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Ciena(CIEN) - 2025 Q2 - Earnings Call Transcript
CIENCiena(CIEN)2025-06-05 13:30
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Financial Data and Key Metrics Changes - Total revenue for Q2 2025 was 1,130,000,000,atthehighendofguidance,reflectingstrongdemandacrosscustomersegmentsandgeographicregions[6][16]−Adjustedgrossmarginwas411,130,000,000, at the high end of guidance, reflecting strong demand across customer segments and geographic regions [6][16] - Adjusted gross margin was 41%, consistent with guidance, impacted by product mix and tariffs [16][17] - Adjusted operating margin was 8.2%, with adjusted net income of 61,000,000 and adjusted EPS of 0.42[18]−Cashfromoperationswas0.42 [18] - Cash from operations was 157,000,000, with approximately 1,350,000,000incashandinvestmentsattheendofthequarter[18]BusinessLineDataandKeyMetricsChanges−Revenuefromcloudprovidersreachedover1,350,000,000 in cash and investments at the end of the quarter [18] Business Line Data and Key Metrics Changes - Revenue from cloud providers reached over 400,000,000, accounting for 38% of total revenue, growing 85% year over year [6][7] - The optical business performed well, with 24 new WaveLogic six Extreme customers added, totaling 49 customers [19] - Blue Planet achieved record quarterly revenue of just under 30,000,000,reflectingsuccessfultransformationefforts[15]MarketDataandKeyMetricsChanges−OrdersinQ2weresignificantlygreaterthanrevenue,withcloudproviderordersexpectedtodoubleinfiscal2025comparedtothepreviousyear[8][9]−Serviceproviderinvestmentsinhigh−speedinfrastructurearebecomingmoredurable,withgrowthseenacrosscoreopticaltransport,routing,andswitching[13]−MOFINactivityreachedanall−timerecordinthefirsthalfoffiscal2025,indicatingstrongsupportforthenexusbetweenserviceprovidersandcloudproviders[14]CompanyStrategyandDevelopmentDirection−Thecompanyisfocusedonexpandingitsmarketopportunitywithindatacenters,emphasizinghigh−speedconnectivityascritical[15][16]−Thestrategyincludesdeployingafullportfolioofproductstoaddressgrowingdemand,particularlyinAIinfrastructure[9][10]−ThecompanyaimstomaintainacompetitiveadvantagethroughitsWaveLogictechnology,whichisexpectedtoleadthemarketfor18to24months[9]Management′sCommentsonOperatingEnvironmentandFutureOutlook−Managementexpressedconfidenceincontinuedgrowthdrivenbystrongdemanddynamicsandfavorablemarketconditions[15][24]−Thecompanyanticipatesarevenuegrowthofapproximately1430,000,000, reflecting successful transformation efforts [15] Market Data and Key Metrics Changes - Orders in Q2 were significantly greater than revenue, with cloud provider orders expected to double in fiscal 2025 compared to the previous year [8][9] - Service provider investments in high-speed infrastructure are becoming more durable, with growth seen across core optical transport, routing, and switching [13] - MOFIN activity reached an all-time record in the first half of fiscal 2025, indicating strong support for the nexus between service providers and cloud providers [14] Company Strategy and Development Direction - The company is focused on expanding its market opportunity within data centers, emphasizing high-speed connectivity as critical [15][16] - The strategy includes deploying a full portfolio of products to address growing demand, particularly in AI infrastructure [9][10] - The company aims to maintain a competitive advantage through its WaveLogic technology, which is expected to lead the market for 18 to 24 months [9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in continued growth driven by strong demand dynamics and favorable market conditions [15][24] - The company anticipates a revenue growth of approximately 14% for fiscal 2025, with adjusted gross margins expected at the lower end of the previously assumed range [24][22] - Management acknowledged the dynamic tariff environment but expects the net effect on the bottom line to be immaterial going forward [22][104] Other Important Information - The company repurchased approximately 1,200,000 shares for 84,000,000 during the quarter, with plans to repurchase approximately $330,000,000 in total for the fiscal year [18] - The upcoming retirement of CFO Jim Moylan was acknowledged, marking the end of his 18-year tenure with the company [26] Q&A Session Summary Question: Can you discuss the linearity of orders with cloud customers this quarter? - Management noted strong order flows in Q1 that continued and accelerated in Q2, with both service providers and cloud players showing sustained momentum [30][31] Question: What are the assumptions for growth in cloud versus telco for the year? - Management indicated that scaling demand would likely lead to increased backlog entering fiscal 2026, with strong visibility into future orders [56][58] Question: Can you provide details on the contributions from top customers? - The largest customer was a cloud provider at approximately 13.4% of revenue, with the second being AT&T at 10.4% [46][52] Question: How do you view the sustainability of cloud growth beyond fiscal 2025? - Management expressed confidence in the sustainability of cloud growth, citing a broadening application base and increasing engagement from various cloud providers [49][50] Question: What is the outlook for gross margins given the product mix? - Management acknowledged that product mix impacts gross margins, but they remain confident in achieving mid-40s percentage gross margins in the long term [34][86] Question: Can you elaborate on the MOFIN opportunities and pipeline? - Management reported strong MOFIN activity globally, indicating significant traction in North America and Europe, alongside ongoing projects in India [88][90]