Ciena's first-quarter results marked the networking vendor's highest revenue quarter with $1.06 billion at a 43% profit margin. Ciena CEO Gary Smith credited that 25% year-over-year growth to the positive demand environment, the strength of the vendor's portfolio, and the visibility of its backlog.

Supply chains issues haven't disappeared, and component deliveries remain volatile. However, the vendor is encouraged by high Q1 component availability and strong shipment performance. "This is both, I think, a proof point of our mitigation efforts and a positive indicator of our expectation for continued gradual improvements in the supply environment as we move through the year," Smith said during Ciena's Q1 earnings call.

Following Ciena's WaveLogic6 optical engine release, Smith is confident in the vendor's ability "to grow faster than the market in both the short and long term, and of course, take market share," he said.

As industry trends like 5G, cloud, artificial intelligence (AI), and automation continue to accelerate, network operators will need to raise capacity, limit latency, and optimize energy consumption. These characteristics are "fundamental drivers" of Ciena's portfolio, and "our customers know that they must continue investing in key parts of their networks to address these areas of their business" and "remain competitive," Smith said.

The CEO also highlighted Ciena's finalized acquisition of Tibit Communications, which was a bid to bolster the vendor's broadband access offerings. "Benefiting now from our vertical integration and a modern open architectural approach, we believe we are very well positioned to attack this rapidly growing market that is the focus of private and public investment across multiple regions," he said.

Ciena's backlog also jumped from $1.2 billion at the end of its fiscal 2020, to $4.2 billion at the start of its fiscal year 2023. "It is clear that in recent periods our backlog has far exceeded historical levels," Smith noted. The backlog did lower a bit in Q1 as the vendor outperformed its revenue expectations, and "this is good news on a variety of fronts," he added.

First, it means the vendor is delivering more products to customers. It also indicates waning supply chain issues and market share gains "as we convert this backlog to revenue," Smith explained. Even in the case of further backlog fluctuations, the vendor plans to end the year with "backlog that is higher than our historical levels, albeit down from the extraordinary level we had at the beginning of the year," he added.

Ciena anticipates that backlog will continue to come down as the year progresses. "We do not think this level of backlog is sustainable or, frankly, desirable. Customers want equipment. They don't want it sitting on our backlog," Smith noted.

Despite investor concerns surrounding the turbulence of cloud service providers and cloud budgets amid an inflationary environment, Ciena isn't concerned about potential impacts to the company.

"I think it's sort of natural that [cloud service providers] are looking at their business in the wake of what's going on in the world, and we've seen a lot of noise out there in the market about what they're doing with their people and what they're doing with their capex," Ciena CFO James Moylan said. "But if you look through all of that, underlying business remains strong. Their cloud businesses are strong," he argued.