What happened

Shares of Infinera (NASDAQ:INFN) are tanking today, down 16.8% as of 1:13 p.m. EDT, after the provider of optical transmission equipment reported second-quarter earnings.

So what

Here's a review of the key numbers from the second quarter:

  • Revenue fell 32% to $176.8 million. While this number was terrible in absolute terms, it landed within management's guidance range. However, it fell short of the $181 million in revenue that Wall Street had projected.
  • Non-GAAP (adjusted) gross margin was 40.7%. This figure was also down considerably from the year-ago period.
  • Non-GAAP net loss for the quarter was $22.8 million, or $0.15 per share. This figure was at the low end of management's guidance range, and $0.01 better than market watchers expected.

While Infinera's quarterly results were mixed, investors appear to be reacting harshly to the company's guidance for the upcoming quarter:

  • Revenue between $185 million and $195 million.
  • Non-GAAP gross margin between 37% and 41%.
  • Non-GAAP $0.14- to $0.18-per-share loss.

In contrast, Wall Street was looking for $196.8 million in revenue and a non-GAAP loss of $0.11 per share.

Given the mixed quarterly results and disappointing guidance, it is easy to understand why shares are being mauled today.

Ticker prices on a screen with a falling arrow imposed over them

Image source: Getty Images.

Now what

In response to the downbeat guidance, Infinera CEO Tom Fallon did his best to draw investors' attention to the company's recently launched products and to build excitement around its future: "We delivered the Cloud Xpress 2 to three customers and had early deployments of the XT-3300. As we continue to deliver on a suite of new products over the upcoming quarters, I believe we are well positioned to grow market share and to gradually improve our financial performance."

However, the company has been asking its shareholders to look past its weak performance and focus on the future for several quarters in a row now. That's a bitter pill for some investors to swallow, especially as competitors like Ciena continue to report sales growth quarter after quarter. 

Despite the challenges, Fallon reaffirmed his belief that the company's decision to invest through these tough times will lead to profitability down the road:

[W]e are investing to deliver a fully refreshed portfolio that we believe is necessary to return to strong top line growth, which given our vertical integration and expected OpEx leverage should improve our bottom line as well. Although a few more quarters of investment are required to complete this refresh, provided our new products perform as expected, I see a clear path toward margin improvement and over time a return to industry-leading profitability levels. Ultimately, I am optimistic that we are well-positioned to get back to delivering differentiated financial results.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.