Ekinops reported that second-quarter revenues declined 25% year-over-year to $32 million as it saw ongoing struggles in its optical transport division.
After a record year in 2023 (+41% growth in H1 2023 and +27% for the full year), Ekinops’ Optical Transport solution sales dipped 41%.
“Beyond this significant base effect, this business line has been excessively penalized since H2 2023 by (i) cautious investment policies by operators carrying high levels of inventory and seeking to reduce their CAPEX (capital expenditure) in an environment of high interest rates, (ii) less buoyant internet traffic growth since 2023 (absence of new use cases since the COVID crisis, data optimization thanks to compression technologies, low pace of 5G roll-out, etc.) in a context of overcapacity,” the company said in its earnings release.
However, Ekinops sees potential opportunities for its optical gear in the growing Artificial Intelligence (AI) and virtual reality segments. “The emergence of generative artificial intelligence and the development of virtual reality equipment (virtual reality headsets) now constitute new use cases which should enable a new phase of growth in internet traffic over the coming years,” Ekinops said.
The company also cited the delayed launch of the new 800G optical solution, which has been effective since the end of the second quarter, as leading to what it said was “a wait-and-see attitude among many Ekinops customers to benefit from this new solution for their deployments.”
Access, software potential
Amidst the struggles in optical, Access solutions and Software & Services were bright spots in Ekinops’ second quarter results.
Driven by the rebound in sales in France (+16% over the semester), sales of Access solutions rose 1% compared to the same period last year, after the decline in 2023.
The company noted that the rebuilding of new inventory of access equipment at Ekinops' main customers continued gradually, without returning to normative levels.
Meanwhile, Software and services accounted for 17% of half-year revenue, with what Ekinops said was “an increasing share of recurring revenue, particularly for the SD-WAN solution.”
Regional fluctuations
From a regional perspective, Ekinops’ international business was down -31% over the period, representing 56% of total half-year revenue.
In North America, where business is mainly centered around its Optical Transport solutions, sales amounted to 12.6 m€ in the first half of 2024, down 31% vs. the first half of 2023. North America represented 22% of Group business in the first half of 2024.
Ekinops said the key issue with the U.S. market is the “wait-and-see attitude adopted by service providers, linked to the slow deployment of the 42 billion dollars federal Broadband Equity Access and Deployment (BEAD) program.”
The company also saw struggles in EMEA, as half-year sales were down 32%, excluding France—Middle East & Africa. The main issue was due mainly to the decline in Optical Transport sales after the strong growth in 2023, notably in Germany and Eastern Europe. The EMEA region accounted for 32% of total business activity in the first half of 2024.
Likewise, in Asia-Pacific, which accounted for 2% of Group business activity, reported revenue of 1.3 m€, down -15%. However, Ekinops noted that it saw a 32% rebound in business volumes, driven mainly by growth in sales of Optical Transport equipment.
Q4 shows potential
Due to the ongoing economic slowdown, Ekinops’ second quarter 2024 activity followed the trend of previous quarters, with revenues around $31 to $33 million for four consecutive quarters.
In Access, inventory easing continued at operators in France in Q2, leading to a slight growth. The Group aims to accelerate this trend in the second half of 2024 in France and the EMEA region.
In Optical Transport, Ekinops expects the new 800G product to help boost sales over the coming quarters.
While Ekinops expects third-quarter 2024 results to align with the four previous quarters, the company said it “anticipates an improvement of the trend” starting in the fourth quarter.
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Sean Buckley
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