<\/p>\n
Corning is best known for Gorilla Glass, the durable material used in smartphone screens.<\/p>\n
The company also makes the optical fiber, cables, and connectors that move data among thousands of processors inside artificial intelligence data centers.<\/p>\n
That business helped more than double Corning\u2019s share price over the previous year.<\/p>\n
Corning (GLW) shares were down about 14.9% at $122 around midday July 28 after the company issued a third-quarter sales forecast slightly below Wall Street\u2019s expectations.<\/p>\n
The decline followed a strong second quarter.<\/p>\n
Corning\u2019s adjusted, or core, sales rose 17% to $4.74 billion, while core earnings increased 30% to 78 cents a share.<\/p>\n
The stock reaction centered on how quickly Corning can turn demand for AI connectivity products into additional shipments.<\/p>\n
Investors are also weighing whether the growing optical business can offset weaker demand for smartphone-related products. Corning\u2019s shares fell more than 20% during the session, even though the stock remained more than twice its level a year earlier.<\/p>\n
AI demand is filling Corning\u2019s fiber factories<\/p>\n
Corning\u2019s Optical Communications sales increased 32% to $2.07 billion in the second quarter.<\/p>\n
Enterprise Networks sales, which include products used inside data centers, jumped 65%. Corning said sales of its generative-AI products grew considerably faster than the broader unit.<\/p>\n
A large AI data center can use thousands of graphics processing units, or GPUs.<\/p>\n
Those processors must exchange information quickly while training models and answering users\u2019 requests. Corning\u2019s fiber, cables, and connectors carry that data among the processors and across the facility.<\/p>\n
CEO Wendell Weeks said customer demand has moved ahead of Corning\u2019s existing manufacturing capacity.<\/p>\n
We continue to have the enviable situation of if we could make more, we could sell more.<\/p>\n
Large customer agreements provide additional evidence of that demand.<\/p>\n
Amazon signed a multiyear, multibillion-dollar agreement with Corning in June for optical fiber, cables and connectivity products used across its expanding U.S. data-center network.<\/p>\n
Corning also announced a long-term partnership with Nvidia in May.<\/p>\n
Related: Morgan Stanley says SpaceX investors miss the bigger story<\/p>\n
Under that program, Corning plans to increase its U.S. optical-connectivity manufacturing capacity tenfold and raise domestic fiber-production capacity by more than 50%.<\/p>\n
The expansion includes three new manufacturing facilities in North Carolina and Texas.<\/p>\n
The multiyear agreements give Corning greater visibility into customer demand.<\/p>\n
Its production lines will determine how quickly those commitments become products that Corning can ship and record as sales.<\/p>\n
Why 16% sales growth disappointed investors<\/p>\n
Corning expects third-quarter core sales of $4.9 billion to $5 billion, representing growth of about 16% from a year earlier.<\/p>\n
The company projected core earnings of 85 cents to 89 cents a share, an increase of about 28%.<\/p>\n
Analysts expected approximately $5 billion in sales.<\/p>\n
Corning would therefore have to reach the top of its guidance range to meet the consensus estimate.<\/p>\n
A 16% sales increase would be strong for many large industrial companies.<\/p>\n
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Corning faced a more demanding comparison because its shares had already more than doubled over the previous year as investors priced in faster growth in AI infrastructure.<\/p>\n
The Optical Communications unit also showed a modest deceleration.<\/p>\n
Its sales grew 32% in the second quarter after increasing 36% in the first quarter.<\/p>\n
Management\u2019s comments still indicate that demand exceeds current production capacity.<\/p>\n
The market focused instead on the slower growth rate and a sales forecast that only reached analysts\u2019 expectations at the top of the range.<\/p>\n
New factories and weak phone demand create the next test<\/p>\n
Corning plans about $2 billion of capital spending in 2026 as it expands manufacturing capacity.<\/p>\n
The company must build and equip new production lines before it can ship more optical products to its large data-center customers.<\/p>\n
It creates a risk: Corning spends the money before the additional lines begin producing revenue. A slower factory ramp could postpone shipments tied to the new customer programs.<\/p>\n
Corning\u2019s other major businesses face a different problem.<\/p>\n
High memory prices are raising costs for smartphone manufacturers and weakening consumer demand. Corning expects global handheld-device shipments to decline by a mid-teens percentage in 2026.<\/p>\n
That decline affects Corning because Gorilla Glass is used in smartphones, laptops, and wearable devices.<\/p>\n
The company can therefore increase its AI-fiber shipments while selling fewer glass products to consumer-electronics manufacturers.<\/p>\n
Global smartphone shipments fell 11% in the second quarter, reaching their lowest second-quarter level since 2013 as memory shortages raised handset prices.<\/p>\n
Corning expects to increase its U.S. optical-connectivity manufacturing capacity tenfold.<\/p>\n
picture alliance / Getty Images<\/p>\n
Key numbers from Corning\u2019s quarter32%: Optical Communications sales growth65%: Enterprise Networks sales growth$4.9 billion to $5 billion: Third-quarter core sales guidance$2 billion: Planned 2026 capital spending<\/p>\n
Corning has large customer commitments and is investing heavily to expand production.<\/p>\n
The next few quarters will show how quickly those new lines begin shipping products and whether optical growth becomes large enough to offset fewer device shipments.<\/p>\n
Related: Goldman Sachs sees writing on the wall for Eli Lilly stock<\/p>\n
#Cornings #datacenter #trade #hits #guidance #wall<\/p>\n","protected":false},"excerpt":{"rendered":"
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