Source: Investing.com transcript (published 06/04/2026)
Tracy, Conference Call Operator: I will now hand the conference over to Gregg Lampf, Vice President of Investor Relations. Please go ahead.
Gregg Lampf, VP IR, Ciena: Thank you, Tracy. Good morning, and welcome to Ciena's 2026 fiscal second quarter conference call. On the call today is Gary Smith, President and CEO, and Marc Graff, CFO. Scott McFeely, Executive Advisor, is also with us for Q&A. In addition to this call and the press release, we've posted to the Investors section of our website an accompanying investor presentation that reflects this discussion, as well as certain highlighted items from the quarter.
Our comments today speak to our recent performance, our view on current market dynamics and drivers of our business, as well as discussions of our financial outlook. Today's discussion includes certain adjusted or non-GAAP measures of Ciena's results of operations. A reconciliation of these non-GAAP measures to our GAAP results is included in today's press release.
Before turning the call over to Gary, I'll remind you that during this call, we'll be making certain forward-looking statements. Such statements, including our quarterly and annual guidance, commentary on market dynamics, and the discussion of our opportunities and strategy are based on current expectations, forecasts, and assumptions regarding the company and its markets, which include risks and uncertainties that could cause actual results to differ materially.
Gary Smith, President and CEO, Ciena: Thanks, Gregg, good morning, everyone. Our Q2 performance was, once again, very strong, reflecting our continued technology leadership, our deep customer relationships, and the strength of our business model. In the quarter, we grew the business 40% year-on-year with revenues of $1.57 billion. We expanded adjusted gross margin to 44.9%, we nearly quadrupled the year-ago adjusted earnings per share to $1.64.
I'd remind everybody that we delivered these results while navigating unprecedented demand and a constrained supply environment. With the combination of a strong and growing backlog driving strong visibility, fueled by AI-led demand from both cloud and service providers, coupled with our leading technology portfolio, we are well-positioned to gain share and deliver long-term value to our customers and our owners.
The breadth and depth of our portfolio positions us to intersect this market growth as AI drives new opportunities across the WAN and in and around the data center. Our portfolio spans systems, interconnects, software, and of course, services. Specifically, systems includes our optical systems as well as our Routing and Switching platforms. Interconnects is comprised of modules for inter and intra data center connectivity, inclusive of our WaveLogic modems and pluggables, as well as co-packaged optics and critical technology components that serve as foundational network building blocks.
Since we spoke to you last in March, the largest hyperscalers have increased their 2026 capital expenditures, with indications of continued expansion into 2027 and beyond. Given the priority to monetize somewhat constrained compute investments, we expect an increasingly larger proportion of that spend will be directed towards network infrastructure. Importantly, service providers are also reinvesting in network infrastructure after several years. This is creating net new opportunities with service providers across long-haul metro and managed optical fiber networks or MOFN. In fact, they were up 28% for us year-on-year.
Simply put, all customers are prioritizing high capacity, low latency, and high-speed connectivity, underpinned by the need to transport data for AI, including model training, data ingestion, and inference. To that end, our latest view is that the addressable market will approximately double over the next several years to roughly $50 billion by 2029.