Bank of America has upgraded Ciena stock to Buy from Neutral. The firm also raised its price target to $355 from $260. Analysts believe strong investment in data centers will keep demand high for networking equipment.
The upgrade comes after a fresh review of spending plans by major cloud companies. Bank of America now believes the networking sector has stronger growth potential than it previously expected.
The firm said demand for high speed data connections is rising quickly. This trend could support the industry for several more years.
Ciena to benefit from data center expansion
Bank of America believes the current demand cycle could turn into a long growth phase. Analysts described it as a possible super cycle that may last until 2027.
Large cloud companies continue to invest heavily in new data centers. These facilities are needed to support artificial intelligence workloads and growing internet traffic.
Many new data centers are also expected to be built between 2026 and 2028. As these facilities come online, they will require advanced networking systems.
Ciena sells optical networking equipment used to connect data centers. This equipment helps move large amounts of data between servers and cloud infrastructure.
Because of this role, the company is well positioned to benefit from the expansion in global data center capacity.
Optical networking demand rising with AI growth
Another factor supporting demand is the rise of artificial intelligence. AI systems require huge amounts of data to move quickly between computing systems.
This has increased the need for high speed optical connections. Ciena already has a strong position in this area.
The company has a leading share in advanced optical modules such as 800G pluggables. It is also expanding its presence in 400G networking systems.
Bank of America also highlighted growth opportunities in Ciena’s line systems business. New technologies developed after its acquisition of Nubis Communications could also add to future revenue.
Because of these trends, analysts now expect stronger growth from the company. Bank of America forecasts Ciena revenue could rise about 28% in fiscal 2026. A year ago the expected growth was only around 8%.
The company’s order backlog has also increased sharply. It recently grew by about $2 billion in a single quarter and reached around $7 billion. This backlog provides visibility for future sales.
Ciena faces risks despite strong growth outlook
Even with the positive outlook, analysts say some risks remain. The optical networking market has always been cyclical.
Sometimes customers place large orders early to build inventory. This can happen when supply shortages are expected.
If those orders slow later, growth could also slow down. That could affect Ciena’s valuation.
Another concern is the supply of key components. Some laser parts used in optical networking equipment remain in tight supply. Higher component costs could reduce profit margins.
Still, Bank of America believes the long term demand for networking infrastructure remains strong. As cloud companies continue building new data centers, firms like Ciena are expected to play a key role in connecting the digital world.