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The year 2024 has witnessed a significant surge in the adoption of artificial intelligence (AI), propelling the growth of not only AI-centric companies but also revitalizing legacy technologies. While many traditional tech sectors are still recovering from the post-pandemic boom of 2021, the escalating demand for AI infrastructure is creating a renewed wave of opportunity. This surge is bolstering sectors such as cloud computing, virtualization, networking, and even hard disk drives (HDDs) as businesses grapple with existing inventory surpluses and race to meet the demands of the AI revolution. This article spotlights two prominent companies, **Ciena** and **NetApp**, that are strategically positioned to capitalize on this AI-driven resurgence, leveraging their established expertise in legacy technologies to dominate the evolving landscape.
Key Takeaways:
- AI’s explosive growth is unexpectedly boosting legacy tech companies.
- Ciena is capitalizing on increased demand for high-speed networking infrastructure crucial for AI data transfer. Their optical networking solutions are in high demand by major cloud providers.
- NetApp’s hybrid cloud and data storage solutions are proving essential in managing the vast amounts of data generated by AI applications. They’re seeing significant growth in cloud storage services and are winning large contracts in the AI space.
- Both companies have reported strong financial results and issued positive guidance, indicating robust growth prospects.
Ciena: Powering the AI Infrastructure Revolution
Ciena Corporation (CIEN), a veteran in the telecommunications industry, is renowned for its contributions to the global internet infrastructure through its advanced optical fiber and networking solutions. The burgeoning AI sector is heavily reliant on high-speed, low-latency connectivity to manage the massive data streams inherent in AI applications. Ciena’s products, particularly its optical transceivers capable of transmitting data at the speed of light, are emerging as critical components in the AI infrastructure buildout. This is especially true in **Data Center Interconnect (DCI)**, which facilitates the seamless transfer of data between multiple data centers and cloud providers, forming the backbone of large-scale AI operations.
Connecting the Cloud Titans and AI Platforms
Ciena’s client roster includes some of the world’s largest cloud providers, such as Google Cloud, underlining the crucial role its technology plays in supporting their surging AI operations. The expansion of cloud computing has significantly contributed to Ciena’s success, with DCI-related business contributing nearly 30% of its total revenue. Moreover, the prevailing trend of enterprises diversifying their infrastructure across multiple cloud providers is further fueling Ciena’s growth, as companies require robust connectivity solutions to manage their data across different platforms.
Networking Platforms Fueling Explosive Growth
Ciena’s recent fiscal third-quarter 2024 earnings report showcased impressive growth, exceeding expectations and affirming its strong position in the market. The company’s Networking Platforms segment revenue surged to 74.2% of its total revenue, reaching $699.5 million. Furthermore, a book-to-bill ratio exceeding one signals a robust demand exceeding its current production capacity. This surge in demand is largely driven by cloud providers aggressively expanding their networking infrastructure, encompassing undersea cables, long-haul routes, and enhanced data center connectivity. The company’s positive outlook is further solidified by its projected fiscal fourth-quarter revenue ranging from $1.06 billion to $1.4 billion – aligning with market consensus – and a projected long-term compound annual growth rate (CAGR) of 6% to 8%, with fiscal 2024 revenues expected to reach approximately $4 billion.
NetApp: Riding the Hybrid Multicloud Wave
NetApp, Inc. (NTAP) provides a comprehensive suite of hybrid cloud and data infrastructure solutions, empowering businesses to seamlessly manage and securely access their data across various environments. The company’s platform, often described as offering a “single pane of glass” view, enables unified management across on-premise, private, and public clouds, facilitating efficient data handling and application management. NetApp’s compatibility with all major cloud providers further broadens its appeal, allowing companies to leverage both on-premise infrastructure for sensitive data and the scalability and cost-effectiveness of public clouds for less critical tasks. Their product portfolio, ranging from servers to all-flash data storage arrays, positions NetApp as a leading one-stop shop for cloud migration and digital transformation.
AI Deployment Reinvigorates Cloud Growth
NetApp’s fiscal first-quarter 2025 results were remarkable, featuring a record non-GAAP operating margin of 26% and a record first-quarter net income of $1.56 billion. The company’s rapid growth in cloud storage services is particularly noteworthy, with first-party and marketplace cloud storage services revenues up 40% year over year. Its Hybrid Cloud division generated $1.38 billion in revenue, while its Public Cloud division contributed $159 million — both representing substantial year-on-year growth. The company’s strong financial standing is further emphasized by its substantial cash reserves of $3.02 billion.
NetApp Secures Key Wins in the AI Arena
NetApp is strategically positioning itself at the forefront of AI adoption, securing noteworthy wins in the high-performance computing (HPC) and AI market. The company has already reported over 50 AI and data lake modernization wins, including a significant contract with one of the world’s largest oil and gas companies. This contract specifically leverages NetApp’s all-flash storage to manage the massive data generated by the company’s 40,000 GPU and CPU cores, which power 3D virtualization workloads and simulations. Another significant win involved a leading financial services institution which selected NetApp to consolidate petabytes of data into a unified data lake facilitating AI and analytics for crucial applications such as fraud detection, portfolio management, and credit scoring. These high-profile wins showcase NetApp’s capabilities in handling the large-scale data processing critical for AI applications.
Upward Trajectory Continues with Positive Guidance
NetApp’s positive financial outlook is solidified by its upwardly revised guidance for its fiscal second quarter of 2025. The company projects EPS ranging from $1.73 to $1.83, surpassing the consensus estimate of $1.71. Similarly, its predicted revenue projection of $1.565 billion to $1.715 billion outpaces the consensus estimate of $1.63 billion. Looking ahead, NetApp’s full-year 2025 fiscal guidance further underscores its positive trajectory, with expected EPS of $7.00 to $7.20 exceeding the consensus estimate of $6.89, and full-year revenue projected between $6.48 billion and $6.68 billion, surpassing the anticipated $6.55 billion.
