Ciena Corporation

second quarter 2025 financial results conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Greg Lamp Vice President of Investor Relations. Please go ahead.

Thank you, Michael. Good morning, and welcome to Ciena's 2025 Fiscal Second Quarter Conference Call. On the call today is Gary Smith, President and CEO, and Jim Moylan, CFO. Scott McFeely, Executive Advisor, is also with us for Q&A. In addition to this call and the press release, we posted to the investor section of our website an accompanying investor presentation that reflects this discussion as well as certain highlighted items from the Court. Our comments today speak to our recent performance, our view on current market dynamics and drivers of our business, as well as a discussion of our financial outlook. Today's discussion includes certain adjusted or non-GAAP measures of CM's results of operations. A reconciliation of these non-GAAP measures to our GAAP results is included in today's press release. Before turning the call over to Gary, I'll remind you that during this call, we'll be making certain forward-looking statements. Such statements, including our guidance, commentary on market dynamics, and discussion of our opportunities and strategy, are based on current expectations, forecasts, and assumptions regarding the company and its markets, which include risks and uncertainties that could cause actual results to differ materially from the statements discussed today. Assumptions relating to our outlook, whether mentioned on this call or included in the investor presentation that we'll post shortly after, are an important part of such forward-looking statements, and we encourage you to consider them. Our forward-looking statement should also be viewed in the context of the risk factors, detailed in our most recent 10-K and 10-Q, which we expect to file with the SEC by June 12th. CCN assumes no obligation to update the information discussed in this conference call, whether as a result of new information, future events, or otherwise. As always, we'll allow for as much Q&A as possible today, though ask that you limit yourselves to one question and follow-up. With that, I'll turn the call over to Gary.

Thanks, Greg. And today, we delivered strong fiscal second quarter results, including revenue of 1.13 billion, which is at the high end of our guidance and demonstrates the strength both of our strategy and our execution. This performance reflects continued strong demand across all customer segments, geographic regions, and our diversified portfolio. Notably, revenue from cloud providers stood out as a key driver in Q2. Specifically, we achieved record direct cloud provider revenue in Q2 that comprised 38% of total revenue, growing 85% year over year, and reaching more than 400 million in a single quarter for the first time. Really highlighting the accelerating investments in AI infrastructure and our leadership in addressing this demand. Indeed, three of our top five customers this quarter were cloud providers. underscoring their sustained investments in AI infrastructure and network expansion. Over the past quarter, market dynamics have not only validated our previous assumptions about customer network infrastructure spend, but have also reflected an accelerating demand environment that continues to ramp and exceed our expectations. And we believe this strength is differentiated for us as the market continues to evolve in our direction. Accordingly, orders in the quarter were again significantly greater than revenue. And notably, we are on track for cloud provider orders to double in fiscal 2025 over last year, as we benefit from the breadth and depth of our customer base in this critical segment. And I think this outstanding performance showcases our substantial market penetration in the AI-driven networking space, where we remain a very trusted partner for a wide range of network operators who are investing to scale their infrastructure for high-speed data center and cloud connectivity, including for emerging applications and use cases. To address this growing demand, we are deploying the entirety of our portfolio, including optical systems and interconnects, routing and switching solutions, software, and services. And as the global leader in high-speed connectivity, our WaveLogic technology remains a cornerstone of our competitive advantage. Specifically, our WaveLogic 6 Extreme 1.6T WAN technology maintains at least an 18 to 24 month competitive lead in the market. As our photonic line systems continue to be the de facto industry standard, demand for our reconfigurable line system RLS continues to increase. And our interconnects business is also ramping with tremendous activity and demand. including new awards with three additional major cloud providers this quarter alone. This momentum reflects the growing adoption of and our demand for our 400ZR and 800ZR coherent pluggable solutions, as well as our 1.6T coherent light solution, which we will be sampling by the end of calendar 2025, with commercial availability in the first half of calendar 2026. As cloud providers expand their data center architectures with scale up and scale out AI related deployments, we are broadening and deepening our relationships with them. In fact, we're addressing new data center related applications, a strategy that we've spoken publicly about over the last few months, and where we recently secured two wins. The first is a very strategic win. And it's for an application involving the connection of regional GPU clusters, which is something the industry has been talking about for some time. For context, to support the massive scale and power requirements of AI training and inference traffic, data centers must become more distributed. And historically, these traffic flows were primarily inside the data center. but they are now across multiple data centers over greater distances that require high-capacity, low-latency links. With that, we are excited to report that our coherent 800-gig pluggables and RLS photonics have been selected by a global cloud provider who is investing in geographically distributed regional GPU clusters. We will start to recognize revenue from this incremental opportunity later this fiscal year and ramping into 2026. And as one of the first vendors to address this application and with our coherent optical technology ideally suited for this type of connectivity, we expect to see more of these types of opportunities emerge as cloud providers evolve their data center network architectures to support their AI strategies. The second win is for a focused application inside the data center for out-of-band network management. These networks operate separately from the main data traffic network and provide remote access to monitor and manage data center systems. We recently worked with a global cloud provider to co-develop a solution based on our existing technologies and this is designed to significantly reduce the complexities of these networks and streamline the management of its large-scale data center operations. Now turning to service providers. It's now been several quarters of an improving trend line with service providers as their network investments in high-speed infrastructure become more durable and sustainable following a long period of underinvestment. We are seeing growth and strength across the board with service providers in core optical transport, routing and switching, software and services to address the connectivity needs of their own customer base and to support cloud providers growing bandwidth demands. As a result, our business with tier one North American service providers gained momentum in Q2. And we also had several new customer wins in both the Americas and international regions, including Europe. This momentum is driven in part by new fiber builds as well as MOFIN. In fact, all the record performance of direct DCI in the quarter, we also achieved an all-time record for MOFIN activity in the first half of fiscal 2025, which further demonstrates really how we're supporting the strong nexus between service providers and cloud providers. I also want to touch on the momentum of our software business. I'll start with the Navigator Network Control Suite, which is our multi-layered domain controller. And this provides a comprehensive set of capabilities to help network operators plan, provision, monitor, and troubleshoot their networks. Orders for Navigator increased significantly in the first half of fiscal 2025 by more than 30% year-over-year, driven by increased investment in the unique capabilities of this microservices-based and differentiated platform. Similarly, Blue Planet had a record performance in Q2, achieving its highest ever quarterly revenue at just under $30 million. This milestone reflects the success of our deliberate transformation efforts over the past couple of years, positioning Blue Planet to better serve our customers' digital transformation needs and journey. Today, Blue Planet is at the leading edge of several large provider projects, particularly as the industry incorporates agentic AI and data-driven intelligence to drive transformation. Before I turn the call over to Jim, I'd summarize by saying that we are very encouraged by the strong activity across all segments of our business. In the context of favorable market dynamics and an accelerating demand environment, we have strong momentum that we are confident will drive continued growth. In particular, We are very pleased with the validation from customers that we can strategically expand our market opportunity inside and around the data center, where high-speed connectivity is absolutely critical. In the short term, and as we've been talking about for some time, we are now seeing more AI traffic come out of the data center for training, as I mentioned earlier, and general monetization that's driving cloud traffic. And our set of technologies is ideally positioned to address these connectivity needs at scale. With that, Jim, can you please provide us with updates on our financial performance in Q2, as well as our outlook?