The AI infrastructure boom is reshaping the economics of networking, and Ciena Corporation CIEN is well-positioned to benefit from this trend. Ciena, known for long-haul optical networking, is now expanding deeper into data centers, targeting a new wave of demand with its Data Center Out-of-Band Management (DCOM) solution at the core of this shift. DCOM targets the critical out-of-band management layer in data centers, replacing complex, space- and power-intensive copper networks with a fiber-based Passive Optical Network.
This shift enables centralized management, a smaller hardware footprint, lower power consumption and easier scaling for AI workloads, resulting in a potential up to 99% reduction in rack space in some hyperscaler deployments. According to management, the four largest global hyperscalers have indicated a sharp increase in 2026 CapEx to more than $600 billion combined, driven by substantial AI infrastructure needs. These investments create multiple growth opportunities for Ciena, not only in WAN but also increasingly within and around data centers, covering scale-up, scale-out, scale-across and its DCOM solution.
DCOM continues to be a major data center opportunity, built on its XGS-PON, routing and switching platforms, initially developed with Meta for hyperscale needs. CIEN is now expanding its engagement to two other major hyperscalers, as strong first-quarter fiscal 2026 demand led to robust orders and a significantly higher backlog. Ciena reported a historically strong order book and record backlog, indicating strong long-term demand for network infrastructure. The backlog increased by approximately $2 billion to reach $7 billion, with most new orders scheduled for delivery in fiscal 2027.
A Deep Dive Into CIEN’s Industry Rivals
Strong demand for Cisco Systems, Inc.’s CSCO products in developing AI infrastructure has been an encouraging sign for the company. In fiscal 2025, it received AI infrastructure orders from web-scale customers in excess of $2 billion. AI infrastructure orders taken from hyperscalers totaled $2.1 billion in the second quarter of fiscal 2026. These orders are coming from some of the biggest players in cloud computing and reflect a growing demand for AI-optimized networks. It expects to take AI orders in excess of $5 billion and to recognize more than $3 billion in AI infrastructure revenue from hyperscalers in fiscal 2026.
Arista Networks, Inc. ANET is likely to benefit from its software-driven, data-centric approach that helps customers build their cloud architecture and enhance the cloud experience they offer their clients. ANET holds a solid foothold in 100-gigabit Ethernet switching for the high-speed datacenter segment, increasingly gaining market traction in 200- and 400-gig high-performance switching products and remains well-positioned for healthy growth in data-driven cloud networking business with proactive platforms and predictive operations. Backed by solid enterprise demand, its unified EOS and CloudVision software stack enables seamless deployment across WAN, campus and data centers, giving it a clear competitive edge.
CIEN Price Performance, Valuation and Estimates
Shares of CIEN have surged 184.5% in the past six months compared with the Communications - Components industry’s growth of 143.8%.
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CIEN trades at a forward 12-month price-to-earnings (P/E) ratio of 77.96, above the industry’s 54.97.
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The Zacks Consensus Estimate for CIEN earnings for fiscal 2026 has been revised upward over the past 60 days.
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CIEN currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
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This article originally published on Zacks Investment Research (zacks.com).