- Ciena isn’t worried about tariffs yet but is is keeping an eye on how events unfold
- Execs continued to ride the AI hype train on the Q1 2025 earnings call
- Ciena seems to have moved past its inventory backlog issues
What’s happening (and not happening) with President Donald Trump’s tariffs has spurred confusion across many industries, telecom included. But optical vendor Ciena isn’t fretting about tariffs disrupting its business with cloud and service providers – at least for now.
Given how “fluid and dynamic” the situation is, Ciena CFO James Moylan said the company so far hasn’t included any potential impacts from tariffs in its financial guidance.
That's perhaps surprising given Moylan noted most of the products in Ciena’s supply chain come from Canada, Mexico, India and Thailand.
But tariffs or not, bandwidth demand related to AI is poised to continue growing through this period, he said on the company's Q1 2025 earnings call. And Ciena isn’t exactly throwing caution to the wind, either.
“We do have a concentration today in Mexico and Thailand, but we do have the capability to move that around depending upon what the shape of the ultimate tariffs are,” said Moylan.
Thus far, U.S. tariffs on China are already in effect, with broader tariffs on steel and aluminum imports due to take effect this week. However, tariffs on certain Canadian and Mexican goods were recently postponed until April.
“We are certainly aware of the potential for disruption in the U.S. and the international economy, given the prospect of additional tariffs and retaliatory actions,” Moylan added.
Still, retooling supply chains and onshoring operations can take a while, as AvidThink Principal Roy Chua recently told us. “Even less sophisticated chains take at least six to 12 months to shift," he said in February.
Flying high on AI
Ciena in December expressed much optimism around how AI is reeling in new business for the vendor. No surprise, then, that execs continued to ride the AI hype train in Q1.
CEO Gary Smith said service providers generated 51% of Ciena’s overall revenue in Q1, while cloud made up 32% of total revenue. Lumen was the latest customer win on the service provider side, as it plans to use Ciena’s WaveLogic coherent optical pluggables to pursue its AI ambitions.
Ciena’s interconnect portfolio, which includes both pluggables and component technologies, “represents a substantial growth opportunity for us moving forward,” said Smith. “Particularly in the context of AI within the metro data center campus and, in the future, inside the data center itself.”
The vendor is among the top dogs in the global optical market alongside players like Cisco, Huawei, Fujitsu and Nokia. Indeed, Nokia is shaping up to become a more sizable competitor now that it’s closed its $2.3 billion purchase of Infinera.
Optical vendors in the past couple of years have faced slowed revenue due to excess equipment inventory. But 2025 seems to be the year everything’s coming up optical – at least from Ciena’s perspective.
“The supply and demand dynamics that we experienced in previous periods continue to come into balance, and we believe service provider inventory digestion impacts are largely now complete,” Smith said.