By Nicholas G. Miller
Ciena raised its full-year revenue outlook on the back of strong demand for artificial-intelligence networking, but shares sank after orders missed elevated investor expectations.
The stock was down 19% to $502.31. It has still more than doubled so far this year.
The selloff comes as investors question whether the runup in some AI stocks has been too extreme. On Wednesday, Broadcom shares slid despite reporting soaring revenue as the company's guidance fell short of some investors' lofty expectations.
The sky-high expectations for Ciena's quarter are an example of "investors just getting ahead of themselves," said Mike Genovese, an analyst at Rosenblatt Securities. "You see people just tripping over themselves to raise numbers … and so this is just where the opportunity is huge, but the imagination of the opportunity sometimes gets a little bit ahead."
The networking-systems and software company's backlog increased $600 million sequentially in the second quarter to $7.7 billion. That is a far cry from the growth reported in previous quarters and that investors expected, Genovese said, adding that some investors thought the backlog would grow $2 billion to $3 billion.
That suggests that the market for the "scale-across" networking that Ciena specializes in, which connects different data centers to each other, may not be as big as investors thought, he said.
Shares of Ciena's fellow networking companies Lumentum, Coherent and Corning also fell following Ciena's report.
Investors were also expecting better gross margins than Ciena reported, failing to take into account higher pricing from Ciena's suppliers, Genovese said.
For the second quarter, Ciena posted net income of $218.2 million, or $1.49 a share, up from $9 million, or 6 cents a share, the year prior.
Adjusted earnings were $1.64 a share. Analysts polled by FactSet expected $1.46 a share.
Revenue rose 40% to $1.57 billion. Wall Street expected $1.5 billion. Two of the company's customers represented a total of 34% of revenue, Ciena said.
The company raised its fiscal-year revenue guidance to $6.3 billion, plus or minus $100 million, up from its previous forecast of $5.9 billion to $6.3 billion.
It also guided for third-quarter revenue of $1.63 billion, plus or minus $50 million.
Analysts see revenue of $6.18 billion for the fiscal year and $1.55 billion for the third quarter.
Write to Nicholas G. Miller at nicholas.miller@wsj.com.
(END) Dow Jones Newswires
June 04, 2026 12:30 ET (16:30 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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