Hyperscalers are focused on monetizing their AI compute investments, which continues to direct a larger share of spending towards network infrastructure, observes Ciena chief Gary Smith.
In sum – what to know:
Market expansion – Ciena said its addressable market could approximately double to roughly $50 billion by 2029 as AI drives investment across WAN and data center networks.
Spending shift – The company expects a growing share of hyperscaler capital expenditure to be directed toward networking infrastructure as operators seek to monetize AI compute investments.
Capacity investments – Ciena plans to spend $250 million-$275 million in capital expenditures this year while expanding manufacturing and supply capacity to meet demand.
Ciena said artificial intelligence-driven demand is expanding opportunities across network infrastructure, leading the company to project that its addressable market could approximately double to roughly $50 billion by 2029.
Speaking during Ciena’s fiscal second-quarter earnings call, president and chief executive officer Gary Smith said the company continues to benefit from AI-led demand from both hyperscalers and service providers.
“Since we spoke to you last in March, the largest hyperscalers have increased their 2026 capital expenditures with indications of continued expansion into 2027 and beyond,” Smith said.
According to Smith, hyperscalers are focused on monetizing large AI compute investments, a trend that he expects will direct a larger share of spending toward networking infrastructure.
“Given the priority to monetize somewhat constrained compute investments, we expect an increasingly larger proportion of that spend will be directed towards network infrastructure,” Smith said.
The company also said service providers are reinvesting in network infrastructure after several years of restrained spending, creating new opportunities across long-haul, metro, and managed optical fiber networks.
Ciena believes these trends are expanding opportunities across both its traditional wide-area networking business and newer markets in and around the data center.
The executive said demand for high-capacity, low-latency, and high-speed connectivity is being driven by AI workloads including model training, data ingestion, and inference.
One area benefiting from this trend is Ciena’s next-generation intelligent line system, RLS Hyper Rail. According to Smith, the platform was developed with multiple hyperscalers and is designed to address growing capacity and efficiency requirements associated with data center interconnect networks and AI inferencing.
During the earnings call, Smith announced what he described as the industry’s first multirail order from a leading hyperscaler for the platform.
Ciena said RLS Hyper Rail supports multiple fiber pairs operating in parallel over hundreds of kilometers using advanced amplification technology. According to the company, the platform is designed to deliver higher density as well as improved space and power efficiency.
Smith also said the company is engaged in discussions with additional hyperscalers, neocloud providers, and service providers evaluating the platform.
The company reported continued momentum for its Data Center Out-of-Band Management (DCOM) solution, which combines routing and switching products with passive optical network technology. Smith said DCOM contributed to 88% year-on-year revenue growth in Ciena’s routing and switching segment during the quarter.
The executive added that, in addition to Meta, Ciena has received initial orders from a second hyperscaler customer and is progressing through lab qualifications with a third hyperscaler customer.
AI demand is also supporting growth across Ciena’s interconnect portfolio. Smith disclosed that the company recently secured a new win with a major hyperscaler for its high-performance coherent modules.
According to the company, the modules will be deployed across metro and long-haul data center interconnect networks supporting both WAN and data center applications.
Ciena also said it continues to see strong demand from hyperscalers for its 400G and 800G pluggable optics products and remains on track to more than double pluggable revenue compared with 2025.
To support anticipated demand, chief financial officer Mark Graf said the company continues to invest in manufacturing and supply-chain capacity.
“We are focusing our resources to secure supply and manufacturing capacity to deliver for both our customers and our owners,” Graf said.
The company remains on track to spend between $250 million and $275 million in capital expenditures this year, including investments in future growth opportunities and supply readiness.
Ciena recently participated in an RCRTech webinar titled “Scaling Optical Networks for the AI and Hyperscale Era,” which can be viewed here.
