Ciena’s backlog is expected to exceed $10 billion by the end of fiscal 2026, as cloud customers place orders faster than the company can currently fill them, according to a Bank of America note shared with TheStreet.
Ciena (CIEN) makes optical networking equipment that moves large amounts of data over fiber between data centers and communications networks. Demand for those systems has increased as large cloud companies build more computing infrastructure for artificial intelligence.
Bank of America (BAC) analyst Tal Liani said limited component supply is holding back how quickly Ciena can ship equipment. His latest product-by-product analysis estimates calendar-year 2026 revenue growth of 35% to 40%, modestly above Wall Street’s roughly 33% estimate.
The stock has gone the other way over the past two sessions.
Ciena fell 9.95% on Oct. 12 to $405.01 during a broader selloff in optical-networking stocks. Investors took profits after a strong run in the sector, and renewed questions emerged over how long hyperscalers can keep spending heavily on AI infrastructure.
Shares were down another 2.34% at $395.54 around midday Oct. 13.
BofA maintained its Buy rating and $550 price target.
Component supply is limiting Ciena shipments
BofA said Ciena historically carried around $2 billion of backlog. That climbed to about $5 billion by the end of fiscal 2025, and management expects the figure to exceed $10 billion by the end of fiscal 2026.
Backlog covers orders customers have already placed but Ciena has not yet turned into reported revenue. BofA said the company cannot currently source enough components to fill all of those orders as quickly as customers want.
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The bank’s 2026 model highlights two numbers:
- Total revenue growth: 35%-40%, compared with Wall Street’s roughly 33% estimate.
- Direct cloud revenue growth: 65%-72%, contributing about 28 percentage points to Ciena’s total revenue growth.
Ciena’s latest results already show growth near that pace.
Fiscal third-quarter revenue rose 37% from the prior year to $1.67 billion, and the company raised its fiscal 2026 revenue forecast to $6.42 billion, plus or minus $50 million. That would represent about 35% growth at the midpoint.
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Cloud customers now drive more than half of Ciena’s revenue
Direct cloud revenue exceeded 50% of Ciena’s total revenue for the first time in fiscal Q3, according to BofA. Two years earlier, direct cloud accounted for roughly 30%.
The shift comes from the amount of data moving through newer cloud and AI systems.
Large AI computing clusters contain thousands of processors that constantly exchange data. Cloud companies need high-speed optical links to move that information between servers, buildings, and separate data centers.
A recent project in India shows how the equipment is being used.
Data-center operator CtrlS said in September that it is using Ciena technology to build five metro networks connecting nine data centers. The networks will provide up to 100 terabits per second of capacity as part of a larger deployment for a hyperscaler.
One of Ciena’s main cloud products is Waveserver, a system built primarily to connect data centers. BofA expects Waveserver to generate about $1 billion in direct-cloud revenue in 2026, with revenue growing 50% to 55%.
Ciena is also expanding its pluggable-optics business. These small modules let network operators add high-speed optical connections without installing a full traditional transport system.
BofA expects Ciena’s ZR/ZR+ pluggables revenue to roughly triple in 2026, helped by growing demand for faster 800G connections.
Several products aimed at connections inside and around AI data centers are still at an earlier stage. BofA has not included revenue from some of those products in its current model because the timing of customer adoption remains uncertain.
Ciena still trades above its historical valuation range
Ciena trades at roughly 30 times BofA’s calendar-2027 earnings estimate. That is well below the roughly 60 times reached earlier this year, but still above the company’s historical range of about 15 to 20 times, according to BofA.
Investors are paying that premium as Ciena targets rapid growth over the next several years.
At its September Investor Forum, the company projected revenue growth of about 30% a year from fiscal 2026 through fiscal 2029. Ciena also expects adjusted operating margin to reach 32% to 35% by fiscal 2029.
BofA sees additional opportunities from newer networking products and more cloud customers, but the bank also identified a clear risk to the stock.
If investors begin cutting their forecasts for hyperscaler capital spending, Ciena’s valuation could fall before its reported revenue starts to slow, BofA said.
Monday’s nearly 10% decline shows how quickly that concern can hit the share price even when current customer orders remain strong.
Ciena currently expects fiscal fourth-quarter revenue of $1.75 billion, plus or minus $50 million. Its next results will show how much equipment the company was able to ship as its order backlog continues to grow.
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