What happened

Shares of Infinera (NASDAQ:INFN) climbed 38.1% in August, according to data from S&P Global Market Intelligence, after the telecommunications equipment maker announced strong second-quarter results.

Infinera stock popped nearly 15% on Aug. 8 alone, the first trading day after the company revealed its adjusted quarterly revenue had jumped 47% year over year to $306.9 million -- albeit largely driven by its acquisition of Coriant last year -- which translated to an adjusted net loss of $42 million, or $0.24 per share. Still, both the top and bottom lines compared favorably to Infinera's guidance, which called for a wider per-share loss of $0.30 to $0.26 on revenue ranging from $290 million to $310 million.

Stock market chart and data with a red arrow indicating losses.


So what

Infinera CEO Tom Fallon lauded their "strong customer traction," including bookings from new Tier-1 customer wins and the ramp up of a new internet content provider.

Fallon elaborated on Coriant, stating "Continued progress on our integration program, which we expect to largely complete in the fourth quarter of 2019, is enabling synergies to track ahead of our prior commitments."

For perspective, when Infinera initially announced the deal last July, management predicted the combined companies would be able to generate total cost synergies of $250 million through 2021.

Now what

Infinera also told investors it's targeting fiscal third-quarter adjusted revenue of $320 million to $340 million, which should translate to an adjusted loss per share of $0.19 to $0.15. In this case, most analysts were modeling a loss near the narrower end of that range on revenue slightly below the midpoint of Infinera's guidance.

During the subsequent conference call, management noted that bookings -- a key metric for predicting future growth -- "increased materially" in the second quarter, and should remain "solid" in the third quarter. It also reiterated that it expects to return to adjusted profitability and positive cash flow in the fourth quarter of this year, while at the same time reaching its target for $1.3 billion in revenue for the full year. 

In the end, it's clear the market was more than willing to forgive Infinera for its bottom-line guidance shortfall, both in light of its relative outperformance in Q2 and its prospects for sustained, profitable growth in the coming quarters. If Infinera is indeed able to make the most of those prospects, I suspect last month's gains will be only the beginning for this top tech stock going forward.

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.