Date: September 4, 2025 | Source: Ciena IR press release + Seeking Alpha / Yahoo Finance transcript data (verbatim opening + compiled)
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Gregg Lampf (Vice President, Investor Relations, Ciena): [Standard introductions and forward-looking statements disclaimer.] With me on the call today is Gary Smith, President and CEO; Mark Graff, CFO; and Scott McFeely, executive adviser, for Q&A. Our comments today speak to our recent performance, our view on current market dynamics and drivers of our business, as well as a discussion of our financial outlook.
Gary Smith (President and CEO, Ciena): "We delivered another strong quarterly performance that reflects our leadership in high-speed connectivity and ongoing accelerated customer demand as the network becomes fundamental to the underpinning, growth, and monetization of AI. With visibility well into fiscal year 2026, we are confident in the continued momentum of our business and remain focused on further expanding our operating leverage as we continue to grow."
Q3 was another record quarter. Revenue of $1.22 billion was up ~29% year over year and above our guidance, driven by continued strong demand from cloud providers — including large hyperscalers and the emerging "Neo scaler" segment — and an improving service-provider environment. Optical Networking revenue was $815.5 million (67% of revenue), up ~34% year over year, driven by strength in RLS (Reconfigurable Line System) and 800G/coherent demand, including our first hyperscaler "scale across" win linking geographically distributed AI training clusters. Routing and Switching revenue was $125.9 million (10%), up ~36% year over year. Blue Planet automation software revenue was $27.8 million (2%). Global Services revenue was $160.2 million (13%), up ~20% year over year on installation/deployment and implementation strength.
Adjusted gross margin was 41.9%, with gross margin pressure from the ramp of new products (including 800G pluggables) and input costs. Adjusted operating margin was 10.7%, up 270 basis points year over year, on revenue growth and disciplined OpEx. Adjusted EBITDA was $158.0 million, up ~60% year over year. Adjusted EPS was $0.67, up 91% year over year (and up 60% sequentially), beating consensus by $0.14. Net cash position and inventory levels remained healthy, with cash + short-term investments of $1.33 billion.
For Q4 FY25, we expect revenue of $1.24-1.32 billion, adjusted gross margin of 42-43%, and adjusted operating expense of $390-400 million. Given accelerating AI-driven demand and visibility well into fiscal 2026, we provided an initial FY26 outlook of ~17% revenue growth at the midpoint (to be updated on the Q4 call), and we accelerated our longer-term operating margin goal of 15-16% into fiscal 2026.
Analyst (Q): How durable is the cloud/AI demand, and how much visibility do you have into FY26?
Gary Smith (A): The cloud providers have underinvested in their networks relative to AI data-center capex; traffic must leave the data center to be monetized. Our early "scale across" hyperscaler win (linking regional AI training data centers) is now extending to more locations, with revenue beginning late in 2025 and scaling through 2026-27. Service provider orders are recovering after years of inventory digestion, and MOFN (managed optical fiber network) wins for hyperscalers are adding a new growth vector.
Analyst (Q): Gross margin is lower than prior cycles — what is the path back?
Mark Graff (A): Near-term pressure is from ramping 800G pluggables (NPI) and rising input costs as supply tightens. We expect gross margin to improve as 800G volumes scale (yield economics) and from pricing/fair-value exchange with customers; we are guiding Q4 GM to 42-43% with continued improvement into FY26.
Analyst (Q): What is driving the acceleration of the 15-16% operating margin goal into 2026?
Mark Graff (A): Flat-to-disciplined OpEx alongside strong revenue growth, and gross margin expansion as 800G ramps. We are investing in capacity (including ~50% more capex for photonics/components) to meet demand.
*Compiled from Ciena Q3 FY2025 press release (Sep 4, 2025), CEO/CFO quotes and transcript-derived Q&A. Stock closed ~+22% on the print (Sep 4, 2025, ~$94.82 → ~$115.86) as investors reacted to the record quarter, big EPS beat, and early FY26 visibility.*
CIEN (Ciena) — Q3 FY2025 (Sep 4, 2025). Blowout: revenue $1.22B (+29% YoY, above guide), adj EPS $0.67 (+91%, beat by $0.14), optical-led with the first hyperscaler "scale across" AI win — stock surged ~+22% on the print to ~$116 as FY26 visibility (>~17% growth) and an accelerated 15-16% OM goal landed.