Corning’s Optical Communications business was the largest contributor to its overall sales in Q3, with unit revenue increasing 16% year on year to $1.3 billion. But CEO Wendell Weeks said on an earnings call this boost isn’t expected to carry over into Q4. Instead, the company warned of a sequential decline in optical revenue in the current quarter.
According to Weeks and CFO Ed Schlesinger, the forecast Q4 slump is typical of the optical market, which they said can be “lumpy” from quarter to quarter. They stressed it is not a reflection of the overall demand environment, but rather the timing of projects from a handful of key telco customers in North America.
“Macro demand in opto is incredibly strong,” Weeks said. “The nature of telecommunications is that it’s a pretty concentrated industry. So, that all that tends to happen is that when some of our bigger customers end up changing their timing or altering their timing, that’s what leads to the lumpiness of our revenue.”
On the optical front, the company noted it’s implementing another round of price increases to pass rising energy and raw materials costs on to customers. It applied a price bump earlier this year as well, mentioning the move on its Q1 earnings call.
Thus far, Weeks said it hasn’t seen pushback on the latest cost changes. He noted that’s in part because the company’s “More Corning” approach saves operators on materials and time to deployment. This angle is one it pitches to cloud-based players in particular, offering “totally engineered connectivity systems” that can slash installation times by months, he added.
Metrics
Corning’s overall revenue fell 4% year on year to $3.5 billion as the boost from Optical failed to offset declines in its Display and Specialty Materials units. Net income of $208 million was down 44% year on year.
In Q4, the company said it is expecting “core” sales of between $3.45 and $3.65 billion. That would mark a dip from $3.68 billion in revenue in Q4 2021.