Ciena Corp Q3 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: George Notter - Wolfe Research LLC - Analyst : I guess I wanted to start by just asking some questions about sort of the industry structure and how you see that impacting your gross margin over time. Obviously, we've seen Infinera get consumed by Nokia. They're putting those two businesses together. A lot of the small or subscale guys in the industry have fallen by the wayside. I think to some degree and so it seems like the market environment should be much better for you guys. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 04, 2025 / 12:30PM, CIEN.N - Q3 2025 Ciena Corp Earnings Call How do you think about that as it relates to gross margin going forward? And do you see some opportunities to be more firm on price or even raise price as the market kind of coalesces around two vendors or even just Ciena?

Question: George Notter - Wolfe Research LLC - Analyst : In terms of value exchange, I assume you're talking about the potential for raising price or being firmer on price. Is that an option for you guys?

Question: Samik Chatterjee - JP Morgan - Analyst : Congrats on the strong outlook here. Maybe just to start with the neo-scaler opportunity. And sort of how you're thinking about how that evolves more in terms of sizing and timing as well? And how should we think about that contributing to your updated guide for fiscal '26? What are the sort of range of engagements you have on that front? And I have a follow-up as well. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 04, 2025 / 12:30PM, CIEN.N - Q3 2025 Ciena Corp Earnings Call

Question: Samik Chatterjee - JP Morgan - Analyst : Got it. And maybe for my follow-up, staying on this sort of guidance for about 17% growth similar to fiscal '25. How should I think about the composition if it's at all different compared to fiscal '25 because between Telcos, MOFN, cloud companies and then you have the incremental opportunities around NeoCloud and the component revenues that you've also talked about. Is there sort of a way to think about how maybe the composition of the growth is different from fiscal '25 even though the growth rate is pretty similar?

Question: Meta Marshall - Morgan Stanley - Analyst : Great. I just wanted to get a sense of -- you guys have been making efforts to increase utilization on some of the pluggable platforms and just kind of getting increased utilization out of that. Just wondered how much of the gross margin upside kind of came from mix relative to kind of initiatives on your own part? And then just if you could kind of identify on gross margins, just what was the upside from tariffs versus expectations?

Question: Roy Ruben - Stifel - Analyst : A question for Gary or Scott. I wanted to dig in a little more to scale across. You obviously talked about the GPU clusters last quarter, Gary. But this term scale across is popping up more and with NVIDIA talking about a dedicated switch for scalercross. I wonder if you could talk through the opportunity relative to coherent light and sort of your broader portfolio. Because it seems like you've been talking about coherent light for a while now, maybe mostly a year, but it seems like there's a bigger opportunity across these dedicated areas of infrastructure that are being discussed with this concept of scale across. Am I thinking about that right?

Question: Roy Ruben - Stifel - Analyst : Got it. And then just a quick follow-up on the essential broadband. I might have missed this. But in terms of -- I think you said you're going to continue to support the business. It sounds like there's a little bit of connectivity going on again, and we've got some does get related stuff happening here in North America. Is that something that you folks might be looking to potentially divest or just no more investment and just kind of run rate that out over however long the time period is?

Question: Simon Leopold - Raymond James - Analyst : The first thing I wanted to ask about is maybe a little bit of a kind of compare and contrast of this DCI opportunity because clearly, Ciena has been interconnecting data centers for years. But -- in this use case, you're talking about hundreds of millions to interconnect a pair of data centers. And so what I'm trying to get a better sense of here is sort of the distinct differences. And then what is sort of that market opportunity from here? And then just -- I'll give you my follow-up as well, which is the routing and switching business outperformed expectations this quarter. And when we pair this with the reduced focus on residential broadband, it would imply that there's some other aspect driving it. And I'd like to see if you could unpack -- is this more about the service provider activity in routing? Or is the strength this telemetry opportunity that Gary mentioned earlier in the call?

Question: Tim Savageaux - Northland Capital Markets - Analyst : My first question is on WaveLogic 6. Can you give us any color or details in terms of customer additions in the quarter and where you are from a total customer count or revenue impact? Or any kind of details you might be able to add there.

Question: Tim Savageaux - Northland Capital Markets - Analyst : And my follow-up is on the supply side. It doesn't really seem to be impacting you, but I wonder if you could comment on the overall component or supply-constrained situation?

Question: Amit J. Daryanani - Evercore ISI Institutional Equities - Analyst : I have two as well. I guess, maybe to start with -- Gary, given the comments you just have been making on the strength of your backlog and auto momentum, is it fair to think that your cloud revenue should actually accelerate in fiscal '26 versus '25. And if that's fair, then does that sort of imply that the rest of the business is going to decelerate next year? Or -- is that more a reflection of -- it's fairly early in the year and we're trying to be a bit more conservative versus now?

Question: Amit J. Daryanani - Evercore ISI Institutional Equities - Analyst : Got it. Super helpful. And then when I saw you listen, you talked about some of the big wins you've had on the AI side, especially the out-of-band networking management and the Ciena crosswind. It always sounds like you're starting to co-develop and co-design some of these solutions with your customers. Is that fair? And if that's the case then, should we think about Ciena having perhaps better market share which you've historically had going forward in this cloud opportunity?

Question: David Vogt - UBS Securities - Analyst : I have two as well and my line cut out if you answered this, I apologize. Can you -- Gary, can you help frame or mark the sort of contribution from the new DCOM opportunity maybe in the quarter and kind of how we should think about that in terms of scale relative to the broader broadly defined networking space out there? And then the second question is appreciate the early look into fiscal '26. Just trying to get a sense for how much of your confidence comes from where your backlog sit today, given how strong orders have been and how that converts into revenue or sort of an explanation is that maybe you think the continued growth in orders in 3Q and 4Q translates into continued strength in fiscal '26 as well? Like how much is coming from sustained order growth versus some of it coming from backlog rev rec at this point?

Question: David Vogt - UBS Securities - Analyst : And then overall fiscal 26 kind of color, if you can share? -- How much of your confidence comes from your elevated backlog strength in orders versus kind of sustained demand going into next year?

Question: Karl Ackerman - BNP Paribas Securities Corporation - Analyst : Yes. Given the doubling of the module business next year, you're growing backlog, higher-margin blades and now these two hyperscale industry-first wins that underscore your opportunity to partner with hyperscalers and perhaps GPU vendors earlier in the cycle as well as your prudent investment in broadband. I guess why can't operating margins attain the -- your long-term goal of 15% next year?

Question: Karl Ackerman - BNP Paribas Securities Corporation - Analyst : That does. Yes. And then if you -- just a quick follow-up. You spoke a lot about the revenue opportunity you see in '26, but you talk about whether your order visibility extends into fiscal '27 with these cloud providers that you spoke about today?

Question: Ryan Koontz - Needham & Company LLC - Analyst : To talk about your comments on vertical integration and supply chain and really at the optical layer here. Can you maybe expand on where you are there relative to your own supply versus commercial components and how you've been able to navigate the tight supply situation out there?

Question: Ryan Koontz - Needham & Company LLC - Analyst : That's helpful. If I can squeeze in one more around what you're seeing in share in North America because of the consolidation with Nokia and Infinera, are you -- do you feel that's been an opportunity of strength for you guys to build more share in US? Or do you feel it's your customers are spending more maybe than theirs traditionally -- are you seeing competitive takeaways? Or is it more just a spending shift where your customers are stronger?