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Corning’s Optical Communications sales of $930 million for the quarter were down 17% year-over-year
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CEO Wendell Weeks said Q1 will be the low-point for 2024
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The company sees big growth opportunity with generative AI because of the connections needed for GPUs
Corning is waiting for a pair of white knights – BEAD and AI – to ride to its rescue after posting lackluster earnings for the first quarter of 2024.
Corning reported sales of $3.26 billion in Q1, down 3% from the same quarter in 2023. Of that, its Optical Communications business, accounted for $930 million, and its display technologies, such as TV screens, $872 million. The company also makes smartphone covers, semiconductor-related products and gasoline filters, among other glass-type products, which in total accounted for the balance of net sales.
Surprisingly, sales for the Optical Communications business, which supplies fiber products for an industry on the brink of deploying massive amounts of fiber in the U.S., were down 17% year-over-year.
On yesterday’s earnings call, Corning CEO Wendell Weeks said things are set to turn around soon.
“We continue to expect that the first quarter will be the low quarter for the year. We are executing our plans to add more than $3 billion in annualized sales within the next three years, and we already have the required capacity and capabilities in place.”
He attributed the low first quarter sales to inventory drawdowns by carriers who had stockpiled equipment during Covid. “Once carrier inventory starts returning to more normal levels and our customers resume purchasing to support their deployment rates, we would expect to see our order book grow. And that's exactly what is happening,” said Weeks.
Corning noted fiber shipments are more than 30% below trend. But Weeks said, “In conversations with our large carrier customers during the quarter, they reinforced their commitment to increasing fiber deployments in 2024 and beyond. Additionally, we expect BEAD related projects for network builds in underserved areas to add to our addressable market for the next several years. The industry expects funding approvals to begin late this year, leading to spending in 2025.”
BEAD refers to the $42.5 billion Broadband Equity, Access, and Deployment program.
Fiber hungry AI
Weeks also indicated generative AI (GenAI) will help Corning because of all the activity in data centers. He explained that in order to meet the computational demands of AI, customers are building fiber-rich networks in their data centers to connect graphical processing units (GPUs).
Weeks explained that GPU clusters require a lot more fibers for each port. A typical front-end rack filled with CPUs is connected with about 32 fibers. But GPU racks will need closer to 256 fibers. “So, this is what leads to the demand for us to do more Corning innovation,” he said. “How do you fit eight times as many light pipes into fundamentally the same area?”
To meet these high-density requirements, Corning has introduced new fiber, cable and connectivity products such as its RocketRibbon cable with Flow Ribbon technology that could reduce cable diameter by 60% with fibers per cable approaching 7,000.
“We’re accumulating significant customer wins for upcoming AI datacenter builds,” said Weeks. “We will see this in our financials as customers begin to build large GPU clusters and adopt our latest high-density innovations."
We'll be watching to see if the promised turnaround materializes.