No Slowdown in Optical Networks
The latest earnings season was a mixed bag in wide-area networking technology, with equipment providers Nokia (NYSE: NOK) and Ericsson (Nasdaq: ERIC) leading a depressing round of reports that reflect a slowdown in telco 5G and enterprise purchasing. But amid the bad news, one area – optical networking – seems to be on the upswing.
Equipment that uses lightwaves to interconnect datacenters, route metro traffic, and link continents on the ocean floor are in demand by carriers that are pulling back in other areas. For instance, even though Nokia saw its second-quarter revenue down 3% overall, its optical gear sales grew 13%. And Ciena (NYSE: CIEN) in its latest quarterly report saw optical platform growth of 25% year-over-year (y/y), which helped boost its revenues 19% y/y.
“Overall, we are very encouraged by conversations we're having with our customers, which are once again more strategic in nature, addressing how they can meet the growing demands of their networks,” said Ciena CEO Gary B. Smith on the company’s Q2 conference call. “And whilst we are mindful of macroeconomic uncertainty, fundamental demand for bandwidth persists as it has done consistently for many years, including through difficult macro conditions.”
According to Ciena management, the demand drivers for its optical solutions include growth in hyperscaler cloud networks, demand for automation, and AI. Ciena also acknowledges that 5G rollouts continue, though other sources indicate slowdowns in that area, especially in North America.
Metro Networks Cited
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