Despite declines in NeoPhotonics’ headline Q2 financial metrics, they were grounds for some optimism for the supplier of advanced optical components. Yes, revenues fell sharply, year-on-year, to $65 million, but it was in the upper side of the guidance range. This was in part due to a ramp up in demand for lasers and 400G and above capable products.

Yet US sanctions on supplying components to Huawei are still clearly having a major impact. The same quarter the previous year, NeoPhotonics raked in $103 million from sales. While the Chinese supplier remained a 10%-plus customer in terms of revenue during Q2, the company’s top brass does not expect that to remain the case when taking the financial year as a whole.

On a GAAP basis NeoPhotonics posted a net loss of $17.4 million, but it does expect to return to profitability in Q4. On a non-GAAP basis, the company expects profitability in the current quarter.

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"Our 400G and above capable revenue grew 100% year-over-year in Q2, and we expect total year-over-year growth to be 100% or higher," said CEO Tim Jenks on the earnings conference call (as transcribed by Seeking Alpha).

"We are in later stage qualification with target hyperscale customers for 400ZR."

Cloud pivot

In parallel with the loss of significant revenue last year following tightened BIS restrictions on Huawei, Jenks reiterated the new strategic message to investors of pivoting to cloud customers.

"As we embarked on this new path, we said the number of 400G and above coherent ports being shipped each year is approximately doubling, and we would have new 400ZR module products that would ramp in 2021," said Jenks.

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During Q2, 400G and above capable products accounted for a 46% slice of NeoPhotonics’ revenue compared with 14% in Q2 2020.

For Q3 the company is forecasting turnover of between $76 million and $84 million. Jenks expects a production ramp-up of 400ZR and 400ZR+ modules in H2 2021.

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— Ken Wieland, contributing editor, special to Light Reading