Ciena Posts 37% Revenue Jump, Sets 2029 Margin Targets
Ciena reported 37% revenue growth and $2.11 adjusted EPS. New 2029 targets aim for 50% gross margin and 30% CAGR.
Key points
- Ciena Q3 revenue rose 37% to $1.67 billion, with adjusted EPS tripling to $2.11.
- Company targets 30% CAGR and 50% gross margin by fiscal 2029.
- Optical networking revenue grew 46% to $1.19 billion, driven by cloud demand.
Ciena reported third-quarter fiscal 2026 revenue of $1.67 billion, a 37% year-over-year increase. Adjusted earnings per share tripled to $2.11, while backlog expanded by $800 million to reach $8.5 billion. The company achieved an adjusted gross margin of 46.4% and a record operating margin of 22.5%.
Following strong quarterly results, Ciena announced fiscal 2029 targets at its September 16 investor forum. The company projects a 30% compound annual revenue growth rate from 2026 to 2029. It also targets an adjusted gross margin of approximately 50% and an operating margin between 32% and 35%.
Revenue Growth Driven By Optical Demand
Optical networking revenue rose 46% to $1.19 billion, fueled by cloud provider spending that grew more than 80%. Management projects backlog exceeding $10 billion by year-end, providing visibility into fiscal 2028. Bookings in the first month of the fourth quarter nearly matched the entire previous quarter's orders.
Analyst Reactions Split On Margin Sustainability
Wall Street initially cut price targets after the earnings release, citing supply constraints. TD Cowen reduced its target to $400 from $575, while B. Riley lowered it to $347. However, following the 2029 outlook, firms like Barclays raised their target to $548 and Northland to $550.
Morgan Stanley maintained an Equal Weight rating, noting that it requires more quarters of new product flow to confirm gross margin improvements. The firm highlighted that roughly 70 basis points of the current margin came from a one-time tariff refund that will not recur. Two customers accounted for 41.7% of revenue, creating concentration risk.
Institutional Positions Reflect Mixed Sentiment
Hedge fund ownership increased to 81 funds from 73 in the prior quarter. Arrowstreet Capital increased its stake by 21% to 1.68 million shares, while AQR Capital added 8%. Conversely, Jericho Capital reduced its position by 67%. Short interest remains low at 2.3% of the float.
Shares trade at 39.37 times forward earnings as of September 18, 2026. Cash from operations is expected to decline in the fourth quarter as Ciena disperses funds to support long-term component agreements through 2029. These investments aim to secure supply for the projected demand surge.
