Ciena Corp. ($CIEN) Stock: Cloud Growth Surges, But Margins Face Tariff Pressure

TLDR

Q2 revenue hit $1.13 billion, surpassing forecasts. EPS missed estimates at $0.42 versus expected $0.52. Cloud revenue surged 85%, now 38% of total. Margins pressured by tariffs and product mix. Shares dropped nearly 13% to $73.05 after earnings.

Ciena Corporation (NYSE: CIEN) closed at $73.05 on June 5, down nearly 13% after releasing its fiscal Q2 2025 results.

Ciena Corp (CIEN)

While the company posted strong revenue of $1.13 billion, at the high end of guidance, investors reacted negatively to a bottom-line miss and rising expenses. Adjusted earnings per share came in at $0.42, below Wall Street’s expectation of $0.52.

The earnings report, released on June 5, 2025, showed robust top-line growth, but profitability was impacted by increased employee compensation and tariff pressures. Operating expenses rose to $369 million, and the company expects that trend to continue into Q3.

Cloud Business and WaveLogic Drive Top Line

Revenue from cloud providers reached over $400 million in Q2, making up 38% of total revenue. This segment grew 85% year-over-year, reflecting strong AI-related demand. Ciena now counts three of its top five customers as cloud providers.

Product innovation continued as the company added 24 new WaveLogic 6 Extreme customers in the quarter, bringing the total to 49 since launch. WaveLogic 5 Extreme and Nano platforms also saw new adoption, reaching 344 and 178 customers respectively.

Blue Planet, Ciena’s software platform, posted a record quarter with nearly $30 million in revenue, signaling traction in software-driven network transformation.

Margins Weighed by Costs and Tariffs

Despite strong revenue, adjusted gross margin was limited to 41%, within guidance but strained by product mix and tariffs. The company faces a $10 million headwind per quarter from tariffs, though it plans to offset most of this impact. The increased demand for lower-margin products like pluggables and reconfigurable line systems continues to compress margins.

Adjusted operating margin stood at 8.2%, and adjusted EBITDA was reported at $117 million. Cash from operations reached $157 million, while the company ended the quarter with $1.35 billion in cash and investments. Ciena repurchased 1.2 million shares for $84 million during the quarter.

Outlook Points to Growth with Higher Costs

Ciena guided Q3 revenue between $1.13 billion and $1.21 billion, topping analyst expectations. However, operating expenses are projected to remain elevated at $370–$375 million, above the prior consensus. Fiscal 2025 revenue is expected to grow approximately 14%, though gross margin is likely to land at the lower end of the 42%–44 % range.

Strong Returns but Sentiment Hit

Despite the post-earnings stock decline, CIEN has outperformed the S&P 500 over the past year, delivering a 51.43% return. However, margin compression and cost management remain key watchpoints for investors heading into the second half of the year.

 

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