Ciena's earnings report sparks a revaluation of AI optical connectivity: How will data center network bottlenecks reshape infrastructure valuation logic?

If the core keyword for AI computing power investment in 2024 is GPU, then by 2026, the trend is quietly shifting. As large-scale AI cluster construction expands from a single data center to cross-domain interconnection, the bottleneck of the "high-speed computing highway" is shifting from chip computing capacity to network transmission bandwidth. The demand for data center interconnection (DCI) centered on optical communication is becoming one of the fastest-growing segments in AI infrastructure spending.

Recent financial reports confirm this judgment. Ciena (NYSE: CIEN) released FY2026 Q2 earnings on June 4, 2026, with quarterly revenue reaching $1.57 billion, a 40% year-over-year increase, surpassing the market consensus of $1.5 billion. More importantly, adjusted earnings per share reached $1.64, nearly four times the same period last year ($0.42), far exceeding analyst forecasts of $1.46. The management attributed this strong performance to the continued acceleration of hyperscaler network investments and the explosive growth in AI workload demands for data center optical interconnects.

Regarding the company's annual revenue outlook, Ciena raised its full-year FY2026 revenue guidance to $6.3 billion (midpoint), significantly above the previous range of $5.9-6.3 billion, with an approximate year-over-year growth rate of 32%. The company also expects Q3 revenue to be between $1.575 billion and $1.58B, with a midpoint of $1.625 billion, again higher than the market expectation of $1.68B. This series of upward revisions indicates that AI-driven infrastructure spending has not shown signs of marginal decline.

Backlog and Capacity Shortages: The Core Contradiction of Demand Outstripping Supply

Behind Ciena’s outperforming results lies a structural tension in AI computing network construction that cannot be ignored. As of the end of FY2026 Q2, the company's backlog increased by over $600 million quarter-over-quarter, totaling $7.7 billion, of which about $6.4 billion are hardware orders. During the earnings call, management explicitly stated that if the supply chain permitted, customers would accept more product deliveries. This supply-demand gap indicates that capacity constraints of key optical network components remain a bottleneck restricting industry growth.

Looking at customer structure, hyperscalers account for about one-third of Ciena’s revenue, with direct cloud customer revenue up 70% year-over-year. Against this backdrop, the company not only achieved strong revenue expansion but also improved profitability—Q2 adjusted gross margin reached 44.9%, an expansion of 390 basis points year-over-year. This means that under supply constraints, Ciena gained stronger pricing power, a phenomenon rarely seen in the history of the semiconductor and optical communication industries.

Valuation Premium Reaches New Highs: What Is the Market Racing for, and What Warnings Are Being Issued?

Contrasting with the strong fundamentals, Ciena’s stock price fell about 5.7% in pre-market trading after earnings release. As of June 5, the closing price was $488.21, down 8.85% from the previous trading day.

The fundamental reason for the price correction is the extreme “racing ahead” in valuation. According to analyst coverage, as of early June 2026, 20 analysts covering Ciena set the 12-month average target price at $530.56, with the highest at $720 (from Rosenblatt) and the lowest at $185. Notably, Morningstar gave a rare “1-star” rating, suggesting Ciena’s stock price is about 115% above its fair value. 【User-provided data】 GuruFocus’s valuation model indicates that, based on the current price of $500.60, Ciena is overvalued by about 440%.

Nevertheless, the number of “Buy” ratings (13 firms) still significantly exceeds “Hold” (7 firms), and many institutions collectively raised their target prices after the earnings release. Rosenblatt raised from $350 to $720, Needham from $470 to $600. The phenomenon of “stellar earnings but falling stock price” essentially reflects a valuation system restructuring in the AI computing infrastructure field—markets are shifting from “can growth be realized” to “has the growth potential been fully priced in.”

Starting from Ciena: What Other Undervalued Targets Exist in the AI Computing Optical Network Industry Chain?

Ciena’s earnings release sends a core signal—the AI data center is shifting from a single-point computing race to a network interconnection race, and capacity bottlenecks and pricing power in optical network infrastructure are reshaping profit distribution in the AI industry chain. Under this logic, several sub-sectors are worth attention.

Optical Modules and Components: Lumentum and Coherent

Optical modules are the core hardware in AI data center optical interconnects, responsible for converting optical-electrical signals within data centers and across wide-area networks. Lumentum (NASDAQ: LITE) achieved $533.8 million in FY2026 Q1 revenue, up 58% year-over-year, with non-GAAP EPS of $1.10, far surpassing last year’s $0.18. More notably, Lumentum’s data center order shipments are over four times the previous levels, and laser products are sold out through 2027. This directly reflects urgent demand for advanced optical components on the demand side.

Coherent (NYSE: COHR) also benefits from the expansion of AI infrastructure. FY2026 Q1 revenue was $1.58 billion, up 17.3% year-over-year, with a Q2 guidance midpoint of $1.63 billion, supported by the continued penetration of DCI ZR/OCS/1.6T VCSEL solutions. JPMorgan recently assigned a “Overweight” rating to Coherent with a target price of $380. From the industry chain perspective, both Lumentum and Coherent’s gross margins benefit from supply-side capacity tightening, but their market valuations have not fully reflected the sustainability of this optical interconnect demand.

Optical Module OEM and Packaging: Fabrinet

Fabrinet (NYSE: FN), a leading contract manufacturer of optical modules and components, also shows noteworthy performance growth within the industry chain. FY2026 Q1 revenue was $978.1 million, up 21.6% year-over-year, exceeding the upper limit of guidance. Particularly, its data center interconnect business revenue grew 92% YoY and 29% QoQ. About 35% of Fabrinet’s revenue comes from data center products, and 49% from telecom equipment, both highly dependent on hyperscalers’ capital expenditure. In an environment of persistent capacity tightness in optical networks, OEM order spillover effects are often among the most direct beneficiaries.

Optical Fiber and Cables: Corning

The geographic distribution of AI clusters is driving new demand for optical fiber infrastructure. Nvidia reached a potential $3.2 billion expansion agreement with Corning (NYSE: GLW) in May 2026, possibly using this as a basis to expand optical fiber capacity in the U.S. to meet AI interconnection needs. Corning’s stock surged about 18% in the week following the announcement, reflecting a market revaluation of optical fiber assets’ value in the AI compute chain. Compared to optical modules and switches, fiber capacity expansion involves longer cycles and higher capital intensity, meaning that once supply-demand imbalance occurs, pricing power may be more durable.

Network Switch Equipment: Arista Networks

If Ciena mainly addresses wide-area interconnection between data centers, Arista Networks (NYSE: ANET) focuses on intra-data center switch architecture. Needham analysts note that about 54% of Arista’s revenue comes from hyperscalers. The company has raised its 2026 AI-related revenue target from $2.75 billion to $3.25 billion, reflecting ongoing expansion of AI clusters. As 800GbE switch penetration accelerates, Arista’s market share advantage in high-speed switching is translating into sustained performance growth.

Network Testing Equipment: Viavi Solutions

The increasing complexity of AI optical networks also drives growing demand for network testing. Each generation of higher network speeds requires new testing equipment. Viavi Solutions (NASDAQ: VIAV) holds a solid share advantage in this segment, with testing needs highly synchronized with capital expenditure cycles. As 400G evolves to 800G and 1.6T, the market for testing equipment is also expanding.

From the industry chain perspective, profits from AI computing infrastructure are spilling over layer by layer along the chain of “GPU—optical modules—optical switches—fiber cables—testing equipment.” Ciena’s valuation premium already signals to the market that this wave of AI-driven optical network demand is reshaping industry valuation centers. The optical components and modules upstream in the chain are currently undervalued relative to their ongoing benefits, potentially representing a structural undervaluation in this cycle’s core.

Gate Stock Trading: A One-Stop Cross-Market Allocation of AI Computing Infrastructure Targets

For investors wishing to track these industry chain dynamics, traditional cross-border investments often face account systems, capital channels, and trading hours restrictions. As digital asset platforms increasingly integrate with traditional finance, these barriers are gradually being broken down.

In June 2026, Gate officially announced the launch of real stock trading services, allowing users to directly trade US stocks and ETFs within the platform using USDT, covering over 10,000 US stocks and ETFs. Gate has established strategic cooperation with Alpaca, a licensed US broker, providing direct access to NYSE, NASDAQ, and other major markets, offering real stock price discovery and settlement, rather than tokenized products mapped on-chain.

The Gate stock trading feature supports direct trading of all core targets such as Ciena, Lumentum, Coherent, Fabrinet, Arista Networks, and Corning. Users can access the “Stocks” section via the Gate app or web, search for the relevant ticker, select quantity, and submit orders to buy, without switching platforms or opening separate overseas securities accounts. Gate’s spot stock trading does not involve interest rates or overnight holding fees, making it more suitable for long-term allocation strategies compared to traditional CFDs. Future updates will include margin trading and one-click transfer of stock assets between brokerages, further enhancing cross-market flexibility and asset liquidity.

Conclusion

Ciena’s FY2026 Q2 performance is not only a company’s earnings surprise but also a directional indicator of the AI infrastructure investment shift from “centralized computing” to “distributed interconnection.” Optical networks are moving from a peripheral role in the AI industry chain to a core hub, and upstream segments such as optical components, modules, fiber, and testing equipment may be relatively undervalued in this structural cycle. For investors aiming to proactively position in AI computing infrastructure, Gate stock trading offers a convenient channel to participate directly in these sectors from the crypto asset ecosystem, bypassing traditional broker complexities and enabling multi-asset cross-market allocation within a unified account.