Infinera (INFN -1.30%), a provider of optical equipment, reported its second-quarter results on August 3rd. Management had previously warned investors that its headline numbers were going to remain weak as its revenue and margins were expected to remain under pressure. As a result, the company was expecting to post yet another quarterly loss.

How did the company's actual results shake out and what does the future hold for the company? Let's put Infinera's earnings report under the microscope to find out.

Picture of a city with lines bouncing back and forth between buildings

Image source: Getty Images.

Infinera Q2: The raw numbers


Q2 2017

Q2 2016

Year-Over-Year Change


$176.8 million

$258.8 million


Non-GAAP net income

($22.8 million)

$30.9 million


Non-GAAP earnings per share




Data source: Infinera.

What happened with Infinera this quarter?

  • Revenue of $176.8 million landed within management's guidance range but was short of the $181 million that Wall Street had projected. On the call with investors, CEO Tom Fallon said that one big customer order was delayed a few weeks and was the main reason why revenue was at the low end of its guidance.
  • Sales in North America grew 12% sequentially. However, those gains were offset by weakness in international markets.
  • Non-GAAP (adjusted) gross margin was 40.7%. This figure fell significantly from the year-ago period, but was toward the high end of guidance.
  • Non-GAAP net loss was $22.8 million, or a loss of $0.15 per share. This figure was $0.01 ahead of Wall Street's estimate.
  • Cash balance at quarter end was $333 million, down $25 sequentially.

What management had to say

CEO Fallon kept his commentary trained on the company's recent product launches and long-term potential:

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.

He also reaffirmed on the investor call that the company will continue to invest through this challenging period in an attempt to return to profitability down the road:

We 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.

Looking ahead

While CEO Fallon remains optimistic about the company's long-term future, CFO Brad Feller said that the company isn't out of the woods just yet. Here's a look at the guidance that was offered for the third-quarter:


Q3 2017 Guidance

Q3 2016 Actual


$185 million to $195 million

$185.5 million

Non-GAAP gross margin income

37% to 41%


Non-GAAP earnings per share (EPS)

($0.14) to ($0.18)


Data source: Infinera.

While the year-over-year comparisons will start to get easier from here, this guidance fell far short of expectations. In response, Infinera's stock fell by double digits on the trading day following this release. 

The past year has been brutal for Infinera's shareholders. Investors have had to sit through quarter after quarter of declining revenue, margins, and profits while competitors like Ciena continue to grow through market-share gains. In response to these realities, management has kept a lid on expense growth while it continues to invest heavily in rolling out its next-generation of products.

With those products finally hitting the market, CEO Fallon said he is "optimistic" that the company will be able to grow its revenue sequentially for the remainder of the year. If that optimism proves true, then the company's top line may have finally hit rock bottom.

Will the company be able to deliver sequential revenue growth from here on out? Only time will tell.