A：AI demand from both cloud and service providers influenced the strong performance in the recent quarter. This demand, coupled with a strong and growing backlog, drove visibility and contributed to the financial results.

A：The increased capital expenditures of the largest hyperscalers and their indication to expand into 2027 and beyond are creating net new opportunities for Siena. This is particularly in network infrastructure as they prioritize monetizing constrained compute investments.

A：The addressable market for Siena is expected to nearly double over the next several years, reaching roughly $50 billion by 2029. This growth encompasses traditional wide area network (WAN) markets and high growth markets in and around data centers.

A：The RLS Hyper Rail platform is a multipurpose solution that addresses growing capacity and efficiency demands for data center interconnects. It supports multiple fiber pairs over hundreds of kilometers with advanced amplification, resulting in higher density, space, and power efficiency, especially in intermediary amplifier sites.

A：Siena has been awarded the industry's first multi-strain order from a leading hyperscaler for its RLS Hyper Rail platform. They have also secured a new win with a major hyperscaler for high-performance coherent modules, and continue to see strong demand for 400 gig and 800 gig pluggables. Additionally, Siena has won a first placement with a major switch OEM for its wavelogic 5 and 6 nano plugs.

A：Sienna has received the final chip back for their linear re-draft, named Nitro, which is performing extremely well and is on track for general availability in the summer. The Vesta 206 dot 4 T, the optical engine for CPO use cases, has seen increased industry momentum and demand, reinforcing the strategic value of recent acquisitions.

A：Customer co-screenplay is a meaningful differentiator for Sienna, contributing to the trust customers place in the company's innovation leadership and execution capabilities across multiple technology generations. This collaboration leads to fit-for-purpose solutions that deploy at scale and upon pace, and it sharpens Sienna's roadmap decisions, increases win rates, builds highly differentiated expertise, and supports market momentum.

A：In Q2, Sienna achieved an adjusted gross margin of 44.9%, exceeding expectations, and generated free cash flow of $219 million, or 13.9% of revenue, with a cash balance of $1.4 billion. Sienna's discipline in managing working capital resulted in a cash conversion cycle improvement of 20 days since Q1, contributing to the strong financial performance.

A：Sienna is deliberately and responsibly allocating owner's capital by investing in new opportunities like developing RLS Hyper Rail, extending its product line, and making key investments to ensure future supply. The company returned $83 million to shareholders through stock buybacks at an average price of $371 per share, while continuing to grow its business organically.

A：Revenue in Q2 reached $1.57 billion, up 40% year over year and $71 million over guidance, setting another quarterly record. The growth was driven by a 42% increase in the optical networking business, primarily from strong demand for RLS and Wave server product lines, and an 88% increase in the routing and switching business due to the ramp of DCOM.

A：Customer revenue grew 70% year over year, with service providers growing 28%. India's service provider revenue more than doubled, reflecting strong demand for MoFAN deployments. Cloud providers contributed more than 10% of the company's revenue, highlighting the growth in direct cloud customer revenue.

A：For Q3 2026, the revenue guidance is approximately $1.625 billion, with an adjusted gross margin of 45% and adjusted operating expenses of about $410 million, leading to an operating margin of 19% to 20%. The company raised its fiscal 2026 revenue outlook to $6.3 billion, with a gross margin between 44.5 and 45%, and operating expenses of approximately $1.61 billion. The expected operating margin for fiscal 2026 is 19% plus or -50 basis points.

A：Sienna is confident in its ability to bring value to customers and drive EPS growth over the next several quarters, supported by continued strong market dynamics, significant backlog, multi-generational customer programs, and customer co-screenplay. The company is optimistic about maintaining robust demand, underpinned by the network's critical role in enabling AI and the doubling of the total addressable market (TAM) by 2029.

A：Gary is celebrating his 100th earnings call and 25th year as CEO at Ciena. During this time, he has led the company through significant industry transformations and positioned Ciena to be the industry leader in high-speed connectivity.

A：Ciena announced a breakthrough with a multi-rail win and an agreement with a first hyperscaler customer, which is a strategic decision for them due to the nature of the deployment. This deal enables very high-density training across greater distances and is tracking ahead of expectations with deal sizes ranging into the hundreds of millions over multiple years. Engagements with major hyperscalers are progressing extremely well.

A：The increase in operating expenses for the year is being driven by higher performance than expected at the beginning of the year for both orders and revenue. Approximately 90% of the increase is due to variable compensation scaling with performance, while the remainder is to ensure supply security for the increased demand. This drives the expectation of generating operating leverage and growing revenue significantly faster than operating expenses over time.

A：Ciena is using a 'value exchange' term to balance supply demand dynamics, aiming to expand margins and make appropriate investments in supply security without compromising other working capital activities. Conversations are ongoing with customers to ensure supply chain risk is managed, which includes additional commitments to suppliers and optimizing the product portfolio. Ciena is also looking at pricing opportunities across all products and has been able to mitigate the impacts of inflationary inputs through cost reduction efforts, reflected in the third guide for the year with a continued expansion of gross margin.

A：The speech does not provide a direct answer to the growth strategy in terms of the split between data centers and traditional WAN. However, it indicates that the company is focusing on expanding its business, which could imply growth in both areas, as well as potentially expanding its market share.

A：The long-haul metro optical transport market is expected to grow to an 8 to 10 billion market by the time they reach 2029, with an overall market exceeding 20 billion. The interconnects market is also opening up, contributing to this growth.

A：The DCOM segment is a significant part of the growth in routing and switching. Even excluding DCOM, routing and switching have shown good growth. The total addressable market (TAM) for DCOM is estimated to be between 1 to 3 billion by 2029. It is seen as a multi-year, multifaceted application within hyperscalers and potentially outside of them, proving to be much larger and broader than initially anticipated.

A：In the short term, there has been consolidation in the system competitor landscape, leading to a few companies capable of addressing large customer needs. However, moving from tech transitions like true GPU to GPU connections or hyper rail requires a significant investment and expertise in integration, control software, and services. This depth of technology and experience creates a competitive advantage for established system vendors.

A：When interpreting gross margin guidance, one should consider the current focus on supply chain dynamics, specifically product mix and the potential for inflationary pressures. The gross margin for the upcoming quarter should not be inferred too early, and any assumptions about it should be based on specific discussions after Q3 with 90 days of data available.

A：Coherent light is anticipated to become increasingly relevant as the demand for high bandwidth communication increases and the current technology's reach diminishes. The technology is expected to move closer to the data centers and eventually be deployed inside them, with the initial deployment anticipated in late 2027-2028 at data rates of 1.6 to 3.2 Tb, as per conversations with lead cloud providers.

A：The Neo Cloud is experiencing increasing demand, suggesting a stronger market position. The market size and growth opportunity should be thought of in the context of this upward trend in demand. The company is starting to see more traction in this area, which implies potential for significant growth.

A：Significant wins have been reported in most of the major neocaesareas, and networks for these are being rolled out.

A：There are great service opportunities emerging as the neocaesars are trying to proceed quickly with less staff compared to their larger predecessors.

A：Hyper rail deployment is expected to start in 2027 and will be linear, with revenue anticipated to come from multiple hyperscalers and service providers. The revenue model is not lumpy but rather expected to be more linear.

A：The introduction of hyper rail is expected to result in a meaningful uptick in revenue in 2027.

A：There is a strong backlog with growth potential for gross margins, leading to continued operating leverage and a meaningful EPS acceleration over the next several years. The company plans to provide more details on Opex at the end of the year.

A：There are challenges in the supply chain, especially on the modems side where there are constraints. However, the company is vertically integrated in the industry, which helps buffer some supply chain challenges. They are also working on the laser pump side and have investments in capacity and long-term discussions with suppliers.

A：Engineering cost reductions are being driven by conversations with the supply chain and customers on optimizing costs while ensuring value exchange that considers more than just price. The company is also focusing on balancing supply risk and managing working capital.

A：The impact of plugins on gross margin is not considered to be hugely negative or positive, and they are seen as a component of the mix but not overly concerning at the moment. The company is pleased with the trajectory of the business related to plugins.

A：There has been a trend of service providers underinvesting in their optical infrastructure for the last five years, focusing instead on 5G investments. Now, as 5G investment tails off, service providers are looking to update their optical infrastructure. Additionally, there is a development of managed optical fiber networks built for hyperscalers and cloud players.

A：The growth in service providers' business is seen as durable and significant because it involves essential network infrastructure that is globally necessary for the increasing demands of AI and hyperscalers. The partnerships with service providers and hyperscalers are also seen as a key reason for the growth.

A：The expectation is that if the backlog could be delivered in 2026, the service providers would take it. This indicates that the current backlog is not forward ordering but rather a pushout, with the potential to turn into revenue. The company is confident in delivering the backlog, with about 80% expected to be delivered in the next 12 months, which reflects a high likelihood of turning into bookable revenue.

A：The shift to multi-rail is expected to improve the margin accretion significantly compared to the single rail product. The increased presence of hyper rail in the revenue mix is anticipated to provide good margin expansion at the company level. Early commercial conversations and orders have been consistent with expectations regarding the value exchange.

A：The company has competitive advantages over active copper cables with new technology due to the ability to extend signals over greater distances with higher efficiency. Specifically, the technology can cover up to 4 meters with approximately 90% less power consumption. These benefits are expected to become more significant from 2027 onwards and will contribute to the company's growth starting from 2026.