First Broadcom, Now Ciena… But the Networking Opportunity Is Still Ahead

In addition to Broadcom (AVGO) being in the red today, Ciena (CIEN), which is part of the Pro Portfolio’s EPS All-Stars basket, is down double digits as well. Much like the parabolic rise in AVGO shares ahead of Broadcom’s earnings report last night, CIEN shares have also been on fire of late ahead of this morning’s earnings report, up nearly 50% since we added them to the EPS All-Stars basket and more than 100% since early March.

With that in mind, by the numbers, Ciena delivered April-quarter results that easily cleared market expectations, with EPS of $1.64 on revenue of $1.57 billion, compared to the market consensus of $1.46 and $1.5 billion, respectively. The company lifted its 2026 top-line guidance to $6.2 billion-$6.4 billion from a December 2025 forecast of $5.7 billion-$6.1 billion and the $4.8 billion posted in fiscal 2025.

The issue, and it’s the same one we saw with Broadcom, is the market priced in a much larger “beat-and-raise” scenario.

But let’s dig a big deeper…

The first standout comment in Ciena’s earnings call, in our view, and it’s one that will not surprise you given our view on AI driving networking demand, was the following:

“… all customers are prioritizing high capacity, low latency and high-speed connectivity, underpinned by the need to transport data for AI, including model training, data ingestion and inference. To that end, our latest view is that the addressable market will approximately double over the next several years to roughly $50 billion by 2029. And to be clear, this significant market growth includes our traditional WAN markets and the high-growth markets in and around the data center.“

Bringing support for that, Ciena’s backlog increased ~$600 million, quarter over quarter, to $7.7 billion, with management sharing that order activity should lead Ciena to exit the current fiscal year, which ends in October, with an even higher level of backlog.

The second standout comment was one about a supply-constrained environment. We’ve heard this before, notably from Arista Networks (ANET), but Ciena’s reminder of that helps explain today’s move lower in ANET shares. The reason for that is that while both companies are in the networking space, because their technologies address different layers of the network, the two are frequently seen as partners rather than direct competitors.

While we understand the supply constraint issue and discussed why we are likely to see periods of ramping revenue with intermittent pauses as more capacity comes online, we intend to play the long game. Giving us a helping hand of reassurance on that was the Computex comment being attributed to Nvidia’s (NVDA) Jensen Huang:

“Next is the memory bottleneck. Larger models required enormous amounts of memory and bandwidth, and the memory companies are scaling aggressively now to match demand. Just recently, we’ve seen three new one trillion-dollar companies emerge. The bottleneck is shifting again; now it’s connectivity that has redefined the limits of the infrastructure.“

And you know how we feel about investing in pain points and companies that address them. With that in mind, we intend to remain holders of ANET shares, especially with Goldman upping its multi-year hyperscaler capital spending forecast to $5.3 trillion between 2025-2030. Previously, Goldman saw that figure at $4.5 trillion.

Remember, two key customers for Arista are Microsoft (MSFT) and Meta (META), which account for around one-third of total revenue. That outlook is also a big positive for our chip positions and others benefiting from the AI and data infrastructure buildout.

As for the Portfolio’s All-Stars exposure to Ciena, we’ll need to see if the shares make it through the next reconstitution process. That process will begin on June 30 and be completed on July 1.

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At the time of publication, TheStreet Pro Portfolio was long ANET, AVGO, CIEN, META, MSFT and NVDA.