Can Corning’s Optical Communications Revenues Cross $5 Billion By 2020?

by Trefis Team
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A key objective for Corning’s (NYSE:GLW) management over recent years has been to surpass $5 billion in sales for the Optical Communication Segment. Trefis believes that the company’s management will be able to fulfill its objective next year, as we expect Corning’s Optical Communication revenue to grow at an average annual rate of 9.2% from $4.2 billion in fiscal 2018 to just over $5 billion in fiscal 2020. The top-line growth will be led by higher sales of carrier as well as enterprise network products. The acquisition of 3M’s Communication Markets Division coupled with long-term growth opportunities stemming from the expected deployment of 5G between mid-2019 and late 2020 will play a crucial role in helping the segment’s revenue breach the $5-billion level.

Trefis has highlighted the growth in the company’s revenue in the interactive dashboard – Can Corning’s Optical Communications Revenues Cross $5 Billion By 2020?  You can modify any of our key drivers to gauge the impact changes would have on its valuation. Additionally, you can see more more Trefis Industrials Data here

How Much Has Corning’s Optical Communications Revenue Grown Since 2015, And How Much Can It Grow Over The Next 3 Years?

  • Optical Communication segment is classified into two main product groupings: carrier network and enterprise network.
    • The carrier network group consists primarily of products and solutions for optical-based communications infrastructure for services such as video, data and voice communications
    • The enterprise network group consists primarily of optical-based communication networks sold to businesses, governments and individuals for their own use. 
  • Corning’s Optical Communication sales grew from $3.0 billion in fiscal 2015 to $4.2 billion in fiscal 2018. This represents a 12% average annual growth in revenues (2016-2018). Both segments have contributed nearly equally to this growth.
  • Optical communication’s contribution to total revenues has increased from around 32% in 2015 to more than 37% in 2018. Trefis expects this contribution to increase to around 39% in 2020.

Corning’s Optical Communication Revenues have witnessed strong y-on-y growth in recent quarters, and the trend is likely to accelerate over coming months

  • Corning’s Optical Communication segment has achieved robust growth over the recent quarters. Sales growth in this segment has been driven by multiyear data center and carrier projects as well as sales from the recently acquired 3M’s Communications. This growth has been supported by increased consumption of streaming and cloud services.
  • Moreover, demand for the company’s fiber, cable and connectivity solutions has remained upbeat which has further aided the segment’s growth.

Increase in internet penetration, growing data traffic and growth of data centers should boost revenue growth over the coming years.

  • Increasing internet penetration and growing data traffic leading have led to rapid growth in data centers while increasing the demand for high-speed transmission networks. This demand is expected to drive Corning’s Optical Communications revenues over coming years.
  • Additionally, we expect Corning’s multi-year contracts with industry leaders in the carrier and data center segments to drive substantial growth for the segment in over a time-frame of 2-3 years.
  • Also, the optical communication and networking market is expected to grow from $15.1 billion in 2017 to $24.1 billion by 2023 at a CAGR of 8%. Keeping this in mind, a growth rate of just over 9% looks achievable for Corning’s Optical Segment over coming years.

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