Networking Stocks Rally as Tech Rebound Lifts AI Gear Makers: Ciena and Arista Climb 4%, but Cisco Barely Moves
AI data center spending is splitting networking stocks into clear winners and laggards, and the gap between Ciena, Arista, and Cisco reveals which part of the network hyperscalers are actually racing to build.
Networking hardware is leading a broad technology rebound, and suppliers of optical links and Ethernet switches for AI data centers are drawing the biggest buying. By Monday afternoon, Ciena Corporation (NYSE:CIEN | CIEN Price Prediction) stock was up 4% to $347.48. Meanwhile, Arista Networks (NYSE:ANET) stock also climbed 4%, hitting $183.32 and keeping pace with the gain in Ciena shares.
Shares of Ciena and Arista are running well ahead of the wider technology group. The iShares U.S. Technology ETF (NYSEARCA:IYW) is up 1.29%. Large-cap tech is advancing at a similar pace, with the Invesco QQQ Trust (NASDAQ:QQQ) also up 1.31%.
A sharp pullback in Ciena and Arista shares over the prior week came before the bounce. Hyperscaler spending on AI infrastructure remains the core support for Ciena and Arista. Both companies build the networks that move data between and inside AI data centers.
Supply Limits Keep Ciena’s Backlog Growing
Ciena’s fiscal Q3 2026 results showed adjusted EPS of $2.11 against a $1.73 consensus. The company’s revenue rose 37% year over year (YoY) to $1.67 billion.
Cloud providers did the biggest spending for Ciena, accounting for 53% of revenue on 82% YoY growth. Management raised its fiscal 2026 revenue guidance to $6.42 billion and issued a preliminary fiscal 2027 outlook calling for at least 30% revenue growth.
Strong demand also shows in Ciena’s backlog, as the company ended Q3 with $8.5 billion on the books and projects to exit fiscal 2026 with over $10 billion. During the earnings call, executives stated, “The demand is absolutely there.” Supply remains the limit, and management doesn’t projects the market to return to balance before 2028.
Optical Links and AI Switches Ride One Spending Wave
Ciena sells optical networking equipment that links data centers, while Arista and Cisco Systems (NASDAQ:CSCO) sell the switches and routers inside them. Pluggable optics were a standout, with Ciena’s pluggables revenue more than doubling YoY in Q3 as the WaveLogic 6 Nano ramped. Notably, CSCO stock is practically unchanged at $107.06 today, so it’s not keeping pace with CIEN and ANET today.
Arista’s EtherLink switches power Ethernet-based AI fabrics in hyperscale data centers. Management frames the Arista 2.0 strategy around networking. The company sees networking as the “central nervous system” for infrastructure, and EtherLink adoption has spread to a broader roster of cloud, AI and neocloud customers.
Scale-across networks, which connect AI training clusters spread over multiple data centers, are Ciena’s next growth leg. Its RLS HyperRail line system, co-created with hyperscalers, is on track for initial customer adoption by year-end and material revenue through 2027. Co-packaged optics offer another lever, with revenue projects to begin in 2027 and grow into 2028 for Ciena.
Improving operating leverage is showing up in Ciena’s results too, with adjusted gross margin expanding 450 basis points YoY to 46.4%. The company’s chief executive asserted in the earnings release that “AI continues to drive compounding waves of network investment.”
Ciena’s Shipping Pace Is the Next Test
Ciena’s growth carries concentration risk, since two customers made up 41.7% of its Q3 revenue. Its outlook also assumes continued AI infrastructure spending by cloud providers, stable optical component supply and no material change to tariff policy.
Next quarter’s results could show whether Ciena can hit its fiscal Q4 2026 revenue guidance of $1.75 billion under tight component supply. Traders will be tracking whether Ciena and Arista shares keep outpacing the iShares U.S. Technology ETF and the Invesco QQQ Trust.
Long-term supplier agreements running through 2029 could ease Ciena’s bottleneck, though recent moves in its shares show how quickly sentiment can turn. Investors may want to hold smaller share stakes until the supply squeeze resolves.
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