Ciena: Expecting Growth To Continue Growing From Here On

Core Viewpoint - Ciena Corporation (CIEN) has entered a growth cycle, supported by solid 3Q24 performance and positive demand trends across major customer segments [2][3][7] Financial Performance - CIEN reported 3Q24 revenue of $942 million, exceeding consensus estimates of $928 million and within the management-guided range of $880 to $960 million [3] - Gross margin improved to 43.7%, stable compared to 2Q24 and up 100 basis points from 3Q23 [3] - Operating expenses as a percentage of revenue decreased by 100 basis points to 35.7%, contributing to strong growth in adjusted net income and adjusted EPS of $0.35, surpassing the consensus estimate of $0.26 [3] Growth Drivers - Revenue growth in 3Q24 was driven by all major customer segments, with direct cloud providers growing 9% sequentially [4] - CIEN is experiencing robust demand trends in AI and cloud network infrastructure, with an increase in the customer base to 122 from 104 in 2Q24 and 86 in 1Q24 [4] - The company has received 23 orders for WaveLogic 6, indicating strong traction for its superior product [4] Supply Chain Improvements - CIEN has made significant progress in supply chain optimization, establishing direct sourcing relationships with major component suppliers and diversifying its supply chain geographically [4] - This transformation is expected to yield better cost control and improved revenue quality over time [4] Valuation Outlook - The growth forecast for CIEN is expected to accelerate back to 10% by FY26, with net margins anticipated to improve [5] - The forward PE multiple has been upgraded to 20x from 18x, reflecting market willingness to attach a premium as CIEN's growth accelerates [5]