Ciena Corporation

Good morning and welcome to Ciena's fiscal fourth quarter and year-end 2025 financial results conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then zero on your telephone keypad. 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, Drew. Good morning, and welcome to Ciena's 2025 Fiscal Fourth Quarter and Year-End Results Conference Call. On the call today is Gary Smith, President and CEO, and Mark Graff, CFO. Scott McFeely, Executive Advisor, is also with us for Q&A. In addition to this call and the press release, we have posted to the investor section of our website an accompanying investor presentation that reflects this discussion, as well as certain highlighted items for the fiscal quarter and year end. 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 CNS 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 quarterly and annual 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 posted earlier today, are an important part of such forward-looking statements, and we encourage you to consider them. Our forward-looking statements should also be viewed in the context of the risk factors detailed in our most recent 10-Q and in our upcoming 10-K filing. Sienna 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 when follow-up. With that, I'll turn the call over to Gary.

Thanks, Greg, and good morning, everyone. Today, we reported record fiscal fourth quarter and full year revenue of $1.35 billion. and 4.77 billion, respectively. These records are a direct result of our sustained, purposeful investment and focus on leading high-speed connectivity technologies, together with disciplined execution and deep collaboration with our customers. Combined, these advantages have positioned and will continue to position Ciena to deliver value in the AI ecosystem. serving both cloud and service provider customers for many years to come. And our progress in driving value from our operating model is also reflected in Q4 earnings per share of 91 cents, up 69% year over year, and full year EPS of $2.64, up 45% from fiscal 2024. Lastly, we generated record orders for the year of $7.8 billion, which resulted in our entering this year again with record backlog. These strong results really underscore our overall market leadership position, as well as the ramping broad-based demand across our business. And to this point, I'd like to provide some insights into what we believe to be robust and durable demand over the next several years. Firstly, we continue to see accelerating demand from our cloud customer providers. And that includes the large hyperscalers and the emerging neoscaler segment that we talked with you about last quarter. In fact, cloud providers today are as focused on scaling their network as they are on their access to power. Orders from cloud providers are very strong and ramping across our portfolio, and they constitute a substantial portion of our growing backlog. It's important to note that this accelerating demand is being driven by several dynamics. And as counterintuitive as it may seem, the cloud providers have largely actually underinvested in their networks to date. particularly relative to other areas of AI infrastructure. The major hyperscalers who are seeing rapid traffic growth not only have the capital to invest, but also have real sustainable business models that are currently constrained by the need to dramatically scale their global networks. These cloud providers cannot and do not intend to strand their significant investments in AI-related data center infrastructure. And I would stress that that traffic needs to leave the data center to be monetized and operationalized. And we are their strategic technology partner for those network requirements. Secondly, demand from our service provider customers continues to grow steadily as they too reinvest in their transport infrastructure after years of digesting accumulated inventory and also having focused on other areas of their networks, most notably and specifically 5G. In addition, service providers' businesses are also being fueled by AI through the enterprise cloud demand and specifically cloud providers' need for managed optical fiber networks or MOFN. And as a proof point here, we have recently won and are working to deploy a large MOFN project in India with two service providers for a major hyperscaler. Additionally, in the quarter, we have secured multiple major MOFN wins in other regions including several in new and emerging geographies for our business. And as a result of these dynamics, service provider orders were up nearly 70% for the year. And in fact, our top three service providers revenue from 24 to 25 grew 16%. Due to the increasing momentum across both cloud and service providers, Ciena's optical market share has continued to grow. and extend our overall leadership, adding two points year to date, and we expect further gains clearly in 2026. In order to address this accelerating demand, we are committed to increasing investments and working with our supply chain partners to scale the business. With product delivery lead times extending in the face of this unprecedented demand, we are proactively expanding our capacity, to ensure our ability to timely meet our customers' demands. Indeed, this has already yielded results for Fiscal 25, as we delivered double our initial revenue growth expectations for the year. Mark will discuss how we are stepping up investments to support demand and the expanding opportunities we expect over the coming years. You know, the simple truth is that AI continues to drive network expansion across all our customer segments, and the scale of investment currently underway is massive and accelerating faster than anything we, or indeed the industry, have seen to date. I would also mention that unlike the COVID-inspired supply-demand imbalance, we are seeing this demand be installed and leveraged for real near-term revenue opportunities at our customers. as evidenced by accelerated implementation services that increased in revenue by 34% in fiscal 25. With that, I'd like to take a moment to share our sort of broader perspectives on the AI opportunity as it relates to high-speed connectivity. As bandwidth continues to grow inside the data center and as this traffic flows out of the data center, AI inference models are moving closer to the network edge. And for the reasons that I mentioned earlier, we will continue to expand our existing leadership and addressable market in high-speed connectivity in the WAN. In addition to the wide area network, we're also seeing a significant addressable market opportunity in and around the data center. It is, I think, well understood that cloud providers are investing heavily in data centers to deliver on the current and future promises of AI. Many third parties are estimating capital spending of more than $7 trillion through the end of the decade in all AI-related infrastructure. And this is obviously necessitating the need for both training and inference workloads at massive scales. As a result of the massive growth in AI workloads and to address growing power and space constraints, cloud providers are planning and building distributed AI data center training clusters or AI factories, which require multiple clusters to act as one. In fact, along with those power and space constraints, the ability of the cloud providers and specifically the major hyperscalers to scale their global networks is becoming the critical long pole in the tent for them to operationalize AI for both training and inference purposes. Within these data center environments, there are three key connectivity requirements. To scale up within a data center rack, to scale out between racks in a data center, and finally to scale across between geographically distributed data centers which must operate at the highest levels of performance with super high capacity and the lowest latency possible. With our innovation and time-to-market leadership in high-speed connectivity solutions, our position could not be better to fulfill this critical demand. This growing AI-driven opportunity for Ciena is what we refer to as in and around the data center. In fact, our in and around the data center opportunities grew threefold from 24 to 25 and are a major contributor to our 26 expected growth rate. We have proactively invested in our portfolio to intersect this growing market segment and with a few notable examples. First is our interconnects portfolio, comprising both our power and space savings ZR and ZR plus pluggables and our optical components. We expect interconnects to play a meaningful role in scale up, scale out, and in fact scale across workloads. In fiscal year 25, we surpassed our target of more than doubling FY24 pluggable revenue, reaching revenue of more than $168 million. In the quarter, our WaveLogic 6 nano 800 gig pluggables are shipped for initial revenue. And since the end of the quarter, we have shipped 800 ZR plugs to three additional cloud providers for testing and certification. And with regard to components, we address the cloud provider's preferred disaggregated consumption model with our high-speed, coherent, and other industry-leading WaveLogic technologies. including a DSP, SIRTES, and other high-speed analog and electro-optical components. In addition, our components business now includes the electrical and optical interconnect solutions from our acquisition of Nubis Communications. The Nubis technologies and expertise will help us address the scale-up and scale-out opportunities inside the data center. We're excited to have the Nubis team as part of Ciena and are on track to GA the first products in fiscal 26. And as we previously noted, as technology advances and data rates increase, the components portion of our interconnects portfolio primarily represents revenue opportunities beyond fiscal 26. In addition to our interconnects portfolio, as market needs continue to evolve, driven by AI, we're seeing new architectural applications arise in and around the data center. With two recent cloud provider use cases, I think of particular note. First use case is the scale across architecture, linking geographically dispersed AI training clusters using our market-leading RLS photonic line system. Wave servers and interconnects portfolio. This is an opportunity we discussed over the past couple of quarters, where a large hyperscale is linking to two regional data centers to build an AI backbone. I'm pleased to report that this hyperscaler is now extending this architecture to more locations. Additionally, I am pleased to announce that two more major hyperscalers have chosen our optical solutions for their ScalarCross training applications as well. The second use case is out-of-band network management. Ciena's unique DCOM solution leverages our XGS PON and other routing and switching products and was initially designed with Meta to meet hyperscale requirements. Today, I'm pleased to announce that our DCOM business with Meta has expanded as they plan to deploy in multiple new data centers. Also, we're engaged in advanced technical discussions with additional hyperscalers to deploy this DCOM solution in their data centers. I'd like to briefly acknowledge here that the scale across and DCOM wins are just the most recent AI-related use cases to materialize for us in recent months. They are great examples of how we co-create and productize with market-leading solutions to address critical customer scaling requirements. And we fully anticipate continuing to develop additional innovative solutions with our customers as they monetize AI across the various architectures. Before I turn it over to Mark... I really want to reiterate that as we leave Q4 and indeed the entirety of 2025, we have absolute conviction that the positive market dynamics and our technology leadership provides us with increasing confidence that the durability of demand and our business and financial trajectory are very strong. I'll now hand it over to Mark for a closer look at our Q4 and fiscal 25 performance and outlook. Mark.