continues to face weakness in parts of its traditional networking business. Fixed Networks sales declined 13% in the quarter due to the company's strategy of prioritizing higher-margin products, while IP Networks growth was partly offset by softness in non-AI customer segments. Management also expects continued headwinds in the customer premises equipment business as it remains disciplined in focusing on long-term profitable opportunities, while describing the overall telecom market as relatively flat.
CIEN Shares vs. NOKOver the past year, CIEN shares have soared 393.5% while Nokia stock has surged 139.4%.
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Valuation for CIEN & NOKIn terms of Price/Book, CIEN shares are trading at 20.48X, higher than NOK’s 2.6X.
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How Do Zacks Estimates Compare for CIEN & NOK?Analysts have significantly revised their earnings estimates upward for CIEN’s bottom line for the current year.
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For NOK, there have been no revisions for the current year.
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CIEN or NOK: Which Stock to Bet on?CIEN sports a Zacks Rank #1 (Strong Buy) at present, while NOK has a Zacks Rank #3 (Hold). Consequently, in terms of Zacks Rank and valuation, CIEN seems to be a better pick at the moment.
You can see the complete list of today’s Zacks #1 Rank stocks here.