We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
How is Ciena's DCOM Unlocking a New Growth Engine Inside Data Centers?
Read MoreHide Full Article
Key Takeaways
Ciena expands into data centers with DCOM, targeting the AI-driven infrastructure demand surge.
CIEN's fiber-based DCOM cuts rack space, lowers power use and simplifies scaling for AI workloads.
Ciena backlog hit $7B after a $2B jump, with strong orders tied to hyperscaler 2026 CapEx plans.
The AI infrastructure boom is reshaping the economics of networking, and Ciena Corporation (CIEN - Free Report) 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 - Free Report) 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 - Free Report) 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.
View the Zacks #1 Rank List
Image: Bigstock
How is Ciena's DCOM Unlocking a New Growth Engine Inside Data Centers?
Key Takeaways
The AI infrastructure boom is reshaping the economics of networking, and Ciena Corporation (CIEN - Free Report) 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 - Free Report) 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 - Free Report) 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%.
Image Source: Zacks Investment Research
CIEN trades at a forward 12-month price-to-earnings (P/E) ratio of 77.96, above the industry’s 54.97.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for CIEN earnings for fiscal 2026 has been revised upward over the past 60 days.
Image Source: Zacks Investment Research
CIEN currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.