- Ciena will redirect R&D spending from residential broadband access to AI and data center products
- The move is in part due to the slower 25G uptake in broadband, said CEO Gary Smith
- He noted Ciena is seeing increased demand from “neoscaler” companies
As Ciena continues to chase AI and cloud growth, it wants to make sure it’s funneling research and development money in the right direction.
To that end, CEO Gary Smith announced today Ciena intends to “[redirect] additional R&D investment” into coherent optics, routing and other data center interconnect products, while pulling back on spending for its residential broadband access portfolio.
“To be clear, we will continue to sell and support our existing broadband access products,” he said on the company’s Q3 2025 earnings call. “However, we will be limiting our forward investments only to strategic areas such as DCOM.”
That refers to Ciena’s data center out-of-band management solution, which involves replacing bulky legacy hardware like copper cabling and console servers with passive optical network (PON) technology.
Ciena’s push from broadband explained
The reason for reducing residential broadband spend boils down to speed demand, Smith told Fierce in an exclusive interview. The move to 25G PON and beyond is “happening slower” than expected in that segment, as Ciena’s broadband access customers are still mainly using 10G for deployments.
“Folks are more concentrated on 10-gig and driving that out, and there’s a good market for that,” said Smith. “As we looked at our overall portfolio and our investments in [25-gig], we see so much opportunity in these different AI workloads that we want to continue to really make sure we’re heavily invested in that.”
Dell’Oro Group VP Jimmy Yu thinks Ciena’s move to re-allocate R&D dollars makes sense so that the company is not “spread too thin and [misses] out the biggest opportunity sitting in front of them.”
“My guess is that to address the future of AI workloads and AI data center interconnect, Ciena will need to not only maintain their cadence on launching new high performance coherent optics like the WaveLogic 6e for long distance 1.6 Tbps connections, but also optical devices for shorter distances like 800 ZR/ZR+ plugs and even shorter distances that take them inside the data center,” Yu explained.
Ciena considers the WaveLogic series its bread-and-butter for coherent optics. The company in Q3 gained 11 new customers for its WaveLogic 6 Extreme product, bringing its total customer tally to 60.
Companies deploying WaveLogic 6 include operators such as Arelion, Lumen and Telstra, which are upgrading their networks to support demand from cloud customers.
“Neoscalers” are the new wave
Aside from service providers and hyperscalers, Ciena is also seeing growing interest from a cohort called “neoscalers,” Smith told Fierce.
The term encompasses a wide range of companies, he said, from “massive compute software type players” to GPU-as-a-service providers, smaller data center and colocation providers, and more.
A neoscaler could be “anybody from OpenAI to Oracle to Apple, frankly,” Smith said. “So, it’s a very broad tent.”
These companies typically build dedicated networks for themselves or a managed optical fiber network (MOFN) for a third party. As far as Ciena’s concerned, it’s “a whole new market.”
“The point is that these players, together with the hyperscalers are now leaning into the network,” Smith added. “Because they realize that if they’re going to enable all of the infrastructure for AI in all of its various forms…traffic has to come out of the data center.”