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CIENA CORP (CIEN)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 FY25 revenue was $1.126B, up 23.6% YoY and 5.0% QoQ; adjusted EPS was $0.42 and GAAP EPS $0.06 .
  • Revenue beat consensus by ~$32.6M while adjusted EPS missed by ~$0.10 as gross margin mix and tariffs weighed on profitability; adjusted EBITDA missed as well* .
  • Management raised full-year revenue growth outlook to ~14%, guided Q3 revenue to $1.13–$1.21B, and flagged gross margins at the low end of the 42–44% annual range, with incentive comp lifting OpEx .
  • Cloud demand and AI networking were key catalysts: direct cloud revenue reached a record 38% of total; orders continued to outpace revenue, building backlog into FY26 .

What Went Well and What Went Wrong

What Went Well

  • Record direct cloud provider revenue at 38% of total, up ~85% YoY, with three of top five customers being cloud providers; “orders in the quarter were, again, significantly greater than revenue” .
  • Strong optical portfolio momentum: added 24 new WaveLogic 6 Extreme customers in Q2 (49 total within two quarters of GA) and maintained an 18–24 month lead in 1.6T WAN technology .
  • Blue Planet posted its highest-ever quarterly revenue at just under $30M; “Blue Planet had a record performance in Q2… positioning Blue Planet to better serve… agentic AI and data-driven intelligence” .

What Went Wrong

  • Margin headwinds from mix: heavy shipments of RLS line systems and coherent pluggables (below corporate average margins) kept adjusted gross margin at 41.0%, down 250 bps YoY, and pressured EPS vs consensus .
  • Tariff environment: new U.S. tariffs caused a mid single-digit millions net impact in Q2; management expects ~$10M quarterly tariff cost but plans to mitigate to make net impact immaterial going forward .
  • Routing & Switching down YoY in the quarter (Q2 FY24: $116.1M to Q2 FY25: $92.7M) despite improving order momentum; mix dilutive while newer solutions ramp .

Financial Results

Top-line, EPS, Margins, EBITDA (Company-reported)

MetricQ4 FY24Q1 FY25Q2 FY25
Revenue ($USD Millions)$1,124.1 $1,072.3 $1,125.9
GAAP Diluted EPS ($)$0.25 $0.31 $0.06
Adjusted Diluted EPS ($)$0.54 $0.64 $0.42
Adjusted Gross Margin (%)41.6% 44.7% 41.0%
Adjusted Operating Margin (%)10.0% 12.3% 8.2%
Adjusted EBITDA ($USD Millions)$136.7 $156.5 $116.7

Q2 FY25 vs Consensus

MetricQ2 FY25 ConsensusQ2 FY25 Actual
Revenue ($USD)$1,093,338,290*$1,125,878,000
Primary EPS ($)$0.51783*$0.42
EBITDA ($USD)$138,308,010*$66,711,000

Values marked with an asterisk (*) retrieved from S&P Global.

YoY and QoQ Change (Q2 FY25)

MetricYoY vs Q2 FY24QoQ vs Q1 FY25
Revenue+23.6% +5.0% (calc using $1,072.3M to $1,125.9M)
Adjusted EPS$0.42 vs $0.27 $0.42 vs $0.64
Adjusted Gross Margin41.0% vs 43.5% (−250 bps) 41.0% vs 44.7% (−370 bps)
Adjusted EBITDA$116.7M vs $85.8M (+36.0%) $116.7M vs $156.5M (−25.4%)

Segment Revenue (Q2 FY25 vs Q2 FY24)

SegmentQ2 FY24 ($M)Q2 FY25 ($M)Mix Q2 FY25
Optical Networking$560.2 $773.6 68.7%
Routing & Switching$116.1 $92.7 8.2%
Total Networking Platforms$676.3 $866.3 76.9%
Platform Software & Services$85.4 $85.4 7.5%
Blue Planet Automation$14.4 $28.0 2.5%
Maintenance Support & Training$77.4 $79.4 7.1%
Installation & Deployment$43.8 $58.2 5.2%
Consulting & Network Design$13.5 $8.6 0.8%
Total Global Services$134.7 $146.2 13.1%
Total$910.8 $1,125.9 100.0%

Geographic Revenue (Q2 FY25 vs Q2 FY24)

RegionQ2 FY24 ($M)Q2 FY25 ($M)Mix Q2 FY25
Americas$662.9 $833.8 74.1%
EMEA$155.8 $191.6 17.0%
Asia Pacific$92.1 $100.5 8.9%
Total$910.8 $1,125.9 100.0%

KPIs and Balance Sheet (Operating cadence)

KPIQ1 FY25Q2 FY25
Cash & Investments ($B)~$1.32 ~$1.35
Cash from Operations ($M)$103.7 $156.9
DSOs (days)90 87
Product Inventory Turns2.3 2.5
Accounts Receivable ($M)$938.7 $929.8
Inventories ($M)$845.1 $874.3
Share Repurchases ($M)$79.2 $84.3

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($B)Q3 FY25N/A$1.13–$1.21 New
Adjusted Gross Margin (%)Q3 FY25N/ARoughly in line with Q2 (41%) New
Adjusted OpEx ($M)Q3 FY25~355 (Q2 guide) ~$370–$375 (incl. higher incentive comp) Raised
Annual Revenue Growth (%)FY258–11 (target high end) ~14 Raised
Annual Gross Margin (%)FY2542–44 Low end of 42–44 Lowered (range bottom)
Avg Quarterly OpEx ($M)FY25$350–$360 $360–$370 (due to ~$10M/quarter higher incentive comp) Raised
Tariffs Net ImpactFY25Excluded/uncertain ~$10M cost/quarter, net immaterial after mitigation Clarified

Earnings Call Themes & Trends

TopicQ4 FY24 (Q-2)Q1 FY25 (Q-1)Q2 FY25 (Current)Trend
AI/Cloud demandPositioning for accelerated growth; AI driving bandwidth Half of Q1 orders from cloud; strong AI-linked investment Record 38% direct cloud revenue; orders > revenue; GPU cluster wins Accelerating
Coherent optics (WL6e, pluggables)Leadership in optical; margin mix noted WaveLogic 6e customers ramp; 800G WL6 Nano roadmap 24 WL6e adds; coherent plugs to double revenue to ≥$150M FY25 Strong ramp
RLS line systemsEmerging standard; lower initial margins Preferred by cloud & SPs; razor/razor-blade economics “Record RLS quarter” with mix headwind to margins Broad adoption; near-term GM headwind
Tariffs/supply chainNoted uncertainty Fluid; mitigation planned New regime impacted Q2; ~$10M/quarter cost; net immaterial after mitigation Manageable
Routing & SwitchingDown YoY Q4; portfolio expanding $93M, up seq; 390 Adaptive IP logos Added India tier-1 win; WaveRouter with WL6e; 800GbE router Improving orders; revenue to follow
Blue Planet & softwareGrowing Blue Planet nearly doubled YoY Record quarter just under $30M; agentic AI use cases Structural momentum
Regional mixAmericas ~76% in Q4 Americas 74% Americas 74%; EMEA up YoY Stable; EMEA up

Management Commentary

  • “We achieved record direct cloud provider revenue in Q2 that comprised 38% of total revenue… highlighting the accelerating investments in AI infrastructure” — Gary Smith, CEO .
  • “Adjusted gross margin was 41%, in line with our guidance… we absorbed a net impact to our bottom line in the mid-single-digit millions due to the rapidly changing U.S. tariff environment” — Jim Moylan, CFO .
  • “We added 24 new WaveLogic 6 Extreme customers in Q2… making [WaveRouter] the industry’s first generally available 1.6 terabit coherent router” — Jim Moylan .
  • “We now expect to deliver revenue growth of approximately 14% for fiscal 2025… annual gross margins at the lower end of 42–44%” — Jim Moylan .

Q&A Highlights

  • Sustainability and breadth of cloud demand: management expects broader contributions from multiple cloud providers, with new data center applications (regional GPU clusters and out-of-band management) beginning to convert to revenue in late FY25 into FY26 .
  • Gross margin trajectory: mix headwinds from RLS and pluggables near term; path to mid-40s over 2–3 years via capacity adds, cost reductions, and next-gen 800G/ZR product margins .
  • Tariffs: ~$10M quarterly cost under current regime, with levers (manufacturing moves, supply flow changes, pricing) to keep net impact immaterial going forward .
  • Orders/backlog: cloud and SP orders significantly > revenue; backlog expected to increase exiting FY25, supporting FY26 growth .
  • Routing & Switching and MOFN: improving order momentum (routing & switching H1 orders >75% of all FY24 orders), record MOFN activity in H1 FY25 across geographies .

Estimates Context

  • Q2 FY25 revenue beat consensus by ~$32.6M; adjusted EPS missed by ~$0.10; EBITDA missed materially as gross margin mix and tariffs weighed* .
  • Given raised FY25 revenue growth (14%) and Q3 revenue guide ($1.13–$1.21B), models likely need higher top-line assumptions with lower gross margin trajectory (low end of 42–44%) and higher OpEx from incentive comp ($10M/quarter)* .
  • Mix assumptions should shift toward RLS and pluggables near term, with margin recovery modeled gradually through FY26–FY27 as capacity adds and cost curves improve .

Values marked with an asterisk (*) retrieved from S&P Global.

Key Takeaways for Investors

  • Revenue momentum is accelerating on AI-driven cloud builds; direct cloud revenue reached 38%, and orders continue to outpace revenue, building backlog for FY26 .
  • The print was a classic “top-line beat, EPS miss”: gross margin mix (RLS and pluggables) and tariffs drove the delta; management expects mitigation with net tariff impact immaterial going forward .
  • Strategic wins around GPU cluster interconnect and inside-DC out-of-band management extend TAM “inside and around the data center,” supporting multi-year growth visibility .
  • Optical leadership is tangible: WL6e and coherent routers are ramping; Blue Planet’s record quarter and Navigator momentum show software is becoming a more meaningful contributor .
  • Guidance reset is constructive: Q3 revenue $1.13–$1.21B and FY25 ~14% growth underscore demand strength; balance sheet and FCF cadence improved (CFO $157M) .
  • Near-term trading lens: watch for margin commentary vs Q3 guide “in line with Q2,” tariff updates, and pluggable/RLS mix; an EPS miss vs revenue beat can create volatility but should be tempered by raised annual revenue guide .
  • Medium-term thesis: mix normalizes as capacity shipments follow line systems; margin improves with scale and next-gen plugs; coherent adoption expands (campus/metro/DCI), sustaining growth into FY26–FY27 .

Additional Relevant Press Releases (Q2 Context)

  • Windstream Wholesale WL6e 2x1.2Tb trial demonstrated 3×800G services over 1,590 km without regeneration—evidence of WL6e performance at ultra-long-haul .
  • Ciena’s AI/DCI report highlights expanding wave services demand and record 2025 submarine cable RFS, aligning with observed cloud network investment trends .