Ciena Corporation

Ciena Corporation generated strong results in the quarter, with higher-than-expected revenue of $1.06 billion and an earnings beat. The company supplied more products than it anticipated since vendor component deliveries improved, especially towards the end of the quarter. The high volume of modems and a favorable product mix led to a great adjusted gross margin of 43.7%. Most of the shipments in the final quarter were modems with larger gross margins than usual. The amount of Q1’s adjusted operating expense, including OpEx from the acquisitions of the Tibit, was $329 million, representing their investments in the TAM expansion. Ciena’s Routing and Switching segment’s quarterly revenue climbed 39% year on year. The company also managed additional client wins in Q1 for its broadband access solution, integrating newly acquired technology from the new networks and Tibit Communications. In customer segments and geographies, non-telco revenue accounted for 40% of the total, reflecting a strong performance with the web scale in the quarter. Given these results, the team anticipates delivering an outsized year-over-year revenue increase in FY 2023. We give Ciena Corporation a ‘Buy’ rating with a revised target price.