What happened

Shares of Oclaro (NASDAQ:OCLR) crashed in Thursday's trading session, tripped by a solid first-quarter earnings report that came with a side of disappointing guidance targets. As of 12:35 p.m. EDT, share prices had fallen 24.4% on massive trading volumes.

So what

The optical-components maker saw first-quarter sales rising 15% year over year, landing at $155.6 million and exceeding Wall Street's consensus projection by $1.3 million. On the bottom line, adjusted earnings jumped 43% higher to stop at $0.20 per diluted share. Here, analysts would have settled for $0.18 per share. So far, so good.

Looking ahead, management sees "choppiness" in key markets such as China and the global data center segment. Sales in the second quarter of fiscal year 2018 should land near $137 million, and adjusted operating profits are headed toward a 15% margin, or roughly $21 million. In the year-ago period, Oclaro recorded non-GAAP operating profits of $33.4 million on $153.9 million in revenue.

Fiber-optic network cables, two loose on a white table and two plugged into a fiber-to-Ethernet transceiver.

Image source: Getty Images.

Now what

On the earnings call, Oclaro CEO Greg Dougherty disputed rosy market forecasts from analysts commenting on China, citing poor visibility and a pipeline stuffed with excess optical-component inventories.

In the data center, some large clients are sitting on component stockpiles while others are shifting their focus to newer and faster technologies. As a result, Oclaro's data center growth becomes much lumpier than usual and harder to predict.

None of these issues should last for very long. Dougherty closed his prepared remarks this way stating: "While we see the market slowness as a short-term phenomenon, we are committed to maintaining strong financials as we move forward. We believe that we will be able to maintain our gross margins in the high 30% to 40%, and deliver operating income in the teens."

I agree that the market slowdown should be temporary, and that the long-term opportunity for optical networking looks bright. In the meantime, Oclaro is equipped to weather this storm suffering no greater damage than a few quarters of soft -- but still positive -- profits. Therefore, today's plunging share prices look more like a buying opportunity than a reason to panic.

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.