Ciena reports a Q2 loss, lowered revenue outlookCiena reports a Q2 loss, lowered revenue outlook

Telecom networking giant Ciena reported a second quarter loss and sagging network equipment sales. However, the vendor buffered the news with expectations that the struggling telecom sector is working its way through its inventory backlogs and that network automation and AI are still top of mind as capex drivers.

Ciena reported a quarterly net loss of $16.8 million, or 12 cents a share, on revenue of $910.8 million. The company's revenue fell by 20% compared to the year-ago period when Ciena was wrestling with an order backlog that was "at least double the normal amount," Light Reading reported.

Ciena's CEO Gary Smith told Light Reading back then that orders weren't being canceled. Service provider customers were slowing spending and pushing orders to later quarters, and, by extension, Smith and the company were not moving products as quickly as they'd once hoped.

A year later, the backlog guessing game continues, but inventory levels and supply chain hiccups are less of an issue. Service provider customer orders are still being kicked around the calendar but Ciena reported that it reduced its backlog by $300 million quarter-to-quarter; the backlog stands at $1.9 billion.

Smith noted in the company's Q2 call that the industry dynamics are unchanged – demand still exists, the need for more bandwidth is growing and the buildout of infrastructure to support AI applications will ensure that capacity challenges remain. 

In the company's earnings press release, Smith is quoted as lauding the strength of Ciena's business "amid a challenging near-term environment as service providers continue to work through existing inventory."

It'd be more alarming if Ciena's revenues were entirely tied to telecom. They're not; nearly half the company's revenue comes from cloud providers, government entities and cable operators. Nearly a third of its revenue during the quarter came from outside the US, with revenue from India growing 16% sequentially, the company said.

Ciena projects that its revenues for next quarter will be between $880 million and $960 million. That assumes the US economy doesn't significantly worsen, and the company doesn't see any major delays in delivering its backlogged inventory to service provider customers.