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    CIEN
    Earnings call· Feb 2025(Q1 FY25)

    CIENA CORP CIEN

    Mar 11, 2025 Source

    Executive summary

    Ciena Q1 FY25 — Strong Orders Driven by Cloud and Service Provider Recovery

    Ciena delivered strong Q1 FY25 results, driven by robust order flow from both cloud and service providers, indicating a broad-based demand recovery and increasing confidence in the full-year outlook. The company is leveraging its leadership in high-speed connectivity and WaveLogic technology to capitalize on the rapid expansion of AI and cloud traffic, with significant traction in pluggables and next-gen optical solutions. Management expects continued momentum, particularly from cloud providers, to drive revenue towards the higher end of its FY25 guidance range.

    Highlights

    5

    • Q1 FY25 revenue reached $1.07 billion.

    • Adjusted gross margin for Q1 FY25 was 44.7%.

    • Adjusted EPS for Q1 FY25 was $0.64.

    • Orders for the quarter were more than double over the last year and well above revenue, with cloud orders comprising half of total orders.

    • Service Provider orders saw their strongest back-to-back quarters in over 2 years, with Q1 revenue up 14% year-over-year.

    Concerns

    2

    • Q1 FY25 adjusted gross margin of 44.7% included non-recurring benefits, with Q2 expected to return to the low 40% range.

    • Potential for disruption from U.S. and international tariffs and retaliatory actions, which are not included in the current guidance.

    Guidance & targets

    8
    CategoryTargetConfidence
    Q2 FY25 Revenue
    $1.05 billion to $1.13 billion
    high materiality
    High
    Q2 FY25 Adjusted Gross Margin
    low 40% range
    medium materiality
    High
    Q2 FY25 Adjusted Operating Expense
    approximately $355 million
    medium materiality
    High
    FY25 Revenue Growth
    toward the high end of our 8% to 11% guidance range
    high materiality
    High
    FY25 Adjusted Gross Margin
    42% to 44% range
    medium materiality
    High
    FY25 Adjusted Operating Expense
    average $350 million to $360 million per quarter
    medium materiality
    High
    Pluggables Revenue Growth
    at least double our revenue this year from fiscal 2024
    medium materiality
    High
    Share Repurchases
    approximately $330 million total
    medium materiality
    High

    Segment performance

    5
    SegmentRevenueYoYQoQMargin
    Service Providers
    Revenue increased year-over-year, with North America leading the way. Management believes inventory digestion impacts are largely complete, and positive spending dynamics will continue.
    		51% of total revenue14%——
    Cloud Providers
    Broadening and deepening relationships with cloud customers, with AI being a key driver for scaling and provisioning high-speed networks. Direct orders from cloud providers were half of overall orders in Q1.
    Cloud providers in top 10 customers: 5
    		32% of total revenue———
    Routing and Switching
    Sequential revenue growth, winning new customers for coherent routing solutions.
    Adaptive IP customers: 390 (total)Adaptive IP customers added in Q1: nearly 40
    		$93 million—17%—
    Platform Software and Services
    Another good quarter with year-over-year revenue growth.
    		—6%——
    Blue Planet
    Quarterly revenue nearly doubled year-over-year.
    		—nearly doubled——

    Operational metrics

    13
    Non-GAAP gross margin
    44.7%
    Q1 FY25

    Driven by a few non-recurring events, including software, and good performance on supply chain overheads.

    Non-GAAP operating expense
    $347 million
    Q1 FY25

    Reported adjusted operating expense for the quarter.

    Non-GAAP operating margin
    12.3%
    Q1 FY25

    Reported adjusted operating margin for the quarter.

    Adjusted Net Income
    $94 million
    Q1 FY25

    Reported adjusted net income for the quarter.

    Non-GAAP EPS
    $0.64
    Q1 FY25

    Reported adjusted EPS for the quarter.

    Adjusted EBITDA
    $156 million
    Q1 FY25

    Reported adjusted EBITDA for the quarter.

    Cash and investments balance
    $1.3 billion
    Q1 FY25

    Cash and investments balance at the end of the quarter.

    Shares repurchased
    1 million$79 million
    Q1 FY25

    Shares repurchased for $79 million during the first quarter.

    WaveLogic modems shipped
    more than 160,000
    cumulative

    Cumulative shipments of WaveLogic modems, confirming the portfolio as a foundation for network backbones.

    WaveLogic 6 Extreme customers
    2520 new customers added in Q1
    Q1 FY25

    Includes large service providers and major cloud provider customers planning to standardize on the technology.

    RLS Photonic platform customers
    nearly 100
    total

    Total customers for the intelligent line system.

    Waveserver customers
    more than 400
    total

    Total customers for the wavelength solution.

    Pluggables orders
    highest orders quarter yet
    Q1 FY25

    Strong demand for high-performing pluggables, taking share in a fast-growing market.

    Industry KPIs

    9
    MetricValueDetails
    Capital returnRepurchased 1 million shares for $79 millionshares / USD
    Backlog order bookBacklog continues to increase
    Book to bill ratiomuch greater than 1
    Orders backlog qualityStrongest back-to-back quarters of orders from service providers in over 2 years; orders for the quarter more than double over last year
    Product orders order growthOrders for the quarter more than double over the last year
    Ai cloud infrastructure ordersDirect orders from cloud providers were half of overall orders%
    Recurring software service revenuePlatform software and services revenue up 6% YoY; Blue Planet quarterly revenue nearly doubled YoY%
    Revenue mix by product customer typeService Provider: 51% of total revenue; Cloud Provider: 32% of total revenue; Routing and Switching: $93 million% / USD
    Design wins product cycle transitionsWaveLogic 6 Extreme: 25 customers; 1.6T coherent light solution for 2-20km campus applicationscustomers

    Orderbook & backlog

    4
    Total Ordersmore than double over the last yearQ1 FY25

    well above revenue

    Implies a book-to-bill ratio significantly greater than 1.

    Cloud Ordershalf of overall ordersQ1 FY25

    Direct orders from cloud providers.

    Service Provider Ordersstrongest back-to-back quartersQ1 FY25

    in over 2 years

    Backlogcontinues to increaseQ1 FY25

    Setting up for a strong second half of the fiscal year.

    Product announcements

    2
    ProductTypeDetails
    800-gig WaveLogic 6 Nano pluggable solutionlaunch
    1.6T coherent light solutionroadmap

    Risks & headwinds

    2
    Potential for disruption from U.S. and international tariffs

    not included in guidance

    Mitigation: Resilient supply chain with manufacturing in Mexico, Thailand, Canada, India; capability to move production; direct control over component sourcing; will work with customers for reimbursement.

    Gross margin pressure from product mixQ2 FY25 and potentially near-term

    Q1 adjusted gross margin of 44.7% included non-recurring events; Q2 expected to be in low 40% range

    Mitigation: Expects margins to improve over time as mix shifts back to traditional balance between line systems and capacity, aiming for mid-40s by FY27; cost reduction efforts on pluggables.

    What to watch in Q2 FY25

    5

    Cloud Provider Revenue Ramp

    next few quarters
    Current32% of total revenue in Q1 FY25
    Targetsignificant ramp

    Why it matters

    Cloud is expected to be the primary driver for Ciena to reach the high end of its FY25 revenue guidance.

    I would expect that to come on strong in the next few quarters⏳ from a revenue point of view. It absolutely will. And I think it will form the main elements around driving us to the high end of the range.

    Q&A highlights

    5

    Inquired about the linearity of order trends in the Cloud and Service Provider segments, specifically if there was any pause or shift in cloud customer strategy.

    Gary Smith stated that there was no linearity or pause in cloud order growth, describing it as an acceleration that has continued into Q2. He attributed this to machine-to-machine learning, global cloud traffic, and the need for high-bandwidth, low-latency solutions to connect data centers for AI monetization. Jim Moylan added that total orders were more than double last year, with cloud accounting for half.

    “We've seen very solid order growth really around accelerating demand across multiple cloud players. We saw no linearity at all around that. In fact, we're probably seeing an increase in demand, which has actually continued right now into Q2.”

    asked by Adrienne Colby · answered by Gary Smith

    2 min read6 chapters

    Detailed Narrative

    01

    Strong Q1 Performance and Demand Dynamics

    Ciena reported strong fiscal first quarter results with $1.07 billion in revenue, 44.7% adjusted gross margin, and $0.64 adjusted EPS. The quarter saw very strong order flow, with cloud providers accounting for half of overall orders and service providers recording their strongest back-to-back quarters of orders in over two years. This performance reflects balanced growth and momentum across all business segments, driven by the increasing demand for ultra-scalable, high-performance networks to support AI and cloud traffic.

    02

    Service Provider Recovery and MOFN Opportunities

    Service Provider revenue increased 14% year-over-year in Q1, comprising 51% of total revenue. Management believes inventory digestion impacts are largely complete, and service providers are reinvesting to scale their networks for anticipated cloud traffic and AI workloads. The MOFN (Multi-Operator Fiber Network) opportunity, where service providers build infrastructure for cloud providers, is expanding globally and is expected to grow from 10-15% to potentially 10-20% of the service provider business over the next 18 months.

    03

    Cloud Provider Momentum and AI-Driven Growth

    Cloud Provider revenue constituted 32% of total revenue in Q1, with five cloud providers among the top 10 customers. AI is identified as a key driver for scaling high-speed networks, leading to large, long-term investment plans from cloud providers. The company noted an acceleration in cloud demand, with Q2 starting 'super strong' for cloud providers, driven by machine-to-machine learning, global traffic increases, and the need to connect data centers for monetization.

    04

    WaveLogic Portfolio and Pluggables Traction

    Ciena's WaveLogic 6 Extreme gained 20 new customers in Q1, with over 160,000 WaveLogic modems shipped cumulatively. The company maintains a 2-year lead in 1.6 terabit WAN solutions. Pluggables saw their highest orders quarter yet, with revenue expected to at least double in FY25 from FY24. The 800-gig WaveLogic 6 Nano pluggable is on track for general availability in H1 CY25, with deployments later in CY25 for Metro DCI, and a 1.6T coherent light solution for campus applications is slated for 2026.

    05

    Supply Chain Resilience and Tariff Mitigation

    The company highlighted its resilient supply chain, with manufacturing capabilities in Mexico, Thailand, Canada, and India, allowing flexibility to mitigate potential tariff impact🌐s. Management stated they have direct control over component sourcing and test assets, enabling them to move production across locations. While tariffs are a fluid situation, Ciena plans to work with customers for reimbursement and will update on impacts when there is certainty.

    06

    Gross Margin Dynamics and Outlook

    Q1 adjusted gross margin of 44.7% benefited from unexpected non-recurring📎 events, including software. Q2 adjusted gross margin is guided to the low 40% range, with the full-year FY25 adjusted gross margin expected to be in the 42-44% range. The company anticipates gross margins to trend upwards over time⏳, reaching the mid-40s by FY27, as the mix shifts back to a more traditional balance between line systems and capacity additions.

    AI-generated summary of the company’s earnings call. Not investment advice.