Network equipment supplier Ciena announced that it will reallocate research and development expenses from residential broadband access to artificial intelligence and data center products. The CEO of the company, Gary Smith, stated that this measure is partly due to the slower than expected application speed of 25G technology in the broadband field, while also noting the continued growth in demand from “neoscaler” enterprises.
As Ciena continues to pursue growth opportunities in the fields of artificial intelligence and cloud computing, the company hopes to ensure that research and development funds are invested in the right direction. To this end, CEO Gary Smith announced today that Ciena plans to shift “additional research and development investment” towards coherent optics, routing, and other data center interconnect products, while reducing investment in its residential broadband access product portfolio.
Smith made it clear during the company’s Q3 2025 earnings conference call that “we will continue to sell and support our existing broadband access products. However, in the future, we will limit our investments to strategic areas such as DCOM.” This refers to Ciena’s data center out of band management solution, which uses passive optical network (PON) technology to replace bulky traditional hardware such as copper cables and console servers.
Smith explained in an exclusive interview with Fierce the reason for reducing residential broadband investment: ultimately, it is a speed demand issue. In this field, the transition to 25G PON and higher speeds has been slower than expected, as Ciena’s broadband access customers are still primarily deploying 10G technology. Smith said, “Customers are more focused on promoting 10G technology, and this market is performing well. When evaluating the overall product portfolio and investment in 25G, we found significant opportunities in the field of artificial intelligence workloads, and therefore hope to ensure a focused investment in this area. ”
Dell’Oro Group Vice President Jimmy Yu believes that Ciena’s decision to reallocate research and development funds is very reasonable, as it can avoid “resources being too scattered and missing the biggest opportunity in front of us”. Yu explained, “Based on my speculation, in order to meet the future demands of artificial intelligence workloads and AI data center interconnection, Ciena not only needs to maintain the pace of releasing new high-performance coherent optical products (such as WaveLogic 6e for long-distance 1.6 Tbps connections), but also needs to develop optical devices suitable for shorter distances, such as 800 ZR/Zr+plugs, and even products suitable for extremely short distance connections within data centers. ”
The WaveLogic series is Ciena’s core product in the field of coherent optics. In the third quarter, the company’s WaveLogic 6 Extreme product added 11 new customers, bringing the total number of customers to 60. Operators deploying WaveLogic 6 include Arelion, Lumen, and Telstra, among others, which are upgrading their networks to meet the needs of cloud customers.
Smith also revealed to Fierce that in addition to service providers and hyperscale enterprises, Ciena has noticed a growing demand from a customer group called “neoscaler”. He stated that this term covers a wide range, including “large computing software enterprises,” GPU as a service providers, small data centers, and hosting service providers. Smith candidly stated, “Neoscaler can be any enterprise from OpenAI to Oracle to Apple, so this is a very broad concept. ”
These companies typically build their own dedicated networks or host fiber optic networks (MOFN) for third parties. For Ciena, this represents’ a completely new market ‘. Smith added, “The key is that these participants and hyperscale enterprises are now strengthening their network construction. Because they realize that if they want to provide infrastructure support for various forms of artificial intelligence… data must go out of the data center.”
