Ciena Stock Could Double on the Next AI Spending Wave. Here’s How to Play CIEN.

Ciena (CIEN) may not be the first stock investors think of when AI comes up. But it could become one of the more interesting ways to play the boom. The company is benefiting from surging demand for the optical connectivity that links increasingly powerful data centers, creating a growth opportunity that may last well beyond the current AI cycle. Ciena stock has climbed roughly 34% so far in 2026. But according to Wall Street, if AI spending keeps accelerating, CIEN stock could double to reach $660.

The Market Ciena Is Chasing Could Get Much Bigger

Ciena is an optical networking company that uses fiber-optic technology to send data at extremely high speeds across the internet and between data centers. Although Ciena sits further down the AI infrastructure chain, it plays an important role. As AI clusters are becoming larger and more distributed, the amount of data moving between locations is also rising. Management believes that the current environment marks the beginning of a long investment cycle in network infrastructure, driven by the massive expansion of data center capacity.

In the most recent fiscal third quarter, Ciena’s revenue surged 37% to $1.67 billion from the year-ago quarter, while adjusted earnings per share (EPS) surged 215% year-over-year (YoY) to $2.11. But the most impressive number in the quarter was the $8.5 billion backlog. Management said orders were still accelerating, with bookings during the first month of fiscal Q4 totaling the entire Q3 order volume. The company targets ending fiscal 2026 with over $10 billion in backlog.

Management estimates that the company’s total addressable market could expand from roughly $25 billion today to around $50 billion by 2029. And Ciena has a competitive advantage in this space. The company has been developing coherent optical technology for decades. Notably, its WaveLogic 6 Extreme platform continues to stand out in the high-performance modem market, and its adoption is growing. Plus, the company’s intelligent line systems business also remains strong, with roughly 70% market share in its installed base. The company is also developing the next-generation Hyper-Rail system, which could support longer-distance distribution of AI workloads between data centers. Ciena expects to generate meaningful revenue from this as the product scales in 2027. Furthermore, Ciena also expects its co-packaged optics business to begin generating revenue in 2027 and build from there into 2028.

Management argues that its experience, focused research spending, and large installed base become increasingly valuable as customers push toward faster and more efficient networking. This is probably why management has an aggressive outlook for fiscal 2027. Revenue is expected to increase at least 30%, reaching roughly $8.3 billion to $8.4 billion, while adjusted operating margin is projected at 25% to 27%.

Ciena’s balance sheet also remains strong, with $2.8 billion in cash and equivalents at the end of the quarter. It also generated $116 million in free cash flow and repurchased approximately $172 million of stock.

Jim Cramer Is Bearish on the Timing, Not on CIEN Stock

CNBC's “Mad Money” host Jim Cramer is cautious on Ciena’s valuation right now, but he has not abandoned the stock’s long-term potential. It makes sense, as Ciena stock is currently trading at 44x forward earnings. Analysts forecast EPS of $7.17 for fiscal 2026, up 171.4% YoY, and $11.68 in fiscal 2027, an increase of 63% YoY. Although earnings are expected to grow rapidly, Ciena’s premium valuation leaves little room for any disappointment. 

For investors trying to figure out how to play CIEN stock now, Cramer’s comments aren’t implying they should avoid the stock altogether. Cramer believes if optical networking eventually regains favor with investors, Ciena could benefit from both the underlying growth in AI-driven connectivity and a recovery in sentiment toward the optical group. In fact, he grouped Ciena with Corning (GLW), Lumentum (LITE), and Coherent (COHR) as optical names he had moved away from as of now. However, he said he could come back to the group because he believes that the technology has a long runway ahead and companies like Ciena represent the future.

Overall, CIEN stock holds a consensus “Moderate Buy” rating, with 12 rating it as a “Strong Buy” of the 19 analysts covering the stock. Two analysts say it is a “Moderate Buy,” while five rate it a “Hold.” The average target price of $507.20 implies an upside potential of 54% from current levels. The high price estimate of $660 implies the stock can climb 100% from here.

On the date of publication, Sushree Mohanty did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.