Investing.com -- Networking equipment maker Ciena hosted its Investor Innovation Day on September 25, voicing confidence in sustained demand as rising data traffic from new data centers drives growth and underscoring the role of its technology in powering cloud and AI infrastructure.
Commenting on the event, analysts at Morgan Stanley and UBS pointed to durable growth opportunities, though with different emphasis on valuation and risks.
Morgan Stanley noted that every data center coming online drives bandwidth requirements, with data center bandwidth expected to grow at a 35% CAGR between 2024 and 2028.
Analyst Meta Marshall highlighted Ciena’s recent co-design deal with Meta, where the DCOM technology delivers “99% space savings and 30% power reduction,” and said adoption could extend across all of Meta’s new facilities, with other hyperscalers also showing interest.
Marshall also pointed to the scale of Ciena’s recently announced AI training deal, worth several hundred million dollars, using 100km interconnects and 800ZR technology, reinforcing its ability to capture meaningful share across AI opportunities.
The Nubis acquisition was flagged as strengthening Ciena’s positioning for inside-the-data-center opportunities, reducing power and latency while expanding component integration.
The bank further noted that Ciena is doing more services work with hyperscalers and neoclouds, which provides better visibility into real demand since it ensures equipment is being put into use rather than stockpiled.
UBS focused on the AI-driven uplift in demand, estimating that Ciena’s bookings and Meta deal provide visibility into at least 17% revenue growth in the coming year.
The bank said “Cloud/AI is likely to drive at least a mid 30s% bandwidth CAGR the next several years,” with knock-on effects benefiting service providers in markets such as North America and India.
UBS, however, cautioned that markets appear to be pricing uninterrupted AI-related capex growth, pointing out that investors are effectively underwriting a 20% CAGR over the next decade after data center spend doubled from $300 billion in 2023 to an expected $600 billion.
Analysts led by David Vogt described this assumption as aggressive given Ciena’s shares already trade at ~36x forward earnings, well above the historical average.
Service providers remain a key pillar of growth. Morgan Stanley noted spending has normalized, with telcos expected to expand edge networks to support agentic AI applications.
UBS added that Ciena’s portfolio, including reconfigurable line systems and multi-rail products, should benefit as providers seek to maximize fiber capacity.
