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Optical networking stocks have been one of the hottest corners of the AI infrastructure trade. On Tuesday, that trade got hit hard and it started with one earnings report.
Corning posted a strong second quarter by almost any measure. The company topped consensus after reporting adjusted EPS of $0.78 and $4.74B in revenue. Its optical communications segment (now Corning's largest business) grew 32% year over year.
The problem was the forward guidance. Corning's third-quarter sales forecast of $4.9B to $5B landed at the very bottom of what analysts expected. FactSet consensus sat at $5B.
That hairline miss was enough to send shares tumbling more than 20% intraday, putting the stock on pace for its worst single day since October 2002.
Two forces are pressing on Corning's near-term growth. First, its own manufacturing capacity can't keep up with demand.
"We continue to have the enviable situation of if we could make more, we could sell more."
Wendell Weeks, Corning CEO
Corning makes the ultradense optical fibers used to link specialized chips inside AI data centers. Demand is accelerating, but output is capped. The company is targeting $2B in capital expenditure this year to expand production, but new capacity takes time to come online.
Second, Corning's consumer business is dragging. High memory prices are squeezing smartphone manufacturers, and Corning now expects full-year global handset volumes to fall by a mid-teens percentage.
Corning's Gorilla Glass (the durable screen material used on smartphones, laptops, and wearables) depends on healthy handset sales. That segment isn't delivering right now.
Corning's miss acted like a starting gun for a broader rout in optical names. Marvell, Lumentum, AXT, and Coherent all dropped double digits. Ciena fell nearly 10%.
These companies don't all report the same results. But they share the same trade narrative that is AI infrastructure buildout drives fiber demand, fiber demand drives revenue. When the anchor name in that narrative guides below expectations, the whole group reprices.
Corning's stock had already dropped more than 50% in July heading into earnings. The AI trade broadly has been under pressure this month, and optical names had been carried along in that current.
The long-term picture Corning is painting remains ambitious. CEO Wendell Weeks told analysts the company expects a 19% sales compounded annual growth rate from the fourth quarter of 2026 through the fourth quarter of 2030.
The Springboard Plan targets an annualized sales run rate of $20B by end of 2026, $30B by end of 2028, and $40B by end of 2030.
The deal flow backs some of that ambition. Corning recently announced a multiyear, multibillion-dollar agreement to supply Amazon with optical fiber and connectivity solutions for US data centers.
Nvidia made an investment worth up to $3.2B in Corning to expand optical networking manufacturing in Texas and North Carolina. A $6B deal with Meta to supply cabling and fiber for data centers was signed in January.
But those deals represent future revenue. Today's guidance reflects today's constraints like capped output, slower smartphone volumes, and a Wall Street that wanted more than it got.
Investors who bought in earlier this year are still in the green. But anyone who chased the stock higher in recent months is sitting on significant losses and the sector just got a reminder that AI-adjacent doesn't mean immune to bad guidance.
