Ciena CEO says 2023 is all about catching up to demand

Ciena’s fiscal Q4 2022 earnings report beat analyst expectations, despite a 6.8% drop in revenue to $971 million and a 31.4% drop in net income to $90.9 million. CEO Gary Smith told Fierce in an interview the company continues to have strong order intake but noted the supply chain environment – while somewhat improved – remains a bottleneck. So, while others are biting their nails over uncertainty in the macro environment, Smith said that for Ciena 2023 “is more about supply and being able to meet demand” than anything else.

According to Smith, Ciena’s order backlog hit $4.2 billion in the recent quarter. That's down slightly from around $4.4 billion in FQ3 but more than double the backlog it had coming into the year. Given its business composition, he noted its queue is mostly comprised of optical orders. However, he highlighted strong demand for its routing and switching products, stating it surpassed 200 customers for its Adaptive IP offering in FQ4.

Ciena previously identified the routing and switching market as a target growth area. Smith said it’s investing heavily in this space both organically and inorganically through deals like its acquisitions of Vyatta, Tibit and Benu Networks in 2022.

As the company heads into its fiscal 2023, Smith indicated it expects to see especially strong demand from webscale customers and for submarine cable connectivity. He also predicted growth in India, which is embarking on 5G upgrades.

“As I think about the different opportunities we’re opening up, our available market continues to grow as a company,” Smith said. “We’re very bullish on the overall secular growth despite all of the global economic challenges.”

In FQ4, Converged Packet Optical sales slipped from $754.6 million to $649.9 million, while Routing and Switching grew from $74.2 million to $102.8 million. Platform Software and Services revenue rose from $66.1 million to $71.6 million and BluePlanet sales increased from $19.8 million to $21.2 million. Global Services revenue dipped from $126.8 million to $125.5 million.

Though its optical unit – by far its largest division – took the biggest revenue hit, Smith said Ciena hasn’t been distracted by its routing and switching ambitions. “We’re not complacent about it. We’re investing heavily in optical innovation,” he said. “We were shipping 800-gig and basically the closest player was two to three years behind us. So, I would expect that dynamic to continue.”

This story has been updated to correct the FQ3 backlog figure.