Corning’s Q1 Optical Communications results show the carrier’s inventory glut is over

Corning is seeing its traditional carrier and data center customers purchase more of its fiber again, signaling that the inventory issues that plagued optical and telecom industry vendors in 2023 and 2024 may be behind them.

In the first quarter, Optical Communications' sales were $1.36 billion, up 106%, driven by the continued strong adoption of its new Gen AI products in the enterprise portion of the business.

Also, Optical Communications’ first-quarter net income was $201 million, up 101% year over year, due to substantial incremental profit on the higher volume.

During its first quarter earnings call, Wendell Weeks, CEO of Corning, told investors that it is seeing indications of a new revenue tide turning this year with its service provider customers.

“In our carrier business, as you've seen from recent telecom earnings calls, our key customers have stated they like the economics of fiber and remain committed to their fiber deployment plans,” he said. “We believe they have completed drawing down inventory they built during the pandemic, and the conditions are now in place for our carrier business to spring back to growth later this year.”

Data center rising

Driven by ongoing sales of its Gen AI products, Corning’s enterprise sales within the Optical Communications segment were $705 million for the quarter, up 106%.

Corning GlassWorks AI™ solutions offer customized data center products and services to help operators build the dense fiber infrastructure required for generative AI. The end-to-end portfolio provides cable and connectivity solutions along with network planning, design, and deployment support.

Having completed detailed reviews with its major hyperscale customers, who have reaffirmed their expectations of continuing spending, Corning reaffirmed its growth expectations.

“There was continued strong demand for its new Gen AI products inside the data center,” said Weeks. “We're tracking ahead of our 30% CAGR from 2023 to 2027. Notably, Corning’s carrier business grew 11% year-over-year. The company said growth included sales of our new data center interconnect products.”

Corning saw the adoption of its products inside the enterprise business, where it reports sales inside the data center, which drove what Weeks said was “$2 billion in sales last year.”

“We are seeing remarkable customer response to both our products used inside Gen AI data centers as well as our innovations to interconnect AI data centers across the country,” Weeks said. “We shared some new products with you at our March investor event. These products are driving positive customer response and rapid adoption.”

Corning (GLW) GlassWorks AI cable solutions are specifically designed to meet the needs of data centers.

The ongoing emergence of Gen AI is also fueling growth in Corning’s carrier business. In particular, Lumen has already adopted Corning’s new products, which are designed specifically to interconnect data centers.

“Last year, we introduced a set of innovations to interconnect AI data centers,” Weeks said. “We shared that we agreed with Lumen Technologies to provide our new Gen AI fiber and cable system, which enables Lumen to fit anywhere from 2 to 4 times the amount of fiber into their existing conduit. The agreement reserved 10% of our global fiber capacity for 2025 and 2026.”

In March, Corning fully commercialized the AI data center interconnection product. Weeks said that it “now has three industry-leading customers adopting the technology and our production tripled every month in the first quarter,” driving it to accelerate its “ramp plans in the second quarter to meet growing demand” for the product.

Mitigating tariffs

As the Trump administration has proposed tariffs, Corning has plans to mitigate their effects.

Corning has established a process for locating its manufacturing operations close to its customers, which it said serves as a natural hedge against tariffs and mitigates the financial impact. Also, the direct economic effects of existing tariff structures, mainly between the U.S. and China, are only $0.01 to $0.02 per quarter.

“We find that geographic proximity leads to better innovation and more delighted customers,” Weeks said. “This also serves as a natural hedge against global trade tensions and tariff structures. We apply this philosophy globally.”

Weeks added that the impact of current tariffs is “minimal” because much of Corning’s manufacturing is based in the United States. “In the U.S., we have a large advanced manufacturing footprint,” including “our optical communications business, where we have the largest fiber factory in the world in North Carolina.”

We also manufacture products for our automotive, life sciences, mobile consumer electronics, and solar businesses in the U.S. Almost all the products we sell in the U.S. originate from our 34 advanced manufacturing facilities in the U.S.

Q2 poised for growth

Looking forward, Corning said it anticipates continued strong growth in its Optical Networking business, driven by its new Gen AI products.

Also, Corning has implemented plans to ease any effects from new tariffs. “Our guidance factors in $0.01 to $0.02 for the expected direct impact of currently enacted tariffs,” Schlesinger said. “We plan to mitigate this impact further going forward, primarily by optimizing our supply chains and adjusting prices where necessary.”

In the second quarter, Corning has forecast approximately $3.85 billion and core EPS to again grow significantly faster than sales to a range of $0.55 to $0.59. The company’s guidance includes $0.01 to $0.02 for currently enacted tariffs and $0.03 of temporarily higher costs associated with production ramps to meet increased demand for Gen AI and solar products.

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