While most of the biggest artificial intelligence (AI) hyperscalers have seen their stocks weighed down by massive spending plans for 2026, many AI infrastructure companies supplying key equipment for new data centers have seen their stock prices soar over the past year. That includes Ciena (NYSE: CIEN), which sells high-speed networking systems. The company’s stock is up 609% over the past year, driven by strong demand for its optical networking products.
But after its incredible run, investors may be wondering if it’s too late to buy the stock.
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A long runway of strong revenue growth
Ciena is a leading innovator in long-haul data networking equipment. Its products play a key role in fiber networks laid by telecom companies, increasing and speeding up data transferred across their networks. Nearly half of its revenue still comes from telecom customers, but a growing share comes from U.S. hyperscalers as they build out networks of AI data centers with massive data-transfer needs.
Ciena provides products and systems that allow hyperscalers to connect data centers to one another as well as connect servers to other servers within the same data center. While the latter is seeing reasonable growth, Ciena’s products don’t stand out against the competition. The former category is where it has built a considerable technology lead and faces limited competition. And the growing number of AI data centers has been a massive boon.
Ciena offers best-in-class long-distance optical networking equipment. It’s historically first to market with new speed standards; the latest is its 1.6 terabit-per-second product, introduced in 2024. That technology lead is bolstered by its highly focused R&D budget, which historically accounts for about one-fifth or one-quarter of its revenue.
Ciena’s technology lead is particularly valuable to energy-constrained hyperscalers. Its 1.6 terabit-per-second product delivers twice the capacity per wavelength (double the speed) with the same power requirements as an 800 gigabit-per-second system. In other words, it halves the energy cost to transmit data. And while data transmission accounts for only a small share of data center power consumption, it can add up to significant savings when scaled to the level of the largest tech companies.
