Can Surging AI Cloud Orders Power Ciena's FY26 Revenue Expansion?

Ciena Corporation CIEN has entered fiscal 2026 with growing momentum as artificial intelligence (AI) reshapes global network infrastructure needs. The rapid expansion of AI workloads is driving cloud providers to scale their networks at an unprecedented pace, creating a powerful demand tailwind for high-speed connectivity solutions. Ciena delivered record financial results in fiscal 2025, positioning the company for another year of robust growth fueled by surging cloud and service provider orders.

The company reported revenue of $1.35 billion in the fourth quarter and full-year revenue of $4.77 billion, implying year-over-year growth of 20% and 19%, respectively. Management attributed this performance to sustained investments in high-speed connectivity technologies, disciplined execution and deepening relationships with both cloud and service provider customers.

A key growth driver has been surging orders from cloud providers, including hyperscalers and emerging neoscalers. These customers are rapidly scaling their networks as AI workloads expand, particularly as traffic must move efficiently out of data centers to be monetized. Management noted that cloud providers had previously underinvested in networking relative to other AI infrastructure, creating a catch-up cycle that is now translating into strong, broad-based orders across Ciena’s portfolio. As a result, cloud-related orders now make up a substantial portion of the company’s record backlog.

Service providers are also contributing meaningfully to growth. After years of inventory digestion and heavy 5G spending, service providers are reinvesting in transport infrastructure, partly fueled by AI-driven enterprise cloud demand. Ciena highlighted strong momentum in Managed Optical Fiber Network (MOFN) projects, including major wins in India and other regions, which helped drive nearly 70% year-over-year growth in service provider orders during fiscal 2025.

Ciena’s Cloud and Service Provider customers are prioritizing network investments to support AI-driven traffic growth, highlighting long-term opportunities for its Systems and Interconnects businesses. To capitalize on this, it is focusing R&D on Coherent Optical Systems, Interconnects, Coherent Routing and solutions like DCOM, while scaling back investments in residential broadband. Ciena’s DCOM solution, built on its XGS-PON and routing and switching portfolio, was originally co-developed with Meta to meet hyperscale needs. The DCOM engagement with Meta has since expanded, with deployments planned across multiple new data centers. Existing broadband products will continue to be sold and supported. Blue Planet plays a key role in major provider projects, supporting digital transformation with AI and data-driven tools.

Ciena has solid support for 2026 revenue and clear demand signals into 2027 and beyond. For fiscal 2026, the company expects revenue of $5.7–$6.1 billion, implying nearly 24% growth at the midpoint. This outlook is supported by roughly $5 billion in backlog, strong visibility into customer deployments and expanding opportunities in and around the data center, which tripled year over year and is expected to be a major contributor to fiscal 2026 growth.

Taking a Look at CIEN’s Competitors’

Cisco Systems, Inc.’s CSCO business model has evolved with subscription revenues accounting for more than half of its total revenues. An increase in recurring revenue base bodes well for investors. The buyout of Splunk enhances CSCO’s recurring revenue base. The buyout significantly expands Cisco’s portfolio of software-based solutions, contributing more than $4 billion in ARR and making it one of the largest software companies in the world.

The launch of AI-powered Hypershield, which combines security and networking, strengthened Cisco’s security portfolio. Networking sales benefited from strong demand for AI infrastructure and campus networking solutions. Product orders from service providers and cloud customers were strong, driven by high double-digit order growth in hyperscalers. For the second quarter of fiscal 2026, Cisco expects revenues to be in the range of $15 billion-$15.2 billion. For fiscal 2026, Cisco expects revenues between $60.2 billion and $61 billion.

Arista Networks, Inc. ANET continues to benefit from the expanding cloud networking market, which is driven by the strong demand for scalable infrastructure. In addition to high capacity and easy availability, its cloud networking solutions promise predictable performance along with programmability that enables integration with third-party applications for network management, automation and orchestration. The company’s product portfolio facilitates the implementation of high-performance, highly scalable and appropriate solutions for every environment.

Arista provides routing and switching platforms with industry-leading capacity, low latency, port density and power efficiency. The company also continues to innovate in areas such as deep packet buffers, embedded optics and reversible cooling. Arista is witnessing solid demand among enterprise customers backed by its multi-domain modern software approach, which is built upon its unique and differentiating foundation, the single EOS (Extensible Operating System) and CloudVision stack. For the fourth quarter of 2025, management expects revenues to be between $2.3 billion and $2.4 billion, driven by healthy growth momentum and solid demand trends.

CIEN Price Performance, Valuation and Estimates

Shares of CIEN have surged 60.6% in the past three months compared with the Communications - Components industry’s growth of 28.7%.

CIEN trades at a forward 12-month price-to-earnings (P/E) ratio of 55.03, above the industry’s 35.1.

The Zacks Consensus Estimate for CIEN earnings for fiscal 2026 has been revised upward over the past 60 days.

CIEN currently has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research