Infinira’s Performance Highlights Growth of Large-scale Data Centers

Infinira cheered for one of the largest transactions in its history this week, offering 800G 3-nm ZR+plugs to an unnamed mega company. The company’s optical products will be used to improve connectivity outside the data centers of ultra large companies (Rosenblatt’s financial analyst believes that Infinira’s unnamed ultra large customers are Facebook’s owner Meta).
However, Infinira’s success in the ultra large scale sector helps mask its ongoing difficulties in selling optical products to telecommunications companies such as AT&T, Verizon, and Vodafone.
Infinira is not the only telecommunications supplier feeling the pressure. Some other telecommunications and cable equipment suppliers, from CommScope to Casa Systems, Vecima Networks, Harmonic, and Lumentum, have provided vastly different comments on the needs of network operators. Generally speaking, service providers hoarded telecommunications equipment during peak traffic periods during the pandemic and are now slowly using these devices. Therefore, they have significantly reduced orders for new equipment.

According to Seeking Alpha, Infinira CEO David Heard said during the company’s earnings conference call this week, “We believe that expenditure and inventory conditions will be released in the second half of 2024. I believe that if you look at the value chain of the entire industry, this has always been a unanimous comment in the industry.”
At the same time, Infinira is committed to compensating for the shortcomings of its telecommunications business by selling optical devices to ultra large scale manufacturers such as Meta. Specifically, the company is focusing on the Data Center Interconnection (DCI) market, which involves creating high-speed connections between data centers. Heard stated that these sales are on the rise, with 40% of the company’s revenue coming from ultra large customers.
“The growth rate we see is quite astonishing,” Heard said, as data centers’ investment in artificial intelligence and machine learning devices is driving this demand.

Infinira is not an exception. Financial analysts from BofA Global Research wrote in a report to investors this week that “opportunities for artificial intelligence (AI) continue to emerge.” They stated that the demand for high-performance, AI based computing is creating opportunities for large data center operators such as Digital Realty and Equinix.
Bank of America analysts also pointed out that “the activity of domestic wireless operators is still sluggish.” However, they also pointed out “sprouts,” indicating that the demand for network operators will recover from the second half of this year and will continue until 2025.
Infinira predicts that this is roughly the same as the recovery time required by network operator customers.
In the preliminary results released this week, Infinira expects revenue for the fourth quarter of 2023 to be between $435 million and $452 million. Infinira also expects its revenue to grow by 2% to 3% in 2024, lower than the 4.4% widely expected by financial analysts. The company stated that most of its revenue growth will occur in the second half of 2024.
Infinira’s leadership remains optimistic. Heard stated in a statement, “Some strategic victories, combined with our designed victory channels, have enabled us to achieve strong growth in the second half of the year and set us on the path to achieving seventh consecutive year of revenue growth, with continuous growth in profit margins and earnings per share.”