Track market-moving stories before they get noisy

Key Takeaways Ciena and Nokia benefit from surging AI and cloud demand, with both seeing strong optical networking growth.Ciena expects 30% revenue growth in fiscal 2027, backed by an $8.5 billion backlog and cloud demand.Nokia targets 25-30% Optical and IP Networks growth in 2027, but supply constraints and costs are woes. Ciena Corporation (CIEN - Free Report) and Nokia Corporation (NOK - Free Report) are benefiting from accelerating demand for optical networking solutions as AI, cloud infrastructure expansion and rising bandwidth requirements drive investments in high-speed connectivity. Both companies are witnessing strong demand from hyperscalers and telecom operators for optical networking equipment, data center interconnect solutions and next-generation technologies. Ciena is capitalizing on its leadership in coherent optics and expanding its optical systems portfolio, while Nokia is strengthening its position through growing adoption of its optical and IP networking solutions.

Both companies have reported strong growth in their optical networking businesses, supported by rising customer orders and expanding opportunities in AI-driven network infrastructure. However, supply constraints and the need to expand manufacturing capacity remain key challenges.

With both companies positioning themselves to capture growing demand for high-speed connectivity, let us examine their growth prospects and challenges to determine which optical networking stock offers a more attractive investment opportunity.

The Case for CIENCiena is gaining from robust demand for high-speed optical networking solutions, fueled by accelerating AI investments, rising bandwidth requirements and expanding data center infrastructure. The company is benefiting from the growing need for high-capacity, low-latency connectivity across traditional wide-area networks, AI-driven networks and data centers. Increasing adoption of AI applications, distributed training and inference workloads is creating significant opportunities for its optical networking portfolio. Management expects its total addressable market to double from $25 billion to $50 billion by 2029. Ciena's strong technological expertise, broad product portfolio and established customer relationships position it well to capitalize on these opportunities and expand its market share.

Ciena is witnessing strong momentum across its optical networking portfolio, particularly WaveLogic 6 Extreme, Reconfigurable Line Systems (RLS) and Waveserver platforms. The adoption of WaveLogic 6 Extreme, its 1.6-terabit high-performance modem, has already surpassed that of its predecessor, WaveLogic 5 Extreme. The company's RLS platform commands approximately 70% market share in disaggregated optical line systems, reflecting its competitive strength. Its next-generation RLS Hyper-Rail platform, designed to support distributed AI training across data centers, is also gaining traction among hyperscale customers. Management expects initial customer standardization by the end of calendar 2026, followed by a meaningful revenue ramp in 2027. Hyper-Rail is expected to generate several hundred million dollars in revenues during fiscal 2027 while supporting further margin expansion.

Ciena is benefiting from increasing investments by hyperscalers and cloud service providers in data center connectivity infrastructure. In the third quarter of fiscal 2026, direct cloud provider revenues surged more than 80% year over year, while interconnects revenues more than doubled. Its WaveLogic 5 Nano pluggable optics portfolio is witnessing solid adoption, with shipments of 800ZR pluggables more than doubling sequentially during the quarter.

The company is also advancing its emerging interconnect offerings, including Nitro linear redrivers and Vesta co-packaged optics solutions. Vesta has received sample orders from several anchor customers, with revenues expected to begin in 2027 and accelerate in 2028. These developments strengthen Ciena's position in the rapidly expanding market for optical connectivity inside and around data centers.

Ciena's expanding order backlog and improving demand visibility provide a solid foundation for sustained revenue growth. The company exited the third quarter with an $8.5 billion backlog, reflecting an $800 million sequential increase, and expects the figure to exceed $10 billion by the end of fiscal 2026. Strong customer commitments extending through 2029 further underscore the durability of demand. The company has also secured long-term agreements for critical components to support increasing production requirements. Supported by these developments, management anticipates fiscal 2027 revenues of at least $8.3-$8.4 billion, representing minimum year-over-year growth of 30%. Adjusted operating margin is projected to reach 25-27%, reflecting improving operating leverage and profitability.

Ciena is also benefiting from recovering investments in optical infrastructure by traditional service providers and growing managed optical fiber network (MOFN) deployments. Hyperscalers are increasingly investing in dedicated network infrastructure across North America and international markets, including India, Japan and the Middle East. The company is witnessing strong demand for optical connectivity in submarine networks, where it holds a leading market position. Increasing network modernization requirements and the expansion of AI-related traffic are expected to support steady service provider growth over the next several years. These trends, coupled with its strong presence in data center interconnect and optical transport technologies, reinforce Ciena's long-term growth prospects.

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However, Ciena faces challenges from persistent supply constraints amid unprecedented demand for optical networking equipment. Limited availability of critical components is restricting its ability to fulfill customer orders and could constrain revenue growth despite a substantial backlog. Management expects the supply-demand imbalance to continue through fiscal 2027 and potentially into 2028.

The company is making significant investments to secure additional manufacturing capacity and component supply, which are expected to weigh on operating cash flow in the fourth quarter of fiscal 2026. Moreover, the third-quarter adjusted gross margin benefited from a one-time tariff-related refund of approximately 70 basis points (bps), which is not expected to recur. Potential exposure to changes in Canadian tariffs could also create additional cost pressures, although management is exploring mitigation measures.

The Case for NOKNokia is gaining from robust demand for AI and cloud infrastructure, supported by growing investments in data center connectivity and high-performance networking solutions. In the third quarter of 2026, AI and cloud revenues surged 123% year over year, accounting for 12% of total net sales. Gross order intake from this customer segment increased 118% to €1.5 billion, reflecting sustained demand from hyperscalers and cloud customers. IP Networks revenues grew 43%, driven by the conversion of earlier design wins into revenues, while Optical Networks recorded 18% growth. With demand remaining strong across front-end networking, scale-across infrastructure and data center interconnect, Nokia expects its combined Optical and IP Networks businesses to grow 25-30% in 2027, highlighting favorable long-term growth prospects.

The company is benefiting from continued innovation and expanding customer engagements across its optical and IP networking portfolio. Demand for its 800G coherent pluggables remains strong, with shipment volumes more than doubling sequentially and design wins secured with 29 customers. The company also secured a significant optical line systems contract with a large hyperscaler and three design wins for its multi-rail technology, which offers 25% higher density than competing solutions. In IP Networks, Nokia added two hyperscaler design wins, including a next-generation data center gateway contract. Significant telecom customer wins across Japan, Europe and the United States further underscore its growing traction in edge and core routing, IP aggregation and 5G backhaul. These developments strengthen Nokia's competitive position as enterprises and telecom operators expand their infrastructure to accommodate rising AI-driven data traffic.

Nokia's increasing focus on AI-native networks and next-generation wireless technologies presents additional growth opportunities. Its collaboration with NVIDIA is accelerating the development of AI-RAN solutions, combining Nokia's AI-native anyRAN software with NVIDIA's Aerial RAN Computer platform. Recent milestones include T-Mobile's first live voice call over AI-RAN on its production network and Elisa's successful simultaneous operation of voice, mobile data and AI workloads on a common AI-RAN platform. Nokia has demonstrated spectral efficiency improvements exceeding 20% in live environments and is targeting a 100% improvement by 2028. With 19 customers actively engaged in AI-RAN initiatives, the company is positioning itself to capitalize on emerging opportunities in AI-powered wireless networks, industrial automation and future 6G deployments.

The company’s profitability is benefiting from improving operating leverage, disciplined portfolio management and ongoing restructuring initiatives. In the third quarter, net sales increased 9%, while comparable operating margin expanded 220 bps to 11.7%, supported by higher revenues and operational efficiencies. The company is prioritizing higher-margin offerings while reducing its exposure to less profitable businesses. The integration of Infinera is largely complete, and Nokia remains on track to achieve €200 million in synergies by the end of 2026, a year ahead of schedule. Accelerated restructuring in Europe and the integration of its China operations are expected to further streamline costs. These initiatives, along with investments in optical manufacturing capacity, should support improved operating efficiency and long-term profitability.

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However, Nokia faces challenges from supply-chain constraints, rising component costs and near-term margin pressures. Despite strong demand, supply limitations continue to restrict its ability to fulfill additional orders, particularly across Optical and IP Networks. The company is also experiencing broad-based cost inflation involving advanced semiconductor components, memory and printed circuit boards. Network Infrastructure gross margin contracted 150 bps to 41.2% in the third quarter, primarily due to an unfavorable product mix and costs associated with ramping new AI and cloud products in IP Networks. Although management expects gross margin to improve in the fourth quarter, persistent supply shortages and elevated input costs could weigh on profitability and constrain revenue growth.

Nokia also faces headwinds from weakness in certain businesses, subdued telecom spending and mounting cash flow pressures. Fixed Networks revenues declined 22% in the third quarter, reflecting the company's decision to reduce exposure to lower-margin customer premises equipment offerings, while Core Software revenues fell 13% amid portfolio rationalization and project delays caused by server infrastructure supply constraints.

Management expects the broader telecom market to remain largely flat, limiting near-term growth opportunities outside AI-driven network investments. Free cash flow was negative €99 million in the quarter due to restructuring payments and higher working capital requirements. Nokia now expects approximately €1.1 billion in restructuring charges in 2026 and plans to invest an additional €400 million in working capital compared with its initial expectations. Consequently, the company expects free cash flow conversion of 35-55% for 2026, highlighting continued pressure on cash generation.

CIEN Shares vs. NOKOver the past year, CIEN shares have soared 80.2% while Nokia surged 26.7%.

Image Source: Zacks Investment Research

Valuation for CIEN & NOKIn terms of Price/Book, CIEN shares are trading at 14.97X, higher than NOK’s 1.83X.

Image Source: Zacks Investment Research

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.

Image Source: Zacks Investment Research

For NOK, there have been no revisions in current-year estimates.

Image Source: Zacks Investment Research

CIEN or NOK: Which Stock to Bet On?CIEN sports a Zacks Rank #1 (Strong Buy), while NOK has a Zacks Rank #3 (Hold). Despite its premium valuation, CIEN appears to be the better pick at the moment, supported by stronger growth prospects and positive earnings estimate revisions.

You can see the complete list of today’s Zacks #1 Rank stocks here.

First Citizens Bank & Trust Co. bought a new stake in Ciena Corporation (NYSE:CIEN – Free Report) in the 3rd quarter, according to its most recent 13F filing with the Securities and Exchange Commission. The fund bought 2,505 shares of the communications equipment provider’s stock, valued at approximately $881,000.

A number of other institutional investors and hedge funds also recently made changes to their positions in CIEN. B. Riley Wealth Advisors Inc. bought a new position in shares of Ciena in the 3rd quarter valued at $519,000. Ring Mountain Capital LLC lifted its position in shares of Ciena by 13.3% during the 3rd quarter. Ring Mountain Capital LLC now owns 1,946 shares of the communications equipment provider’s stock worth $685,000 after buying an additional 228 shares during the last quarter. Heffernan Advisory Inc. boosted its stake in Ciena by 104.0% in the third quarter. Heffernan Advisory Inc. now owns 1,020 shares of the communications equipment provider’s stock valued at $359,000 after buying an additional 520 shares in the last quarter. NorthCrest Asset Manangement LLC boosted its stake in Ciena by 16.1% in the third quarter. NorthCrest Asset Manangement LLC now owns 12,417 shares of the communications equipment provider’s stock valued at $4,369,000 after buying an additional 1,724 shares in the last quarter. Finally, Wedmont Private Capital boosted its stake in Ciena by 1.7% in the third quarter. Wedmont Private Capital now owns 3,533 shares of the communications equipment provider’s stock valued at $1,243,000 after buying an additional 60 shares in the last quarter. Institutional investors own 91.99% of the company’s stock.

Analyst Ratings Changes Several research analysts have commented on the company. B. Riley Financial lowered their target price on Ciena from $516.00 to $413.00 and set a “neutral” rating for the company in a research note on Monday, August 31st. TD Cowen reissued a “buy” rating on shares of Ciena in a report on Thursday, September 17th. UBS Group reduced their price target on shares of Ciena from $508.00 to $394.00 and set a “neutral” rating on the stock in a research note on Friday, September 4th. Citigroup reaffirmed a “buy” rating on shares of Ciena in a report on Friday, September 4th. Finally, Barclays lifted their price target on shares of Ciena from $475.00 to $548.00 and gave the company an “overweight” rating in a report on Thursday, September 17th. One research analyst has rated the stock with a Strong Buy rating, fourteen have issued a Buy rating and five have given a Hold rating to the company’s stock. According to data from MarketBeat, Ciena currently has an average rating of “Moderate Buy” and a consensus price target of $506.11.

Get Our Latest Analysis on CIEN Ciena Stock Down 7.0% Shares of CIEN opened at $331.73 on Friday. Ciena Corporation has a 52 week low of $159.56 and a 52 week high of $637.51. The stock has a market capitalization of $47.04 billion, a price-to-earnings ratio of 74.05, a PEG ratio of 4.95 and a beta of 1.28. The company has a debt-to-equity ratio of 1.06, a quick ratio of 3.17 and a current ratio of 3.80. The stock has a fifty day moving average of $376.08 and a 200-day moving average of $440.27.

Ciena (NYSE:CIEN – Get Free Report) last issued its quarterly earnings data on Thursday, September 3rd. The communications equipment provider reported $2.11 earnings per share for the quarter, topping analysts’ consensus estimates of $1.73 by $0.38. Ciena had a return on equity of 25.33% and a net margin of 10.87%. The business had revenue of $1.67 billion for the quarter, compared to analyst estimates of $1.64 billion. During the same quarter in the previous year, the company posted $0.35 EPS. Ciena’s quarterly revenue was up 37.0% compared to the same quarter last year. As a group, sell-side analysts anticipate that Ciena Corporation will post 6.00 earnings per share for the current fiscal year.

Insider Activity In other Ciena news, CFO Marc Graff sold 4,995 shares of the company’s stock in a transaction dated Friday, August 14th. The stock was sold at an average price of $430.72, for a total value of $2,151,446.40. Following the sale, the chief financial officer owned 107,519 shares in the company, valued at approximately $46,310,583.68. The trade was a 4.44% decrease in their position. The transaction was disclosed in a filing with the SEC, which is accessible through this link. The transaction was executed under a pre-arranged Rule 10b5-1 trading plan. Also, CEO Gary B. Smith sold 2,952 shares of the stock in a transaction dated Tuesday, September 15th. The shares were sold at an average price of $330.18, for a total value of $974,691.36. Following the completion of the sale, the chief executive officer directly owned 240,126 shares of the company’s stock, valued at approximately $79,284,802.68. The trade was a 1.21% decrease in their position. The disclosure for this sale is available in the SEC filing. The transaction was executed under a pre-arranged Rule 10b5-1 trading plan. In the last three months, insiders sold 31,862 shares of company stock worth $12,017,320. 0.58% of the stock is owned by corporate insiders.

About Ciena (Free Report)

Ciena Corporation is a networking technology company that provides communications infrastructure, software and services for telecommunications providers, cloud operators, enterprises, governments and research institutions. Its solutions are designed to help organizations build, manage and automate high-capacity networks that support applications such as cloud computing, broadband connectivity, data center interconnection and 5G services.

The company’s portfolio includes optical networking systems and coherent optical technologies, routing and switching platforms, broadband access solutions, network management software and professional services.

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Bank of America expects Ciena Corporation (NYSE:CIEN), the optical networking equipment maker, to deliver revenue growth of 35% to 40% in the calendar year 2026 as demand for artificial intelligence infrastructure outstrips available supply.

The bank maintains a 'buy' rating on the shares with a $550 price target, supported by rising cloud-provider spending and expanding opportunities to connect data centres.

Bank of America forecasts revenue from direct cloud customers will grow 69% at the midpoint of its estimates, making this growth the main driver of Ciena's expected expansion.

The bank identifies Ciena's Reconfigurable Line System (RLS) and Waveserver platforms as key growth engines, as customers invest in optical infrastructure to move increasing volumes of data between cloud facilities.

Pluggable optical transceivers, which convert electrical signals into light for data transmission, are also expected to grow threefold year on year, while Meta's data centre out-of-band management business could generate $200 million in the calendar year 2026.

The outlook depends partly on Ciena's ability to deliver equipment into a market where supply constraints continue to limit shipments despite strong customer demand.

Bank of America also sees opportunities to sustain annual growth above 30% over the longer term through Hyper-Rail, connections between geographically distributed data centre clusters and new customers adopting data centre out-of-band management solutions.

These opportunities could expand Ciena's addressable market beyond traditional telecommunications networks as cloud operators build infrastructure to support increasingly demanding AI workloads.

An expected backlog of more than $10 billion provides an additional buffer, giving Ciena greater visibility into future demand and potential revenue conversion.

The bank's assessment points to a business with substantial growth opportunities, although the pace of expansion will depend on supply availability and the successful delivery of new customer programmes.

The sharp moves could partly be a reaction to recent cautious commentary on AI spending.

Key Takeaways Q3 Earnings Season Begins with Big BanksBond Yields Surge in U.S. & FranceCPI Inflation Report Due Wednesday
What happens across this Global Week Ahead?

The IMF-World Bank meetings take place in Bangkok, againstA backdrop of high energy costs and rising central bank rates, while The latest U.S. and China macro dataWall Street Q3 earnings, and Turbulent bond markets point to a packed week ahead
Next are Reuters’ five world market themes, re-ordered for equity traders—
 

(1) U.S. Q3 Earnings Season Kicks Off — with the Major Banks, of Course
It's the start of Q3 U.S. earnings season, and who better to kick things off than the banks?

Four of the six largest U.S. lenders, JPMorgan Chase (JPM - Free Report) , Goldman Sachs (GS - Free Report) , Citigroup (C - Free Report) and Wells Fargo (WFC - Free Report) , report on Tuesday, followed a day after by Morgan Stanley (MS - Free Report) and Bank of America (BAC - Free Report) .

Earnings are ‌expected to rise up to +20% relative to last year.

Still, the surge in Treasury yields to multi-decade highs has hurt shares — the KBW Bank Index is down around -13% from its peak in August.

Investors will be looking for signs that the recent spike in government borrowing costs may curb dealmaking and lending growth, as well as pressure funding costs across the industry.

(2) U.S. and French Government Bond Yields Keep Surging
Surging government borrowing costs are clearly luring some investors back to bonds as evidenced by the strong demand at the latest U.S. and Japanese auctions.

But do you really want to catch a falling knife?

That's the question for traders in the coming week as the bond selloff shows few signs of abating.

U.S. and French bond yields have hit fresh 24-year highs and market volatility is high.

The French-German 10-year bond yield spread, at around 136 basis points, was below 100 bps a month ago.

The speed and scale of the rise in the French risk premium is hurting Italian peers, the euro and European shares.

It's also led to some finger-pointing at the role of hedge funds — that fast-money group that has stepped up its presence in systemically important bond markets of late.

(3) On Wednesday, U.S. Consumer Price Inflation (CPI) Data for September Lands
A fresh look at U.S. inflation on Wednesday will be among the last key data released before the Federal Reserve decides whether to hike interest rates again to contain high prices.

The September CPI is set to show a 0.6% rise on a monthly basis. The core measure, excluding volatile energy and food components, is estimated to increase just 0.2%, according to a Reuters poll.

Thursday's Producer Price Index (PPI) numbers will further flesh out the inflation picture. Retail sales data is also out that day.

Core CPI for August rose at its fastest pace in four months, helping cement the Fed's first rate hike since 2023.

Bets on another hike when the Fed meets in late October have fallen back. A hot CPI report could change that.

(4) On Wednesday, Mainland China Macro Data Will Reveal Export Growth
Chinese data on Wednesday will show whether AI-related exports are still propping up an economy hobbled by anemic demand at home.

Overseas shipments from the world's second-largest economy have logged double-digit growth for ???four straight months on surging global demand for AI goods, electric vehicles, solar cells and lithium-ion batteries.

But a prolonged property slump has kept domestic consumption in the doldrums.

Exports are forecast to have jumped +25.3% year-on-year in September in dollar terms, according to a Reuters poll, up from +25% in August.

Imports are projected to show +23.5% growth versus +28.2% previously.

Separate figures the same day are expected to show continuing price pressures related to the Iran war.

The Producer Price Index is forecast to have risen to +4.4% in September from +3.8% the previous period, while consumer inflation may have edged up to +1.1% from +0.8%.

(5) The IMF and World Bank Annual Meetings Happen in Bangkok
The IMF and World Bank annual meetings go on tour to Bangkok next week with three themes front and center: growth, debt and geopolitics.

Market focus is on Tuesday's updated IMF World Economic Outlook, given the Iran war has already forced two cuts to its global GDP forecast this year.

IMF chief Kristalina Georgieva has signaled it won't make easy reading, given sky-high energy prices, record public debt and tetchy bond markets.

Fractured and fractious geopolitics, including conflicts in the Middle East and Ukraine, will feature prominently, as will how to regulate AI given an arms race between the US and China.

Senegal's recently announced debt rework plan is likely to get attention from IMF crisis watchers too, although they will have more than half an eye on whether France is dragging the Eurozone back in that direction as well.

Zacks #1 Rank (STRONG BUY) Stocks
This week, I picked three fresh Zacks #1 (STRONG BUY) large-cap stocks.

(1) Keysight Technologies (KEYS - Free Report) : This is a $375 a share tech growth stock, with a market cap of $64.3B.

It is found in the Zacks Electronics-Measuring Instruments industry. The stock holds a Zacks Value score of D, a Zacks Growth score of C, and a Zacks Momentum score of D.

F12M P/E: 33.3.

Image Source: Zacks Investment Research

Keysight Technologies is a provider of electronic design and test instrumentation systems.

Keysight's suite of connected car test solutions include Virtual Drive Test Toolset, which facilitates automakers to build virtual test routes in the lab by integrating network and channel emulation capabilities, and combining data captured in the field.

Moreover, the company is evolving its expertise in software test automation capabilities.

Meanwhile, KeysightCare aids customers with end-to-end scalable support model solution loaded with robust test and measurement know-how to reduce time-to-market and enhance efficiency in a cost-effective manner.

(2) Ciena (CIEN - Free Report) : This is a $426 a share Communications stock, with a market cap of $63.3B.

It is found in Zacks Communication Components industry. The stock holds a Zacks Value score of F, a Zacks Growth score of B, and a Zacks Momentum score of C.

F12M P/E: 62.3.

Image Source: Zacks Investment Research

Ciena Corp. is a leading provider of optical networking equipment, software and services.

Its reporting segments are: Networking Platforms, Platform Software & Services, Blue Planet Automation Software & Services, and Global Services.

The Networking Platforms segment includes networking solutions optimized for the convergence of coherent optical transport, Optical Transport Network switching and packet switching.

Its products include the 6500 packet-optical platform, the Waveserver family of products, 6500 Reconfigurable Line System, 5400 family of packet-optical platforms and coherent-optimized edge line system, the 3900 family of service delivery switches and service aggregation switches and the 5000 series of service aggregation platforms.

The Platform Software & Services segment provides domain control management, analytics data and planning tools.

Blue Planet is a comprehensive, cloud native and standards-based software portfolio that enables customers to realize their digital transformation.

(3) A.P. Moller-Maersk (AMKBY - Free Report) : This is an $18 a share global shipping stock, with a market cap of $58.2B.

It is found in the Zacks Transportation-Shipping industry. The stock holds a Zacks Value score of A, a Zacks Growth score of B, and a Zacks Momentum score of B.

F12M P/E: 7.3.

A.P. Moeller-Maersk A/S operates as a shipping company.

It operates container vessels, tankers, supply ships, special vessels, APM terminials and oil drilling rigs.

A.P. Moeller-Maersk A/S is headquartered in Copenhagen, Denmark.

Key Global Macro
Wednesday’s U.S. CPI data for SEP is among the key inflation reports this week.

On Sunday, the IMF World Bank meetings began in Bangkok.

On Tuesday, the Reserve Bank of Australia (RBA) meeting minutes come out, and Mainland China releases a raft of macro data. Among this, China’s CPI for SEP is reported. The consensus looks for +1.1% y/y, while the prior is +0.8% y/y.

On Wednesday, the U.S. CPI for SEP gets released early. The prior broad CPI was +3.4% y/y, while the core CPI was +2.4% y/y.

On Thursday, the U.S. PPI for SEP gets released. The prior AUG broad PPI was up +5.4% y/y, while the prior AUG core PPI was up +4.6% y/y.

On Friday, the Euro Area core and broad HICP data for SEP gets released. Look for core HICP to remain unchanged at +2.5% y/y. Broad HICP should also remain unchanged at +3.8% y/y.

Conclusion
On Oct. 7th, Zacks Research Director Sheraz Mian shared his Q3 earnings set-up.

Key points:

(1) The overall setup for the Q3 earnings season remains very favorable, with earnings growth expected to be in the double digits for the 8th consecutive quarter.

The growth momentum is broad-based.

15 of the 16 Zacks sectors are expected to enjoy positive earnings growth, and the outlook steadily improving.

(2) Total S&P500 earnings in Q3 are currently expected to increase +24.6% from the same period last year, on +11.5% higher revenues.

(3) The revisions trend remains positive, sustaining the favorable revisions trend that has been in place for a year now.

Since the start of Q3, earnings estimates have moved higher for half of the 16 Zacks sectors.

We are seeing a similar trend for Q4 — and full-year 2027, as well.

(4) Micron (MU - Free Report) and Nvidia (NVDA - Free Report) continue to be material contributors to the Info Tech sector’s growth picture.

Excluding Nvidia, Micron, and Alphabet (GOOGL - Free Report) , which enjoyed an outsized gain in the preceding period?

Q3 earnings for the rest of the Info Tech sector would be +20.7% (vs. +43.4% otherwise).

That’s all from me!

Best of luck, in trading & investing.

John Blank, PhD.
Zacks Chief Equity Strategist and Economist

Key Takeaways Ciena's Q3 fiscal 2026 revenue surged 37% to $1.67 billion, with adjusted operating margin hitting 22.5%.Optical networking revenue grew over 45%, while direct cloud provider revenue jumped more than 80% y/y.Ciena targets 30% annual revenue growth through fiscal 2029, but component constraints may persist.
Ciena Corporation (CIEN - Free Report) is benefiting from strong demand for optical networking solutions as artificial intelligence (AI), expanding data centers and rising network traffic drive investments in connectivity infrastructure. The company delivered record financial results in the third quarter of fiscal 2026, with revenues rising 37% year over year to $1.67 billion. Adjusted gross margin increased 450 basis points to 46.4%, while adjusted operating margin reached a record 22.5%, more than doubling from the year-ago quarter. Cost management, favorable product mix and pricing discipline supported the improvement.

Ciena's expanding optical networking and data center connectivity businesses are strengthening its growth and profitability prospects. Revenue from combined optical networks, including interconnects, grew more than 45% year over year. Routing and Switching and Waveserver systems each recorded growth of more than 55%, while interconnect revenue more than doubled. Direct cloud provider revenue increased more than 80%. The growing contribution of these offerings is supporting profitability, while next-generation products such as Hyper-Rail are expected to provide additional margin benefits as deployments scale.

The company is also strengthening its supply chain to address rising component demand. The company has secured long-term agreements for critical components through 2029, including incremental capacity to support growing customer requirements. It is expanding its supplier base and exploring alternative technologies to improve supply resilience. Although component availability remains a constraint on order fulfillment, these investments should help Ciena increase output and capitalize on its substantial backlog. Management expects supply and demand constraints to persist into 2028.

Pricing actions provide another potential source of margin support. Ciena has made progress in customer discussions on price increases across product lines, alongside payment terms, delivery commitments and capacity requirements. These measures aim to align customer demand with available supply while supporting profitability.

Ciena's long-term targets reinforce management's confidence in sustained growth and margin expansion. Recently, the company outlined fiscal 2029 targets, including approximately 30% revenue compound annual growth from fiscal 2026 through fiscal 2029, adjusted gross margin of approximately 50%, adjusted operating margin of 32-35% and free cash flow margin of approximately 20%.

However, achieving these targets will depend on securing sufficient component supplies and managing the investments required to expand capacity. Overall, strong demand, favorable product mix, pricing discipline and supply chain investments position Ciena to pursue further margin gains despite ongoing component constraints.

Taking a Look at CIEN’s CompetitorsCorning Incorporated (GLW - Free Report) is expanding its solar manufacturing footprint, but execution risks remain as operations scale. Growing AI infrastructure exposure supports growth but increases dependence on a few large customers. U.S.-China trade restrictions, tariffs and supply-chain disruptions could pressure margins, production efficiency and demand. For the third quarter, Corning expects core sales of $4.9-$5 billion, up approximately 16% year over year, and core earnings of 85-89 cents per share, reflecting roughly 28% growth. Under its upgraded Springboard Plan, the company targets a $20 billion annualized sales run rate by year-end 2026, $30 billion by 2028 and $40 billion by 2030.

Nokia (NOK - Free Report) continues to benefit from its broad portfolio spanning mobile networks, optical transport, IP routing, fixed broadband, software and services. The company continues to execute its long-term strategy while balancing attractive growth opportunities against persistent industry risks. AI and cloud demand are emerging as key growth drivers, especially in Network Infrastructure, while strong licensing performance and disciplined capital allocation continue to support its long-term growth. For 2026, Nokia expects comparable operating profit in the range of €2.1-€2.6 billion, reflecting a technical revision from the previous range following the reclassification of two businesses as discontinued operations.

CIEN Price Performance, Valuation and EstimatesShares of CIEN have gained 40.7% in the past month compared with the Communications - Components industry’s surge of 25%.

Image Source: Zacks Investment Research

CIEN trades at a forward 12-month price-to-earnings (P/E) ratio of 44.27, above the industry’s 38.33.

Image Source: Zacks Investment Research

The Zacks Consensus Estimate for CIEN’s earnings for fiscal 2026 has been revised upward over the past 60 days.

Image Source: Zacks Investment Research

Ciena currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Key Takeaways Corning is gaining from AI infrastructure demand, driving optical communications growth and stronger margins.Ciena's AI networking momentum lifted backlog to $8.5 B, with year-end backlog expected above $10 B. GLW targets $20B in annualized sales by 2026, while CIEN expects at least 30% revenue growth in 2027. The U.S. communication components industry has been benefiting from healthy demand trends driven by the fast-track 5G deployment and the transition to cloud and fiber networks. As both consumers and enterprises are using networks more extensively, there is tremendous demand for quality networking components.

The Zacks-defined Communication - Components industry is currently in the top 7% of the Zacks Industry Rank. Over the past year, the industry has provided a massive 169.4% returns, while its year-to-date return is 118.6%. Since it is ranked in the top half of the Zacks Ranked Industries, we expect it to outperform the market over the next three to six months.

Here, we recommend two bigwigs — Corning Inc. (GLW - Free Report) and Ciena Corp. (CIEN - Free Report) — from the communication components industry for investment. These stocks have flourished this year. Despite the rally, they have double-digit price upside left in the near term.

Each of our picks currently carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The chart below shows the price performance of our two picks year to date.

Image Source: Zacks Investment Research

Corning Inc.Corning entered the second half of 2026 with its growth outlook tied to AI infrastructure and optical connectivity. Revenue growth was primarily led by Optical Communications and Solar segments. Enterprise Networks sales jumped supported by accelerating demand for generative AI infrastructure. Core operating margin also expanded as higher volumes and improved execution strengthened profitability.

GLW continues to strengthen its competitive position through innovation across optical connectivity, advanced glass and semiconductor applications. The company recently launched Gorilla Glass Ceramic 3 and continues to see opportunities for advanced optics products tied to AI-driven data center build-outs and semiconductor manufacturing demand. GLW is expanding its Generative AI optical portfolio with multicore fiber and high-density connectivity solutions that improve network capacity and reduce installation complexity.

AI and Optical Communications MomentumEnterprise Networks drove the improvement as hyperscale customers expanded AI-related data center capacity. GLW announced multiyear agreements with Amazon.Com Inc. (AMZN - Free Report) and NVIDIA Corp. (NVDA - Free Report) , supporting further demand for optical fiber, cable and connectivity products. The NVDA partnership plans to increase U.S. optical connectivity manufacturing capacity tenfold and expand domestic fiber production capacity by more than 50%.

Strong Guidance For the third quarter, management expects core sales between $4.9 billion and $5 billion, representing approximately 16% year-over-year growth. Core earnings are projected between 85 cents and 89 cents per share, implying growth of roughly 28%.

Corning continues to target an annualized sales run rate of $20 billion by the end of 2026 under its upgraded Springboard Plan. The company also aims to reach $30 billion by the end of 2028 and $40 billion by the end of 2030, supported by AI infrastructure, solar expansion and deeper customer partnerships.

Solid Estimate RevisionsCorning has an expected revenue and earnings growth rate of 16% and 30.2%, respectively, for the current year. The Zacks Consensus Estimate for the current year’s earnings has improved 0.3% over the last 30 days. 

GLW has an expected revenue and earnings growth rate of 18% and 30.7%, respectively, for the next year. The Zacks Consensus Estimate for next year’s earnings has improved 0.2% over the last seven days.

Image Source: Zacks Investment Research

Robust Price Upside PotentialThe short-term average price target of brokerage firms represents an increase of 14% from the last closing price of $163.25. The brokerage target price is currently in the range of $129-$238. This indicates a maximum upside of 45.8% and a downside of 21%.

Image Source: Zacks Investment Research

Ciena Corp.Zacks Rank #1 Ciena is witnessing encouraging demand trends as AI applications drive higher network traffic and bandwidth consumption across cloud and service provider environments. Customers are prioritizing investments in network infrastructure to support AI model training, data ingestion and inference workloads.

CIEN continues to expect its addressable market to reach roughly $50 billion by 2029 as growth extends from traditional WAN into data center connectivity. Fiscal third-quarter 2026 backlog rose to $8.5 billion and is expected to exceed $10 billion at year-end.

Expanding Data Center Connectivity OpportunityCiena's revenues are primarily generated from packet optical transport, switching products, integrated networks and software platforms. The company continues to diversify its footprint in data center connectivity and AI networking infrastructure. In the last reported quarter, direct cloud provider revenue rose 82% year over year and represented 53% of sales, while interconnects more than doubled. 

WaveLogic 6 Nano 800ZR shipments more than doubled sequentially, and CIEN received Vesta sample orders from several anchor customers. CPX revenue is expected to begin in 2027 and ramp in 2028. These developments broaden Ciena's reach across optical systems, modules and components.

Strong Guidance For fourth-quarter fiscal 2026, CIEN expects revenue of $1.75 billion (+/- $50 million). Adjusted gross margin is projected at 45% (+/- 50 bps), and adjusted operating expenses are expected to be $415 million (+/- $10 million). Adjusted operating margin is forecast at 20% (+/- 50 bps).

Ciena raised fiscal 2026 revenue guidance to $6.42 billion (+/- $50 million), implying 35% year-over-year growth at the midpoint. For fiscal 2027, management’s early view indicates at least 30% revenue growth, an adjusted gross margin of 45-46%, and an adjusted operating margin of 25-27%. 

Solid Estimate RevisionsCiena has an expected revenue and earnings growth rate of 34.6% and more than 100%, respectively, for the current year (ending October 2026). The Zacks Consensus Estimate for the current year’s earnings has improved 0.6% over the last 30 days. 

CIEN has an expected revenue and earnings growth rate of 18% and 30.7%, respectively, for the next year. The Zacks Consensus Estimate for next year’s earnings has improved 0.2% over the last seven days.

Image Source: Zacks Investment Research

Robust Price Upside PotentialThe short-term average price target of brokerage firms represents an increase of 17.7% from the last closing price of $446.45. The brokerage target price is currently in the range of $347-$660. This indicates a maximum upside of 47.8% and a downside of 22.3%.

Image Source: Zacks Investment Research

For Immediate ReleaseChicago, IL – October 7, 2026 – Today, Zacks Equity as Ciena Corp. (CIEN - Free Report) , Viavi Solutions Inc. (VIAV - Free Report) and Ooma, Inc. (OOMA - Free Report)

Industry: Communications

Link: https://www.zacks.com/commentary/3001086/3-communication-stocks-likely-to-gain-from-industry-tailwinds

The Zacks Communication - Components industry is likely to benefit from strong demand, driven by fast-track 5G deployment, increasing digitalization, expanding IoT adoption, and the seamless transition to cloud and fiber networks. However, elevated customer inventory levels, high capital expenditure for infrastructure upgrades, margin erosion, volatility in oil prices and geopolitical conflicts have dented the industry’s profitability.

Despite short-term setbacks, Ciena Corp., Viavi Solutions Inc. and Ooma, Inc.  are likely to gain in the long run as the demand for scalable infrastructure for seamless connectivity rises with the widespread proliferation of IoT, accelerated 5G rollout and fiber densification.

Industry DescriptionThe Zacks Communication - Components industry primarily comprises companies that provide diverse telecom products and services to develop scalable network architecture, demand-driven video solutions, and broadband access equipment. These include various building blocks such as small cells, routers and antennas incorporated into equipment and facilities and subsequently utilized by service providers to build networks for end users. 

Their product portfolio encompasses optical and copper connectivity products, hybrid fiber-coaxial equipment, edge routers, metro Wi-Fi, storage and distribution equipment for cable TV operators, modems, Embedded Multimedia Terminal Adapter, gateways, set-top boxes, analog and digital microphones, audio processors, glass substrates for LCD TVs and notebooks, and ceramic substrates for mobile and laboratory filtration products.

What's Shaping the Future of the Communication Components Industry?Network Convergence:With operators moving toward converged or multi-use network structures, combining voice, video and data communications into a single network, the industry is increasingly developing solutions with steady R&D investments to support wireline and wireless network convergence. These investments are likely to help minimize service delivery costs to adequately support broadband competition, and expand rural coverage and wireless densification. 

The industry players have enabled enterprises to rapidly scale communications functionalities to a vast range of applications and devices with easy-to-use software application programming interfaces. The firms support high user volumes without affecting deliverability and cost-effectively eliminate performance degradation.

Solid Growth Dynamics:As consumers and enterprises are using networks more extensively, there is tremendous demand for quality networking components. Additionally, data consumption patterns are changing, with a growing propensity to consume more video content, creating the need for faster data transfer. Since optical networks are more efficient and most existing networks are copper-based, the demand for optical solutions is strong. The industry firms offer several products focused on the data center, with a typical portfolio comprising optical fiber, hardware, cables and connectors, enabling them to meet the evolving customer requirements and bridge the digital divide across the United States.

Depleting Margins:Although higher infrastructure investments will eventually help minimize service delivery costs to support broadband competition and wireless densification, short-term profitability has largely been compromised. High technological obsolescence of most products has escalated operating costs, with steady investments in R&D. 

High customer inventory levels and a conservative approach toward placing orders for high-value items remain other headwinds. Moreover, high raw material prices due to the United States-Iran war, volatility in oil prices due to restrictions across the Strait of Hormuz and the consequent economic fallout have affected the operation schedule of various firms. 

Software-Driven Data-Centric Connectivity:The firms are likely to benefit from a software-driven, data-centric approach that helps customers build their cloud architecture and enhance the cloud experience. The industry participants are well-poised for growth in the data-driven cloud networking business with proactive platforms and predictive operations. Fiber networks are essential for the growing deployment of small cells that bring the network closer to the user and supplement macro networks to provide extensive coverage. 

Telecom service providers are increasingly leaning toward fiber optic cable to meet the burgeoning demand for cloud-based business data and video streaming services by individuals. Moreover, the fiber-optic cable network is vital for backhaul and last-mile local loops, which are required by wireless service providers to deploy the 5G network.

Zacks Industry Rank Indicates Bullish ProspectsThe Zacks Communication - Components industry is housed within the broader Zacks Computer and Technology  sector. It carries a Zacks Industry Rank #25, which places it among the top 10% of more than 250 Zacks industries.

The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates rosy prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one. 

Before we present a few communication component stocks that are well-positioned to outperform the market based on a strong earnings outlook, let us take a look at the industry’s recent stock market performance and valuation picture.

Industry Outperforms S&P 500, SectorThe Zacks Communication - Infrastructure industry has outperformed the S&P 500 composite and the broader Zacks Computer and Technology sector over the past year.

The industry has jumped a stellar 158.5% over this period compared with the S&P 500 and sector’s returns of 16% and 27.2%, respectively.

Industry's Current ValuationOn the basis of the trailing 12-month price-to-book (P/B), the industry is currently trading at 11.71 compared with the S&P 500’s 7.24X. It is also above the sector’s trailing 12-month P/B of 9.55X.

Over the past five years, the industry has traded as high as 15.19X, as low as 1.72X and at the median of 2.56X.

3 Communication Components Stocks to BuyCiena:Headquartered in Fulton, MD, the company is a leading provider of optical networking equipment, software and services. The stock has surged 154.3% over the past year. The Zacks Consensus Estimate for the current and next fiscal-year earnings has been revised 64.2% and 111.7% upward, respectively, over the past year. It has a long-term earnings growth expectation of 12% and delivered an earnings surprise of 17.6%, on average, in the trailing four quarters. 

Ciena is well-positioned to capitalize on the secular growth trend through its industry-leading coherent optical technology portfolio, particularly its WaveLogic platform. The company’s latest WaveLogic 6 Extreme solution supports transmission speeds of up to 1.6 terabits per second per wavelength, enabling cloud providers to scale network capacity efficiently while lowering power consumption and operating costs by maximizing existing fiber infrastructure without the need for extensive new fiber deployment. 

The company is also strengthening its position through software-driven networking solutions. Its Blue Planet automation platform helps operators simplify network management through AI-driven orchestration, analytics and automation capabilities. Ciena currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Viavi:Headquartered in Scottsdale, AZ, the company is a leading provider of network test, monitoring and service enablement solutions to diverse sectors across the globe. Viavi offers products with end-to-end network visibility and analytics that help build, test, certify, maintain and optimize complex physical and virtual networks. It delivered an earnings surprise of 14.3%, on average, in the trailing four quarters. The Zacks Consensus Estimate for the current and next fiscal-year earnings has been revised 165.6% and 61.7% upward, respectively, over the past year. 

The integration of Spirent’s high-speed Ethernet and network security testing assets continues to contribute to revenue growth, and broadens Viavi’s addressable market across enterprise and data center applications. Investments in PCIe 7.0 analysis capabilities and the launch of the CyberFlood CF1000 platform expand Viavi’s ability to validate AI inference workloads, encrypted traffic and next-generation data center infrastructure. 

It strengthens exposure to long-term AI-related network testing demand and supports continued growth in lab, production and field-testing solutions. This Zacks Rank #1 company has skyrocketed 267% in the past year.

Ooma:Headquartered in Sunnyvale, CA, the company offers cloud-based communications solutions, smart security and other connected services. Ooma’s smart software-as-a-service and unified-communications-as-a-service platforms serve as a hub for seamless communications and networking infrastructure applications. 

This Zacks Rank #1 firm delivered an earnings surprise of 12%, on average, in the trailing four quarters. The Zacks Consensus Estimate for the current and next fiscal-year earnings has been revised 44.2% and 8% upward, respectively, over the past year. It has a VGM Score of B. The stock has surged 81.6% in the past year.

Ooma’s focus on small business customers with simple, easy-to-use interfaces, which can be implemented quickly without IT support for an integrated business connectivity solution, is likely to drive healthy growth momentum. Its low-cost fixed line that reportedly offers faster emergency access services is expected to gain traction, while increased penetration within enterprise markets with customized offerings is expected to bear fruit. 

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Ciena (CIEN - Free Report) could be a solid choice for investors given the company's remarkably improving earnings outlook. While the stock has been a strong performer lately, this trend might continue since analysts are still raising their earnings estimates for the company.

The upward trend in estimate revisions for this developer of high-speed networking technology reflects growing optimism of analysts on its earnings prospects, which should get reflected in its stock price. After all, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements. Our stock rating tool -- the Zacks Rank -- has this insight at its core.

The five-grade Zacks Rank system, which ranges from a Zacks Rank #1 (Strong Buy) to a Zacks Rank #5 (Strong Sell), has an impressive externally-audited track record of outperformance, with Zacks #1 Ranked stocks generating an average annual return of +25% since 2008.

For Ciena, strong agreement among the covering analysts in revising earnings estimates upward has resulted in meaningful improvement in consensus estimates for the next quarter and full year.

The chart below shows the evolution of forward 12-month Zacks Consensus EPS estimate:

12 Month EPS

Current-Quarter Estimate RevisionsFor the current quarter, the company is expected to earn $2.05 per share, which is a change of +125.3% from the year-ago reported number.

The Zacks Consensus Estimate for Ciena has increased 14.66% over the last 30 days, as eight estimates have gone higher compared to no negative revisions.

Current-Year Estimate RevisionsFor the full year, the earnings estimate of $7.16 per share represents a change of +171.2% from the year-ago number.

The revisions trend for the current year also appears quite promising for Ciena, with nine estimates moving higher over the past month compared to no negative revisions. The consensus estimate has also received a boost over this time frame, increasing 10.68%.

Favorable Zacks RankThe promising estimate revisions have helped Ciena earn a Zacks Rank #1 (Strong Buy). The Zacks Rank is a tried-and-tested rating tool that helps investors effectively harness the power of earnings estimate revisions and make the right investment decision.

You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Our research shows that stocks with Zacks Rank #1 (Strong Buy) and 2 (Buy) significantly outperform the S&P 500.

Bottom LineWhile strong estimate revisions for Ciena have attracted decent investments and pushed the stock 19.4% higher over the past four weeks, further upside may still be left in the stock. So, you may consider adding it to your portfolio right away.

Bullish analyst calls piled up all week on one optical networking name, and now the stock is surging while its closest peers barely budge. Here is what the sell-side sees that the market is only starting to price in.

This post may contain links from our sponsors and affiliates, and Flywheel Publishing may receive compensation for actions taken through them.

A week of upbeat sell-side research on artificial intelligence (AI) networking is showing up in shares of Ciena (NYSE:CIEN | CIEN Price Prediction). Ciena stock is at $371.68, up 6% in early trading action. With the company itself quiet on news, the gain looks like the market catching up to a sell-side re-rating of Ciena stock that’s been building for a week.

Meanwhile, shares of fellow AI networking supplier Arista Networks (NYSE:ANET) are at $205.30, up 0.8%. Cisco Systems (NASDAQ:CSCO) stock is holding steady at $107.94, up 0.3%. That split leaves Ciena stock out in front of the networking group by a wide margin.

Tech names are stronger overall, with the iShares U.S. Technology ETF (NYSEARCA:IYW) at $265.36, up 0.2%. In contrast, the SPDR S&P 500 ETF Trust (NYSEARCA:SPY) is at $760.92, down 0.2%.

Evercore and Bernstein Make the Optical Case Evercore ISI analyst Amit Daryanani upgraded Ciena stock to Outperform late last week and raised the firm’s price target to $550. Daryanani’s argument is that an AI system runs only as fast as the chips inside it can exchange information across server racks and between data centers. When those connections fall behind, operators lose efficiency. They struggle to get full use of equipment they’ve already paid for, and Daryanani sees the opportunity in Ciena’s optical networking technology, which moves that traffic inside data centers and over longer distances.

Bernstein added to the momentum in the previous session, launching coverage of Ciena stock at Outperform as part of a positive rollout across the U.S. networking group. In that research, Bernstein told investors that networking and optical companies stand to be structural winners within AI infrastructure. Both calls point at the same bottleneck, and Ciena sells the optical transport that lets data centers, and the links between them, keep pace with the compute being installed around them.

Ciena’s Own Re-Rating Stands Apart From Its Peers Ciena stock is up 59% year to date, so the two analyst calls are landing on a name that has already run a long way. Evercore ISI’s higher price target arriving after that kind of climb raises the bar into strength, at a point when the market was already rewarding Ciena’s optical franchise.

Arista and Cisco shares are barely moving alongside Ciena stock, suggesting the market views the analyst calls as specific to Ciena. Extreme Networks (NASDAQ:EXTR), a smaller enterprise networking peer, rounds out the group.

Both firms point to a bottleneck supporting the bullish thesis, where every new rack of AI chips depends on faster optical links (we highlighted seven suppliers solving exactly these AI expansion bottlenecks, from power to networking, in a free report here). Much of that story may already be priced in after this year’s run, so any slowdown in AI infrastructure spending could weigh on the shares.

What to Watch Next It’s worth watching whether other firms follow Evercore ISI and Bernstein with bullish research on Ciena. Any pickup in Arista or Cisco shares toward Ciena’s pace could signal the buying is spreading across AI networking.

Anyone sizing up their exposure should adjust their holdings carefully given that Ciena stock is up 59% year to date and the latest price target raise arrived into strength. Keeping one’s Ciena stake moderate leaves room to benefit from the AI networking demand case both firms laid out while limiting the damage if momentum in CIEN stock fades.

Contact [email protected] for any questions or corrections.

Key Takeaways Ciena is partnering with CtrlS on five metro networks linking nine data centers across India.The networks are designed to deliver up to 100 Tb/s using Ciena's optical networking technology.Ciena reported $1.67 billion in fiscal Q3 revenue, up 37% year over year. As AI, cloud computing and hyperscale infrastructure expand, the ability to move enormous volumes of data quickly between facilities is becoming exceedingly important. Against this backdrop, CtrlS Datacenters is working with Ciena Corporation (CIEN - Free Report) to build five metro networks connecting nine data centers across Chennai, Hyderabad, Kolkata, New Delhi and Noida in India, with the networks designed to deliver up to 100 Tb/s of capacity. The deployment is part of a larger Managed Optical Fiber Network (MOFN) project for a leading hyperscaler.

Ciena highlights metro data center interconnect as a way to provide high-capacity, resilient connectivity between metro data centers, an architecture increasingly relevant as cloud and AI infrastructure becomes more distributed. Ciena has identified MOFN as a growing opportunity associated with distributed AI infrastructure. In its recent research, 96% of surveyed service providers expected MOFN services to generate revenue from connecting distributed AI compute clusters over the next three years. 

CtrlS is deploying Ciena's WaveLogic 5 Extreme (WL5e)-powered Waveserver platform alongside the 6500 Reconfigurable Line System (RLS). The Waveserver platform is designed for high-capacity optical connectivity, while the 6500 RLS provides the optical transport infrastructure needed to scale network capacity. Ciena's broader technology roadmap reflects the direction of the optical industry. The company recently highlighted 1.6 Tb/s coherent optical capabilities and other technologies designed to support AI-scale networking. Although this CtrlS deployment uses WL5e, the broader evolution of Ciena's coherent optics portfolio illustrates the industry's move toward increasingly high-capacity optical transport.

The project also fits Ciena's broader strategy around AI-driven network investment. Recently, it was selected by the Africa Coast to Europe cable system consortium to upgrade a roughly 17,000-km route connecting Western Europe, West Africa and South Africa. Additionally, FLAG deployed Ciena’s WL6e technology on its dedicated fiber pair in the ECHO trans-Pacific subsea cable system connecting Singapore, Guam and California. Ciena reported fiscal third-quarter revenue of $1.67 billion, up 37% year over year, and raised its fiscal 2026 revenue guidance to approximately $6.42 billion at the midpoint. The company has repeatedly pointed to AI-related connectivity demand, hyperscaler infrastructure and MOFN as structural drivers for its business.

How Does CIEN Stack Up in the Optical Networking Market?Corning Incorporated (GLW - Free Report) entered the second half of 2026 with its growth outlook tied to AI infrastructure and optical connectivity. Corning is also expanding its GenAI optical portfolio with multicore fiber and high-density connectivity solutions that improve network capacity and reduce installation complexity. It announced a long-term partnership with NVIDIA to expand U.S.-based optical connectivity manufacturing capacity by 10 times and increase domestic fiber production capacity by more than 50%. In September, Corning secured a multiyear, multibillion-dollar Verizon deal to supply more than 80 million miles of optical fiber through 2032, boosting revenue visibility and exposure to broadband and AI infrastructure demand.

Nokia (NOK - Free Report) continues to benefit from its broad portfolio spanning mobile networks, optical transport, IP routing, fixed broadband, software and services. Network Infrastructure delivered double-digit growth in second-quarter 2026, supported by continued momentum in Optical Networks and IP Networks. The planned divestiture of the Fixed Wireless Access CPE business simplifies the portfolio and allows greater investment in higher-growth opportunities such as AI networking and optical technologies. NOK is also expanding U.S. optical manufacturing capacity through investments in San Jose, PA and the planned acquisition of an additional semiconductor manufacturing site in Arizona. Management noted that supply constraints persist in optical networking, supporting longer-term customer orders.

CIEN Price Performance, Valuation and EstimatesShares of CIEN have gained 147.6% in the past year compared with the Communications - Components industry’s surge of 140.5%.

Image Source: Zacks Investment Research

CIEN trades at a forward 12-month price-to-earnings (P/E) ratio of 35.72, above the industry’s 35.31.

Image Source: Zacks Investment Research

The Zacks Consensus Estimate for CIEN’s earnings for fiscal 2026 has been revised upward over the past 60 days.

Image Source: Zacks Investment Research

Ciena currently has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Plenty of companies quietly making that boom possible have been overlooked, their shares languishing while the giants soar. Ciena Corporation NYSE: CIEN is a good example.

Key Takeaways Ciena expects to exit fiscal 2026 with over $10B in backlog, with demand extending into fiscal 2028.ADTRAN faces supply constraints, product-mix pressure and customer deployment timing issues.Ciena trades at 16.98X Price/Book versus ADTRAN's 4.54X, as their earnings estimates diverge. Ciena Corporation (CIEN - Free Report) and ADTRAN Holdings, Inc. (ADTN - Free Report) are benefiting from strong demand for optical networking solutions as AI, cloud and data-center investments drive the need for greater bandwidth and connectivity. Ciena is seeing accelerating demand across its optical portfolio and a significant increase in backlog, while ADTRAN continues to report healthy demand, particularly in optical networking and among hyperscaler, cloud, enterprise and government customers despite near-term supply constraints and customer-related timing issues.

Both companies are positioning their optical businesses to capture expanding opportunities tied to the continued buildout and modernization of AI-driven network infrastructure.

Let’s analyze their fundamentals, growth opportunities, market challenges and valuation to assess which one presents a stronger investment opportunity.

The Case for CIENCiena continues to benefit from the significant expansion in bandwidth and connectivity requirements being driven by AI-related data-center investment and rising network traffic. Management views the industry as being in the early stages of a multi-year network investment cycle, with high-speed, low-latency optical connectivity becoming increasingly important across traditional WAN, AI WAN and data-center architectures. Growing requirements for capacity, speed, density, reliability and lower power consumption are expanding the role of optical technology across these markets.

The company's technology leadership and broad optical portfolio continue to support strong customer adoption. WaveLogic 6 Extreme has ramped faster than the prior WaveLogic 5e generation, while RLS has established a leading position in disaggregated optical line systems. The company is also advancing Hyper-Rail for scale-across applications, ramping WaveLogic 5 Nano pluggable optics and progressing products such as Nitro and Vesta. Customer orders for Hyper-Rail are increasing, with initial standardization expected by the end of 2026 and material revenue anticipated as 2027 progresses.

Strong order activity, a growing backlog and long-term customer commitments are providing Ciena with substantial demand visibility. The company reported a book-to-bill ratio significantly above 1 and expects to exit fiscal 2026 with more than $10 billion of backlog, with demand extending well into fiscal 2028. Management also secured increased customer commitments extending through 2029, while noting that most of the expected year-end backlog carries customer request dates in 2027.

Ciena is also making progress on profitability through disciplined cost execution, favorable product mix, pricing actions and operating leverage. Management believes the company has reset its gross-margin baseline to the mid-40% range and sees scope for further expansion over time. Customer discussions have resulted in price increases ranging from high single digits to the high teens or low-20% range depending on the customer and product, while products such as DCOM and the upcoming Hyper-Rail platform are expected to support the margin profile as they scale.

However, supply availability weighs on Ciena's ability to convert demand into revenue. Management highlighted that revenue could be higher if additional supply were available and expects the industry to remain in a constrained supply-demand environment through 2027 and likely into 2028. Ciena is securing long-term component supply and investing upstream to expand capacity, but these actions require additional working-capital commitments and are expected to affect cash generation while the company works to bring supply more closely in line with its backlog.

The Case for ADTNADTRAN's performance continues to be affected by the timing of large customer deployment programs. A project timing adjustment by one customer weighed on Access & Aggregation revenue, although management stated that the customer remains committed to its deployment plans and characterized the change as a timing issue rather than a reduction in demand. Management also indicated that it did not expect an immediate rebound from that customer, leaving deployment timing as an ongoing factor affecting near-term revenue progression.

Supply constraints remain a significant operating challenge and have broadened beyond memory components. On the last earnings call, management highlighted that tight availability of optical amplifiers, certain silicon components and even some printed circuit boards has reduced ADTRAN's ability to respond to incremental demand and limited shipments of some higher-margin products. The company does not expect the tighter supply environment to disappear in the near term and said that better forecasting, greater order coverage and securing critical components will remain necessary to manage these conditions.

ADTRAN's margin performance is being pressured by unfavorable product and customer mix as well as higher product costs. Strong demand for pluggable products has contributed to the mix pressure because these products carry lower margins, while supply limitations have restricted shipments of certain higher-margin offerings. Management continues to target gross margins of 42-43% and is addressing the pressure through price increases, product redesigns designed to increase supplier flexibility and additional cost-reduction efforts in operating expenses and COGS-related areas.

The tighter procurement environment has also reduced ADTRAN's operating flexibility and increased the importance of forecasting and inventory management. Management said the company is adding inventories of selected key components to protect against future supply disruptions, even as older inventory continues to be worked down. It also noted that new component shortages can emerge even after existing issues are mitigated, making the supply environment difficult to predict, while the Subscriber Solutions business continues to exhibit greater demand-driven volatility.

Nevertheless, ADTRAN's optical networking business and customer diversification remain important growth drivers. Optical networking continues to benefit from demand for higher-capacity infrastructure, AI-driven networking expansion and secure connectivity, while enterprise, government and cloud revenue increased 47% year over year and hyperscaler revenue rose 97%, primarily driven by data-center interconnect activity. The company is also expanding hyperscaler engagements around MicroMux Quattro and LiteWave 800, while vendor replacement programs, network modernization, broadband expansion and increasing security requirements are creating additional opportunities across its service-provider markets.

In August, ADTRAN launched Mosaic One Fabric, enabling network operators to build and deploy custom AI agents and automated workflows. The platform aims to simplify network operations, enhance automation and help operators improve efficiency through AI-driven tools tailored to their specific requirements.

CIEN Shares vs. ADTNOver the past year, CIEN’s shares have soared 162.3% while ADTRAN stock has lost 24.6%.

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Valuation for CIEN & ADTNIn terms of Price/Book, CIEN shares are trading at 16.98X, higher than ADTN’s 4.54X.

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How the Zacks Consensus Estimate Compares for CIEN & ADTNAnalysts have revised their earnings estimates upwards for CIEN’s bottom line for the current year.

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For ADTN, there have been significant downward revisions for the current year.

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CIEN or ADTN: Which Stock to Bet on?CIEN sports a Zacks Rank #1 (Strong Buy) at present, while ADTN has a Zacks Rank #4 (Sell). Consequently, in terms of Zacks Rank, CIEN seems to be a better pick at the moment.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Ciena Corporation (NYSE:CIEN – Get Free Report) EVP Brodie Gage sold 1,200 shares of the firm’s stock in a transaction that occurred on Tuesday, September 15th. The shares were sold at an average price of $324.86, for a total value of $389,832.00. Following the completion of the sale, the executive vice president directly owned 37,207 shares of the company’s stock, valued at approximately $12,087,066.02. The trade was a 3.12% decrease in their ownership of the stock. The transaction was disclosed in a legal filing with the Securities & Exchange Commission, which is accessible through this hyperlink. The transaction was executed under a pre-arranged Rule 10b5-1 trading plan.

Ciena Stock Up 1.2% CIEN stock opened at $348.46 on Friday. The company has a current ratio of 3.80, a quick ratio of 3.17 and a debt-to-equity ratio of 1.06. The firm has a market capitalization of $49.42 billion, a PE ratio of 77.78, a PEG ratio of 4.85 and a beta of 1.30. Ciena Corporation has a 1-year low of $133.67 and a 1-year high of $637.51. The business’s 50 day simple moving average is $381.17 and its 200 day simple moving average is $437.79.

Ciena (NYSE:CIEN – Get Free Report) last posted its quarterly earnings results on Thursday, September 3rd. The communications equipment provider reported $2.11 earnings per share for the quarter, beating analysts’ consensus estimates of $1.73 by $0.38. The business had revenue of $1.67 billion for the quarter, compared to analysts’ expectations of $1.64 billion. Ciena had a return on equity of 25.33% and a net margin of 10.87%.The firm’s revenue for the quarter was up 37.0% on a year-over-year basis. During the same quarter in the prior year, the business earned $0.35 EPS. As a group, research analysts anticipate that Ciena Corporation will post 6 EPS for the current year.

Ciena News Roundup Here are the key news stories impacting Ciena this week: Positive Sentiment: Analysts reacted favorably to Ciena’s long-term growth targets. Barclays raised its price target to $548 and maintained an overweight rating, while Morgan Stanley lifted its target to $450. Needham and Rosenblatt reaffirmed bullish ratings with targets of $520 and $525, respectively. Ciena’s 2029 Outlook Draws Positive Analyst Reactions Positive Sentiment: Investors were encouraged by expectations for continued market-share gains, strong orders and an expanding backlog. Ciena’s technology position in optical networking could allow it to benefit from sustained AI-related data-center spending. Ciena Expects Continued Market Share Gains Positive Sentiment: The outlook builds on recent operating momentum. Ciena’s latest reported quarter included earnings of $2.11 per share versus the $1.73 consensus estimate, revenue of $1.67 billion and 37% year-over-year revenue growth. Neutral Sentiment: Although analyst targets generally imply additional upside, Morgan Stanley retained an equal-weight rating, and some commentary questioned whether Ciena’s pricing power is durable or partly related to temporary supply constraints. The stock also trades at a relatively demanding valuation, increasing execution risk. Is Ciena’s Pricing Power Real, Or Just a Parts Shortage? Negative Sentiment: CEO Gary B. Smith sold 2,952 shares for approximately $975,000, while EVP Brodie Gage sold 1,200 shares worth about $390,000. Both transactions were made under pre-arranged Rule 10b5-1 plans, limiting their bearish signal, but insider selling may create modest pressure following the rally. Hedge Funds Weigh In On Ciena A number of hedge funds have recently added to or reduced their stakes in CIEN. Corient Private Wealth LLC grew its holdings in shares of Ciena by 30,114.5% during the 4th quarter. Corient Private Wealth LLC now owns 2,870,677 shares of the communications equipment provider’s stock worth $671,365,000 after purchasing an additional 2,861,176 shares in the last quarter. Geode Capital Management LLC lifted its position in Ciena by 5.7% during the fourth quarter. Geode Capital Management LLC now owns 2,687,437 shares of the communications equipment provider’s stock worth $627,567,000 after purchasing an additional 145,948 shares during the period. Arrowstreet Capital Limited Partnership grew its stake in Ciena by 95.6% during the fourth quarter. Arrowstreet Capital Limited Partnership now owns 2,236,835 shares of the communications equipment provider’s stock worth $523,129,000 after buying an additional 1,092,980 shares in the last quarter. Capital World Investors grew its stake in Ciena by 1.7% during the fourth quarter. Capital World Investors now owns 1,868,881 shares of the communications equipment provider’s stock worth $437,075,000 after buying an additional 31,900 shares in the last quarter. Finally, Atreides Management LP increased its holdings in Ciena by 2.0% in the 4th quarter. Atreides Management LP now owns 1,428,230 shares of the communications equipment provider’s stock valued at $334,020,000 after buying an additional 27,466 shares during the period. Institutional investors own 91.99% of the company’s stock.

Analyst Upgrades and Downgrades A number of equities research analysts have recently issued reports on the company. Northland Securities set a $550.00 price objective on Ciena in a report on Thursday. Morgan Stanley restated a “positive” rating on shares of Ciena in a research note on Thursday. Citigroup reaffirmed a “buy” rating on shares of Ciena in a report on Friday, September 4th. UBS Group lowered their price objective on Ciena from $508.00 to $394.00 and set a “neutral” rating on the stock in a research report on Friday, September 4th. Finally, Bank of America reissued a “buy” rating on shares of Ciena in a report on Thursday, August 20th. One analyst has rated the stock with a Strong Buy rating, thirteen have issued a Buy rating and six have issued a Hold rating to the company. According to data from MarketBeat.com, Ciena presently has an average rating of “Moderate Buy” and an average price target of $483.47.

Check Out Our Latest Stock Analysis on Ciena

Ciena Company Profile (Get Free Report)

Ciena Corporation (NYSE: CIEN) is a networking technology company that provides hardware, software and services for communications networks. Its solutions help service providers, cloud companies, enterprises and government organizations build, manage and automate high-capacity networks that support broadband, cloud computing, data center interconnection and other digital services.

The company’s product portfolio includes optical networking systems, coherent optical technology, routers, switches, network control and automation software, and network management tools.

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3 AI Optical Networking Stocks Positioned for the Data Center BuildoutCiena NYSE: CIEN outlined financial objectives through fiscal 2029, including a target of approximately $14 billion in revenue, gross margins of about 50%, and operating margins of 32% to 35%, as the company expects demand for optical systems and interconnect products to continue outpacing industry supply.

Marc Graff, Ciena’s chief financial officer, said the company has made progress on its previously stated goals of improving gross margin, strengthening working capital management and applying a disciplined capital allocation strategy. He said gross margins have improved by more than 200 basis points year over year through cost reductions, pricing actions and product mix, resetting the company’s gross-margin base to “solidly mid-40s.”

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The AI Boom Has a Second Act—And It's Playing Out in OpticsGraff said Ciena has returned an average of more than 100% of free cash flow to shareholders over the past five years. Since 2024, revenue has grown at an average rate of 27% to the company’s current $6.4 billion fiscal 2026 guidance, while operating margin expanded by 1,100 basis points and earnings per share more than tripled, he said.

Supply Constraints Remain a Central Factor The CFO said orders, which Ciena views as a measure of unconstrained demand, doubled from 2024 to 2025 and are expected to increase by at least another 50% in 2026. Revenue, meanwhile, has risen by an average of 27% over the past two years amid supply constraints.

Beyond NVIDIA: Picks-and-Shovels AI Plays with Strong MomentumAs a result, Ciena expects backlog to reach $10 billion exiting fiscal 2026, after more than doubling from 2024 to 2025 and again from 2025 to 2026. Graff said the company does not expect supply and demand in the industry to reach balance before 2028.

For fiscal 2027, Ciena expects orders to grow by at least 50% and said it has secured enough supply to support at least 30% revenue growth. The company believes its supply arrangements can support a 30% annual revenue growth trend through 2029, producing its approximately $14 billion revenue target.

Graff said customer commitments and long-term supply agreements should allow Ciena’s revenue growth to exceed the company’s estimate for capital expenditure growth among the four largest hyperscalers. He also cited expected share gains and demand for products including RLS Hyper-Rail, WaveLogic 6 Extreme, coherent plugs, digital coherent modules, and future co-packaged optics and near-packaged optics products.

Margin and Investment Plans Ciena’s projected 50% gross margin in 2029 is based on multiyear pricing and term discussions with customers, lower unit costs as newer products reach higher volumes, engineering-led cost reductions, and a product mix with higher-value and potentially higher-margin offerings, according to Graff.

He said the company expects operating leverage from reusable optical engineering across multiple product lines and from broader relationships with large customers that operate across multiple segments and use cases. Ciena expects to invest between $2.5 billion and $3 billion in research and development over the next three years, including spending on next-generation WaveLogic technologies, new material systems and data-center products.

The company expects cash generated from operations to increase by roughly five times, Graff said, while net leverage could decline to zero or below. Ciena completed a convertible debt issuance in 2026 and has financial flexibility associated with a BB+ rating and roughly $20 billion of merger-and-acquisition capacity, according to Graff.

Ciena’s capital priorities remain organic investment first, followed by acquisitions and investments that can extend market leadership. Graff pointed to the company’s Nubis acquisition and its recently announced $200 million Ciena Ventures Fund. After those priorities, the company plans to return excess capital to shareholders and has committed to returning an average of at least 70% of free cash flow, absent major M&A activity.

New Reporting Segments Planned for Fiscal 2027 Ciena also said it will revise its reporting structure beginning in fiscal 2027, with the new segments first reported alongside first-quarter fiscal 2027 results. The company said the structure aligns with a $52 billion total addressable market projected for 2029.

Optical Systems: Includes line systems, WaveLogic and Waveserver systems, and the Navigator Network Control Suite. Ciena estimates a $21 billion 2029 addressable market growing at roughly an 18% compound annual rate. Interconnects: Includes coherent plugs, digital coherent modules, Nubis-derived Nitro and Vesta products, and optical and electrical components. Ciena estimates a $17 billion 2029 market and a 95% average annual growth rate through 2029. Global Services: Includes platform software services revenue. The company estimates a $2 billion 2029 market and 15% growth. Routing and Other: Combines non-digital-coherent-module routing and switching with Blue Planet. Ciena cited a $12 million 2029 market and a 2% compound annual growth rate. Overall, Ciena expects its three-year model to deliver a 30% revenue compound annual growth rate through 2029, a free-cash-flow margin of approximately 20%, operating investment of 15% to 18%, and an adjusted tax rate remaining in the 20% range.

About Ciena (NYSE:CIEN)Ciena Corporation NYSE: CIEN is a networking technology company that provides hardware, software and services for communications networks. Its solutions help service providers, cloud companies, enterprises and government organizations build, manage and automate high-capacity networks that support broadband, cloud computing, data center interconnection and other digital services.

The company's product portfolio includes optical networking systems, coherent optical technology, routers, switches, network control and automation software, and network management tools.

This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected].

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Ciena Corporation (CIEN) Discusses Financial Objectives, Margin Improvement and Demand Acceleration in Optical Systems September 15, 2026 8:00 PM EDT

Company Participants

Marc Graff - Senior VP & CFO

Presentation

Marc Graff
Senior VP & CFO

Hello, everyone, and thank you for joining. This is Marc Graff, Ciena's Chief Financial Officer. Today, I'll update you on the journey we've been on for the past few years, the amazing results we've achieved and our plans and financial objectives through 2029.

It was a little more than a year ago when Ciena laid out its near-term financial goals, namely structurally improving gross margins, driving towards world-class working capital and having a focused capital allocation strategy. I'm happy to report we've made excellent progress against all 3 of these objectives as they have been the core on delivering the fundamentals for Ciena's business model.

You've seen gross margins improve by over 200 basis points year-on-year through an aggressive cost reduction program, pricing actions and accretive product mix. These dynamics are sustainable and have reset our gross margin base to solidly mid-40s. Our working capital management has been a focus not only for financial hygiene, but also to power the growth of the company. We have the resources to fund our growth over the long term and to ensure that our capital is deployed to meet growing customer needs while reinforcing efficiencies such as cash conversion cycles.

Lastly, we have a disciplined capital allocation framework that focuses on investing in our current leadership portfolio as its top priority and maintaining an eye to inorganic opportunities as our second priority. Being the only pure-play optical systems and interconnect solution provider and a leader in the industry is the result of decades of deliberate investment decisions, trade-offs and execution to meet this extraordinary market opportunity.

Lastly, when

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[url="]Ciena[/url]Â Corporation (NYSE: CIEN), the global leader in high-speed connectivity, held its Investor Forum today at its R&D facility in Ottawa, Ontari

Ciena just bounced hard off a brutal month-long slide, and the buying looks less like optimism and more like investors finally catching up to a number management dropped weeks ago.

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Ciena (NYSE:CIEN | CIEN Price Prediction) stock is climbing early Wednesday, up 4% to $347.60. The advance is a rebound rather than a breakout, since Ciena stock is down 19% over the past month. No fresh company news landed this morning, and the market is re-pricing disclosures Ciena made at the start of September, when the company reported record quarterly results with revenue at the top end of guidance.

Arista Networks (NYSE:ANET) stock is up 2% to $197.25, a smaller gain that still keeps Ciena’s closest networking peer in green territory. Cisco Systems (NASDAQ:CSCO) stock is only slightly higher, up 0.4% to $110.49. Arista and Cisco are both riding the same AI infrastructure networking cycle that’s carrying Ciena, and the gap between today’s moves points to a name-specific catalyst rather than a group event.

The iShares U.S. Technology ETF (NYSEARCA:IYW) is up 0.6% to $251.53. The SPDR S&P 500 ETF Trust (NYSEARCA:SPY) is up 0.3% to $759.52. Technology and the broader market are both modestly higher, which means the session is permitting Ciena’s move rather than producing it.

Backlog Outlook Fuels the Rebound The clearest reason for the buying is a backlog picture Ciena management laid out on its September 3 earnings call. Ciena Chief Financial Officer Marc Graff said the company exited the quarter with $8.5 billion in backlog. Chief Executive Gary Smith said Ciena is projecting to exit its current fiscal year with more than $10 billion in backlog, and he added that one month into the current quarter Ciena was approaching a level of orders booked equal to the entirety of the prior quarter.

On the forward view, Graff said Ciena expects revenue to grow a minimum of 30% year over year in its next fiscal year, and management noted that the backlog extends beyond that period. Smith framed the demand as structural rather than cyclical, stating that Ciena remains “in the very early stages of a multi-year, highly durable network investment era” tied to AI data center buildout. High-speed optical connectivity, he added, has become a critical enabler of those investments.

A Re-Rating of Ciena’s Order Book Ciena’s gain today is repair work on a two-week-old story. Buyers appear to be paying for Ciena’s order book, since a backlog the company expects to keep growing through year end represents revenue Ciena has already won rather than demand it still has to compete for. The month-long slide made the setup possible, turning Wednesday’s move into recovery after a heavy drawdown.

The peer read backs this up. Arista’s more modest advance and Cisco’s near-flat move sit inside the same AI infrastructure demand cycle that carries Ciena, and neither is climbing anywhere near as much. That gap argues today’s action is specific to Ciena’s own backlog disclosures rather than a broad networking sector rotation, and it fits the pattern of a single name repairing recent losses rather than a group moving in step.

What to Watch Ciena stock has ground to make up before it recovers the highs it saw earlier this summer, and Wednesday’s advance is one session in what looks like a longer repair job. The next scheduled catalyst is Ciena’s Q4 FY2026 report in December, which will bring an updated fiscal 2027 outlook and a check on whether the backlog trajectory Smith described continues to build across the fourth quarter.

For now, investors can watch for signs that today’s advance holds through the close, since a fade back into red would say more about positioning than the underlying story around Ciena. Sizing your Ciena exposure with the recent volatility in mind is sensible risk management, given how sharply the stock has moved in both directions since the summer.

Contact [email protected] for any questions or corrections.

David Moadel

David Moadel is financial writer specializing in stocks, ETFs, options, precious metals, and Bitcoin. David has written well over 1,000 articles for leading online publications, helping investors understand markets, income strategies, and risk.His work has appeared in The Motley Fool, InvestorPlace, U.S. News & World Report, TipRanks, ValueWalk, Benzinga, Market Realist, TalkMarkets, Finmasters, 24/7 Wall St., and others.With a master’s degree in education, David has taught at the elementary, high school, and college levels. That teaching background shapes his writing style: clear, educational, and practical. David has also built a loyal social-media audience by providing trustworthy financial content on YouTube, X/Twitter, and StockTwits.

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Artificial intelligence (AI) data centers process enormous amounts of data quickly to perform complex calculations, ensuring that AI workloads such as model training and inference run seamlessly.

The rapid movement of data in AI data center clusters has created a massive shortage in the memory market. That's because memory chips help in feeding huge data sets quickly to AI accelerator chips, which then perform calculations on that data. However, the need to quickly transport large data sets is also creating a shortage in the optical networking market.

Optical networks are known for their higher bandwidth and speed, which is why they are in great demand in AI data centers. Goldman Sachs notes that the optical networking market could be worth a whopping $154 billion in 2028, a significant jump from $15 billion this year. Ciena (CIEN +3.70%) is already benefiting from this market's phenomenal growth, evidenced by its latest quarterly report.

The good news for investors is that Ciena stock is down almost 50% from the 52-week high it reached just over three months ago. This gives savvy investors a great opportunity to buy a fast-growing company at a relatively attractive valuation. Let's see why buying this AI stock following its recent slide could be a smart long-term move.

Image source: The Motley Fool.

Ciena is experiencing stunning earnings growthCiena released its fiscal 2026 third-quarter results (for the three months ended Aug. 1) on Sept. 3. The company's revenue jumped 37% year over year to $1.67 billion. What's more, its operating margin more than doubled year over year to 22.5%, suggesting that it is benefiting from the favorable pricing environment in optical networking.

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As a result, Ciena's non-GAAP earnings per share more than tripled year over year last quarter to $2.11. However, the stock crashed following its quarterly report. Ciena expects a non-GAAP gross margin of 45% in the current quarter, which would be slightly lower than the 46.4% figure it reported in fiscal Q2. This seems to have spooked investors.

However, there is no reason to panic as Ciena's margin guidance points toward an improvement over the year-ago period's reading of 43.4%. Also, management expects a non-GAAP operating margin of 20% in the current quarter, a significant jump from 13.2% in the year-ago period. Given that Ciena forecasts a 30% year-over-year increase in revenue in the current quarter to $1.75 billion, I won't be surprised to see a sharp spike in the company's bottom line once again.

More importantly, there is ample evidence suggesting that Ciena's phenomenal growth will continue. CFO Marc Graff remarked on the latest earnings call:

One month into the quarter, we have booked nearly as much demand as all of Q3 and expect to end the year with more than $10 billion in backlog.Ciena is on track to end fiscal 2026 with $6.4 billion in revenue. Its sizable backlog and the pace of orders suggest that it can sustain its impressive growth. Additionally, Ciena's margin should increase in the future thanks to a higher average selling price (ASP). Goldman Sachs notes that the gross margin of optical component suppliers could grow to a range of 48% to 55% due to a favorable product mix.

Even Ciena management believes that the company can "expand gross margins further over the next few years." So, the outstanding earnings growth the company has been clocking is likely to continue over the long run, setting the stage for this tech stock to regain its mojo and head higher.

The stock could rally once againCiena's earnings are on track to increase by 172% in fiscal 2026 from last year's level of $2.64 per share. The company is projected to keep growing at a healthy pace over the next couple of years as well.

CIEN EPS Estimates for Current Fiscal Year data by YCharts

However, emerging supply constraints in optical networking, driven by robust demand from AI data centers, could drive a larger jump in Ciena's earnings. This probably explains why analysts expect its earnings per share (EPS) to grow at a 70% annual rate over the long run.

CIEN EPS LT Growth Estimates data by YCharts

Assuming Ciena's earnings increase by 70% in fiscal 2029 and 2030 from fiscal 2028's projected earnings of $16.64 per share, its EPS could hit $48.08 in fiscal 2030 (which will coincide with the majority of calendar 2030). If Ciena trades at even 30 times earnings at that time, a discount to its forward earnings multiple of 40, its stock price will increase to $1,442. That suggests potential upside of 350%, making Ciena an ideal growth stock to buy on the dip as it can skyrocket over the long run.

FULTON, Md.--(BUSINESS WIRE)--Ciena Corporation (NYSE: CIEN) today announced the launch of Ciena Ventures, a new corporate venture capital (CVC) program designed to complement the company's organic innovation investments and strategic acquisitions. With an initial commitment of $200 million, Ciena Ventures will invest in early-stage companies and technology-focused venture funds that align with Ciena's strategic focus areas and help advance the future of networking and connectivity in the AI era.

Key Takeaways Ciena expects fiscal 2027 revenue to grow at least 30% to $8.3B-$8.4B, with 25%-27% operating margin.CIEN trades at 35.7X forward earnings versus its 25.5X five-year median, leaving less room for setbacks.Two cloud providers generated 41.7% of Ciena's Q3 revenue, while direct cloud sales made up 53% of sales. Ciena Corporation (CIEN - Free Report) is entering fiscal 2027 with a growth outlook few networking peers can match. Management expects at least 30% revenue growth as AI-driven bandwidth demand expands across cloud and data-center networks.

The question is valuation. CIEN trades well above its own five-year median, so the investment case depends on whether earnings leverage and sustained hyperscaler spending can offset supply and concentration risks.

Ciena's 2027 Growth Case Is Hard to IgnoreManagement expects fiscal 2027 revenues to grow at least 30% to between $8.3 billion and $8.4 billion. Adjusted gross margin is projected at 45%-46%, while adjusted operating margin is expected to reach 25%-27%.

Cisco Systems, Inc. (CSCO - Free Report) reported $9.3 billion of fiscal 2026 AI infrastructure orders from hyperscalers and expects $7.5 billion of AI infrastructure revenues in fiscal 2027. Hewlett Packard Enterprise Company (HPE - Free Report) reported fiscal third-quarter 2026 Cloud & AI revenues of $9 billion, up 25.4%, while AI systems orders rose more than 30% sequentially to $2.4 billion.

Ciena's Premium Multiple Demands ExecutionCiena trades at 35.7X forward 12-month earnings, versus its five-year median of 25.5X. That gap means investors are paying a materially higher multiple than the stock has typically commanded over the past five years.

The multiple is slightly below the Zacks sub-industry's 36.3X, but well above the Zacks Computer and Technology sector's 20.4X and the S&P 500's 19.7X. The premium leaves less room for execution setbacks.

CIEN's Supply Commitments Add Cash-Flow RiskCiena has secured supply of certain key components through 2029, but the arrangements require upstream investment. Management expects related disbursements to reduce fiscal fourth-quarter 2026 operating cash flow.

Purchase orders totaled $3.3 billion as of Aug. 1, 2026, with only a portion firm and non-cancelable. Nine-month inventory excess and obsolescence provisions were $72.4 million, adding working-capital and execution risk if demand shifts.

Image Source: Zacks Investment Research

Ciena's Cloud Mix Raises Concentration StakesDirect cloud-provider revenues represented 53% of fiscal third-quarter sales, while two cloud providers generated 41.7% of total revenues. Management also indicated that roughly half of the business now comes directly from hyperscalers.

The fiscal 2027 outlook assumes cloud providers continue AI infrastructure spending at levels consistent with recent commitments. That makes hyperscaler budgets and order timing important variables for delivering the projected growth.

CIEN's Factor Scores Favor Growth Over ValueCiena's growth and earnings outlook is favorable, but the premium multiple means investors must weigh that upside against supply and customer-concentration risk. The shares are better aligned with investors willing to accept execution volatility than with those seeking a clear value entry.

The stock currently carries a Zacks Rank #1 (Strong Buy), reflecting favorable earnings estimate-revision trends over the one- to three-month horizon. Its Momentum Score of A and Growth Score of B also indicate favorable momentum and growth characteristics.

The Value Score of F points to a weaker value profile, while the VGM Score of C is less favorable than an A or B composite reading. That mix supports a constructive near-term view without removing the need for valuation discipline. You can see the complete list of today’s Zacks Rank #1 stocks here.

Key Takeaways Ciena's Q3 revenue rose 37% to $1.67B, while adjusted EPS jumped 215% to $2.11.Backlog hit $8.5B and is expected to top $10B, covering most of Ciena's fiscal 2027 revenue guide.CIEN sees fiscal 2027 revenue of at least $8.3B-$8.4B, but supply constraints may persist through 2028. Ciena Corporation (CIEN - Free Report) has put concrete targets behind the surge in AI-related networking demand. Fiscal third-quarter results showed faster growth, expanding cloud exposure and improving profitability as customers added optical capacity.

The next test is conversion. Backlog and multiyear customer commitments support visibility, but component availability and manufacturing capacity will help determine how much demand becomes revenue in fiscal 2027.

Ciena's Q3 Results Set the 2027 BaselineFiscal third-quarter revenues increased 37% year over year to $1.67 billion. Adjusted earnings rose 215% to $2.11 per share, while adjusted operating margin reached 22.5%, up from 10.7% a year earlier.

Direct cloud-provider revenues represented 53% of quarterly sales and jumped 82% year over year. That mix underscores how hyperscaler spending is becoming more important to Ciena's growth trajectory.

CIEN's 2027 Guide Points to Another Step UpCiena expects fiscal 2027 revenues to grow at least 30%, following projected fiscal 2026 growth of 35% at the midpoint of its $6.42 billion revenue guidance. Management sees fiscal 2027 revenues reaching at least $8.3 billion to $8.4 billion.

Profitability is expected to scale with that growth. Ciena projects an adjusted gross margin of 45%-46% and an adjusted operating margin of 25%-27%, which would extend the operating leverage evident in the latest quarter.

Ciena's Backlog Extends Visibility Into 2029Backlog reached $8.5 billion at the end of the fiscal third quarter and is expected to exceed $10 billion at fiscal year-end. Ciena has also secured increased customer commitments that extend through 2029.

The timing matters for the 2027 framework. Management said the vast majority of the expected year-end backlog carries customer-request dates in fiscal 2027 and covers most of the company's revenue guide for that year.

CIEN's Optical Products Are Broadening the AI BetRLS and Waveserver revenues each increased more than 55% year over year, while pluggables revenues more than doubled. WaveLogic 6 Nano 800ZR shipments more than doubled sequentially, and Ciena secured a second multi-rail win for high-density photonic infrastructure.

The broader market is showing similar AI networking investment. Cisco Systems, Inc. (CSCO - Free Report) took $9.3 billion of AI infrastructure orders from hyperscalers in fiscal 2026 and expects $7.5 billion of related revenue in fiscal 2027. Lumentum Holdings Inc. (LITE - Free Report) reported $1.01 billion of fiscal fourth-quarter 2026 revenues while highlighting advancing 1.6T cloud-module adoption as AI bandwidth requirements rise.

Ciena's Capacity Limits Could Shape the RampDemand remains ahead of available supply. Management does not expect the constrained supply-demand balance to normalize before 2028, making component availability and manufacturing expansion central to the pace of fiscal 2027 growth.

Ciena has secured certain key components through 2029 and is investing upstream to increase capacity. Those agreements strengthen supply visibility but are expected to reduce fiscal fourth-quarter 2026 cash from operations as related investments are disbursed.

CIEN's Growth and Momentum Scores Back the ThemeThe bottom line is that Ciena's 2027 guide gives the AI optical theme a measurable financial target. Backlog and product demand support the growth case, while supply constraints remain an important limit on how quickly the company can convert that demand.

CIEN currently carries a Zacks Rank #1 (Strong Buy). The rank reflects favorable earnings estimate-revision trends over the one- to three-month horizon, while a Growth Score of B and Momentum Score of A indicate favorable growth and momentum characteristics.

The Value Score of F signals a weaker value profile, and the VGM Score of C provides a more mixed composite reading. Those scores keep valuation discipline relevant even as Ciena's operating outlook and AI-related demand remain favorable. You can see the complete list of today’s Zacks Rank #1 stocks here.

Ciena Corp. presents a textbook asymmetric buying opportunity after a post-earnings sell-off driven by expectations mismatch, not fundamentals. Ciena expects to exit FY26 with >$10B, which implies >17-18% sequential acceleration, the sharpest q/q growth jump in 4 quarters, setting the stage for strong revenue growth surprises next year. Plus, price hikes across product lines and a 50 bps margin expansion are expected, signaling strong pricing power amidst a robust demand environment for Ciena.

Growth investors focus on stocks that are seeing above-average financial growth, as this feature helps these securities garner the market's attention and deliver solid returns. But finding a growth stock that can live up to its true potential can be a tough task.

By their very nature, these stocks carry above-average risk and volatility. Moreover, if a company's growth story is over or nearing its end, betting on it could lead to significant loss.

However, the task of finding cutting-edge growth stocks is made easy with the help of the Zacks Growth Style Score (part of the Zacks Style Scores system), which looks beyond the traditional growth attributes to analyze a company's real growth prospects.

Our proprietary system currently recommends Ciena (CIEN - Free Report) as one such stock. This company not only has a favorable Growth Score, but also carries a top Zacks Rank.

Research shows that stocks carrying the best growth features consistently beat the market. And for stocks that have a combination of a Growth Score of A or B and a Zacks Rank #1 (Strong Buy) or 2 (Buy), returns are even better.

While there are numerous reasons why the stock of this developer of high-speed networking technology is a great growth pick right now, we have highlighted three of the most important factors below:

Earnings GrowthArguably nothing is more important than earnings growth, as surging profit levels is what most investors are after. And for growth investors, double-digit earnings growth is definitely preferable, and often an indication of strong prospects (and stock price gains) for the company under consideration.

While the historical EPS growth rate for Ciena is 1.2%, investors should actually focus on the projected growth. The company's EPS is expected to grow 150.7% this year, crushing the industry average, which calls for EPS growth of 36.6%.

Impressive Asset Utilization RatioGrowth investors often overlook asset utilization ratio, also known as sales-to-total-assets (S/TA) ratio, but it is an important feature of a real growth stock. This metric exhibits how efficiently a firm is utilizing its assets to generate sales.

Right now, Ciena has an S/TA ratio of 0.93, which means that the company gets $0.93 in sales for each dollar in assets. Comparing this to the industry average of 0.79, it can be said that the company is more efficient.

In addition to efficiency in generating sales, sales growth plays an important role. And Ciena is well positioned from a sales growth perspective too. The company's sales are expected to grow 34% this year versus the industry average of 0%.

Promising Earnings Estimate RevisionsSuperiority of a stock in terms of the metrics outlined above can be further validated by looking at the trend in earnings estimate revisions. A positive trend is of course favorable here. Empirical research shows that there is a strong correlation between trends in earnings estimate revisions and near-term stock price movements.

The current-year earnings estimates for Ciena have been revising upward. The Zacks Consensus Estimate for the current year has surged 0.5% over the past month.

Bottom LineWhile the overall earnings estimate revisions have made Ciena a Zacks Rank #2 stock, it has earned itself a Growth Score of A based on a number of factors, including the ones discussed above.

You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

This combination positions Ciena well for outperformance, so growth investors may want to bet on it.