Ciena’s profit plunged 95% year on year to just $10.5 million in its fiscal Q3 2022 (ended July 30), as supply chain issues continued to severely hinder the company’s ability to meet strong demand for its products.
During an earnings call, CEO Gary Smith said it experienced “substantial delays and lower than expected component deliveries” from a handful of suppliers in the back half of the quarter. So, while it is receiving materials from majority of its suppliers as promised, a “relatively small number of low cost, low value components is holding up a disproportionate amount of revenue, primarily for our optical modems.”
“But for this specific challenge, we would have been at the high end of our revenue range and in line with consensus gross margin expectations for Q3,” he added. Smith said the tough environment has persisted into the early part of its fiscal Q4.
Revenue of $868.0 million in the quarter was down substantially year on year from $988.1 million. Net income fell from $238.2 million to $10.5 million, though the prior year figure received a $124.2 million boost from a tax benefit.
By segment, Converged Packet Optical sales slipped from $712.9 million to $563.9 million, while Routing and Switching grew from $69.7 million to $100.7 million. Platform Software and Services revenue rose from $56.9 million to $63.5 million and BluePlanet sales inched up from $16.6 million to $17.3 million. Global Services revenue dropped from $132 million to $122.6 million.
Despite the revenue slide, Smith said it continued to see a strong pace of orders in the recent quarter.
“In Q3, specifically, orders outpaced revenue by more than 30% and we continue to grow our backlog, which is now well over $4 billion. And we project further growth in our backlog in Q4,” he stated. Smith added it has faith that as it converts its backlog to revenue it will continue to gain market share.
He also noted the quarter was a strong one for its WaveLogic 5 coherent pluggable optics, highlighting a vendor deal with a large international Tier 1 service provider for a major network upgrade. All told, Smith said Ciena managed to achieve record WaveLogic 5 shipments in FQ3, increasing its total number of shipments to date to 44,000.