ADTRAN Holdings Inc. reported second-quarter revenue of $281.1 million on August 4, representing a 6.1% increase from the prior year period ended June 30, though the figure fell short of company guidance and weighed on the stock price.
The Optical Networking Solutions segment emerged as a significant growth driver, generating $109.7 million in revenue with a 22% year-over-year increase and 13% sequential gain. Chief Executive Tom Stanton highlighted this unit as the primary source of quarterly strength. Enterprise, government, and cloud customers generated revenue that grew 47% year over year with a 19% sequential advance, now representing approximately one-quarter of total sales. Hyperscaler revenue nearly doubled, increasing 97% compared to the prior year, marking a substantial shift in the company’s customer base away from traditional telecom carriers toward data center operators constructing artificial intelligence infrastructure. Management indicated that cloud operations constitute between 30% and 50% of the enterprise segment and expects this proportion to expand as new products launch. The company achieved record quarterly results for 100ZR pluggable optics and is preparing the Micromux Quattro and Lightwave 800 products designed for intra-data center connectivity, a market segment ADTRAN has not previously entered. The company also refinanced its credit facility during the quarter, reducing borrowing costs by 200 basis points and extending maturity to 2031.
Overall profitability declined during the period. Non-GAAP gross margin contracted to 40.7% from 41.4% year over year and from 43% in the prior quarter, while GAAP operating margin reached negative 3.6% alongside a diluted loss of $0.13 per share. Access and Aggregation Solutions revenue, the segment most exposed to the delayed customer, declined 5% year over year and 4% sequentially.
Management attributed the revenue shortfall to a project delay at a single large customer and an unfavorable product and customer mix. The company stated that component supply constraints, including optical amplifiers, certain silicon, and printed circuit boards, represented the binding constraint, and that sufficient material availability would have closed the revenue gap. Third-quarter guidance projected revenue between $275 million and $295 million with non-GAAP operating margin expected in a range of 1.5% to 5.5%. The stock traded at a forward price-to-earnings ratio of 13.57 as of September 9, while short interest stood at 16.45% of the float.
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