Ciena ended the third quarter boasting “very strong” revenue growth, particularly in optical line systems, as CEO Gary Smith stated the company saw 22% year-to-date revenue growth.
Optical revenue was up 27% year on year, driven by a “record quarter in revenue and shipments” for Ciena’s 6500 Reconfigurable Line System (RLS), which among other things aims to double fiber capacity and automate optical networking.
“RLS is, in fact, the only next-gen line system in the industry that is shipping at scale and serves as a strong indicator of future revenue growth and margin expansion opportunity,” Smith said on Thursday’s earnings call.
He attributed the demand for RLS to network expansions by cloud and content providers.
Ciena added 18 new customers for its WaveLogic 5e offering, bringing the total customer count for that service to 246. The vendor in Q3 also received its first order of WaveLogic 6, “well before it is even generally available,” and scored its first customer for the new WaveRouter platform, which was announced in the spring.
Revenue from service provider customers increased by 9% year on year. Smith said Ciena recently secured a “multiyear strategic expansion” of a partnership with a “major U.S. Tier 1 service provider for our full portfolio,” including routing and switching services.
Despite an uptick in revenue, Smith noted new order flow continues to lag and that will likely persist over the next couple of quarters.
“Specifically, customers ordering decisions in the prior supply-constrained environment resulted in both large order backlog and then higher than typical customer inventory levels,” he said. “In addition, the recent rapid compression of our lead times has reduced the need for customers to place advanced orders.”
Ciena began the year with lead times of approximately 52 weeks, but now “the average is probably in the high-teens across the portfolio,” said SVP of Global Products and Services Scott McFeely on the call.
As for order backlog, CFO Jim Moylan said the number stood at $3.1 billion, which was “very much in line with our expectations.” Ciena expects to end fiscal year 2023 with a backlog of roughly $2.7 billion.
“I would remind everyone that our backlog is still larger in both absolute and relative terms than any of our competitors, which is testament to our increasing competitive advantage,” Smith added.
Q3 results
Consolidated revenue of $1.07 billion was up 23% from $868 million in Q3 2022. Total networking platforms revenue was $847 million, with most of the segment’s revenue ($719 million) coming from the Converged Packet Optical business. Routing and Switching accounted for $127.6 million in revenue.
As for revenue breakdown by region, the Americas contributed 70% of Ciena’s overall revenue at $749.5 million. Whereas revenue from EMEA and APAC regions reached $152.8 million and $165.6 million, respectively.