Prices for specialized optical fiber used inside AI data centers are forecast to average more than five times their 2025 levels this year.
That could be good news for Corning Incorporated (NYSE:GLW), a major manufacturer of fiber-optic cables and connectivity equipment. The company has a supply agreement worth up to $6 billion with Meta Platforms Inc. (NASDAQ:META).
Corning’s Optical Communications business is already booming. Second-quarter sales jumped 32% to $2.07 billion, while segment net income surged 77% to $438 million.
But CEO Wendell Weeks says higher fiber prices aren’t the main reason.
Why Higher Fiber Prices Aren’t the Whole Story
TrendForce released new research Monday forecasting a global optical fiber shortage of 180 million fiber-kilometers this year, with shortages potentially lasting until 2028.
TrendForce puts industry capacity utilization at 92%, while inventories have fallen to just one month’s supply. Expanding production typically takes 18 to 24 months.
As fiber supplies tighten, major customers are signing long-term agreements to secure future deliveries.
Corning’s agreement with Meta runs through 2030 and covers fiber, cables and connectivity products. Meta will also serve as the main customer for an expansion of Corning’s North Carolina cable factory, giving the manufacturer committed demand as it increases production.
During July’s earnings call, Wolfe Research analyst George Notter questioned Weeks about rising prices and the company’s growing reliance on long-term agreements.
“The price is higher, but that really isn’t how we’re driving that profitability improvement,” Weeks said.
Instead, Weeks credited higher-value connectivity products that help customers build networks faster and more cheaply.
Weeks added that Corning could sell more of its newest products if it had the capacity to manufacture them.
Wall Street Remains Bullish Despite Selloff
Corning shares have lost roughly half their value since hitting a record high in June, despite booming demand for its optical products.
UBS raised its price target for Corning to $201 earlier this month, maintaining a Buy rating. Citi is even more bullish, with a $220 target, while Bernstein is more cautious at $140.
On Polymarket, traders put roughly 28% odds on Corning’s third-quarter optical revenue exceeding $2.3 billion, although trading volume is just $3,500.
Meanwhile, a separate Polymarket puts roughly 9% odds on an AI industry downturn meeting the contract’s specific conditions by year-end, with more than $3 million traded on the market.
Meta reports earnings Wednesday, Oct. 21, followed by Corning on Oct. 27.
Image: Shutterstock
Recent Comments