Q2 2025 ADTRAN Holdings Inc Earnings Call
Good morning. My name is Kate, and I'll be your conference operator. At this time, I would like to welcome everyone to the ADTRAN Holdings, Inc. second quarter 2025 financial results conference call. All participants have been placed on mute to prevent any background noise.
After the speaker's remarks, there will be a question and answer session.
If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad,
If you would like to redraw your question, press star 1 again, thank you Mr. Peter showman vice president investor relations. You may begin your conference call.
Thank you for joining us today for adtran holding second quarter, 2025, Financial results conference call and welcome to all those joining by webcast.
During the conference call adran Representatives will make forward-looking statements that reflect Management's best judgment based on factors currently known. However, these statements involve risk and uncertainties including those detailed in our earnings release our annual report on form, 10K, as amended and other filings with the SEC. These risks and uncertainties could cause actual results to differ materially from those, in our forward-looking statements, which may be made. During the call. We undertake no obligation to update any statements to reflect events that occur after this call.
During today's call, we will refer to certain non-gaap Financial measures reconciliations of gaap to non-gaap measures and certain additional information are also included on our in our investor presentation and our earnings release. We have not provided reconciliations of our third quarter, 2025 Outlook with regard to non-gaap operating margin because we cannot predict and quantify without unreasonable effort, all the adjustments that may occur during the period.
The investor relations presentation has been updated and is available for download on the Adrian, investor relations website, turning to the agenda. Tom Stanton, atran holding CEO and chairman of the board will provide the key investment highlights for the second quarter 2025, Tim Santo our senior, vice president, and CFO will review the quarterly financial performance in detail and per
Provide our third quarter, 2025 Outlook, and then we will take any questions that you may have. I now like to turn the call over to Tom Stanton.
Thank you Peter. Good morning, everyone.
at Trend delivered, solid, second quarter results, marked by stronger, Revenue performance, healthy profitability, and continued balance sheet, improvements
as previously disclosed in our pre announcement Revenue, exceeded our expectations with sequential and year-over-year growth across all 3 of our Revenue categories.
This performance reflects strong execution and market share gains coupled with an improving industry, backdrop driven by renewed infrastructure investment, the normalization of service providers spending and growing demand for advanced fiber and Optical Solutions.
Importantly, cash generation remained, healthy with 32.2 million in cash from operations and 18.3 million in free cash flow.
I'm encouraged by the improving demand environment across our key market segments.
These demand Trends, not only supported our strong Q2 for performance, but also increased our confidence in our outlook. For continued growth, over the coming quarters.
Returning to the quarterly results at Transit revenue of 265.1 million was above the high, end of our previous guidance range.
All 3, Revenue categories, delivered sequential growth. And for the second straight quarter each Revenue category generated year-over-year gains
This broad-based. Momentum, reinforces the strong competitive positioning of our Optical transport fiber access and subscriber Solutions, portfolios.
As expected, the highest sequential Revenue growth in the quarter came, from our Optical networking Solutions, which grew 22% year-over-year and 15% sequentially.
This growth was driven by demand in both the US and non US regions with the most significant gains coming from our US service provider customers.
New customer acquisition, also remains strong with 18, new Optical customers added during the quarter including several cross-selling wins further validating the synergies with our Optical transport and fiber access portfolios.
There are multiple application. Demand drivers fueling, the investment in Optical networks. These include the buildout of private compute infrastructure. The expansion of wholesale service providers to connect AI infrastructure ongoing 5G densification and upgrading critical infrastructure.
Combining these application demands with new customer wins and a return to more normalized service provider buying patterns gives us optimism for sustained growth in this category.
And access and aggregation, we followed a very strong first quarter with additional growth in the second quarter growing in impressive. 30% year-over-year for the quarter.
This category was led by the strength of our larger, European service providers and small to midsize US service providers with many of these customers. Not only expanding their fiber footprint, but also expanding their share of business with us.
New customer acquisition with our fiber access platforms. Also remained healthy.
The ongoing success in our access and aggregation solutions is being driven by the technical leadership shown in our SDX portfolio, and the corresponding Mosaic Cloud software.
In our fiber access portfolio.
Demonstrating our ongoing commitment to Innovation. We recently connected the first commercial 50 gig Pond customers in the UK using our new sdx 6400 series.
These product Investments paired, with our strong Regional presence in the US and Europe, new customer wins. And the continued demand for high-speed fiber-based Broadband has us well positioned to sustain this sex success into the future.
Our subscribers category, grew 4% sequentially after a strong first quarter.
Within this category residential Solutions performed particularly well increasing 18% sequentially and 25% year-over-year.
since remained strong with 20 new service, provider, and government customers added for our subscribers Solutions category during the quarter,
Subscriber Solutions revenues growing due to expanded fiber connectivity Rising multi-gigabit, demand and service providers adopting bundled Broadband Solutions covering both access and in-home needs.
Our broad subscriber Solutions part for you. It covers residential Enterprise and wholesale, fiber services, and is being expanded to address. The unique needs of SMB, MDU and Community Wi-Fi, with the launch of our sdg 9000 series of products.
The expanded offering, along with continued demand for high-speed fiber services and large-scale deployments of our complimentary fiber access platform, is expected to result in further growth in this segment during this quarter.
Our Mosaic software suite integrates our comprehensive fiber networking portfolio, which covers everything from the optical core to the customer premise.
Leveraging, this extensive range of solutions and advanced software capabilities. We are well, positioned to facilitate the industry's transition towards AI driven network operations.
Live customers are currently in progress featuring our new suite of AI applications including Advanced generative and agentic, AI tools.
That complement. And enhance that these, these complement and enhance our Mosaic 1 offering,
Early results, highlight the ability that these applications to transform how networks are operated by substantially lowering Network operating costs while improving the subscriber experience.
In summary, we are encouraged by the progress we made during the second quarter, both financially and strategically we delivered growth of all major Revenue categories and advanced our positions in key technology. Domains
Our continued investments in general, Next Generation optical fiber, access and subscriber Solutions are translating into new customer wins and deeper engagement with existing accounts.
The ongoing expansion of AI infrastructure, especially as it moves, closer to the network Edge plays directly to our strengths.
Looking ahead. We remain confident in our outlook for the second half of the Year. Strong Custer demand and discipline execution position as well to deliver continued Improvement in profitability and cash generation, both of which are Central to our long-term strategy.
With a differentiated portfolio expanding Global presence and increasing relevance in Next Generation Network architectures. We believe adtran is exceptionally well positioned to for sustained success.
With that, I'll turn the call over to Tim our CFO to walk. You through our financial results for the second quarter and then following terms or marks we'll open the call up to any questions. You may have
Tim.
Thank you, Tom, and thank you for joining us this morning.
As I shared last quarter, my focus remains on 3 key priorities. Strengthening our capital structure enhancing the capabilities of the finance organization and deepening our engagement with stakeholders.
These are fundamental to delivering long-term sustainable value for our stockholders.
We are making solid progress across each of these areas first, we are taking meaningful steps to improve our capital structure. We generated 32.2 million in operating cash and 18.3 million in free cash flow this quarter.
With 106 million of cash available on our balance sheet.
We are advancing efforts to raise Capital through the sale of non-core assets, including our Huntsville campus, which I will speak further shortly.
Meanwhile, availability on our revolving. Credit facility, has more than doubled and will continue to expand as we grow non-gaap ebit and accelerate, our free cash flow.
Second, we've strengthened our financial organization. Through strategic additions to my senior leadership team.
These hires improve our ability to manage the complexities of our current structure and support execution.
Finally we've deepened our engagement with external stakeholders, we've expanded participation in investor and Industry conferences and are pursuing broader research coverage. We remain committed to transparency listening and increased accessibility as we execute our strategy and will continue to expand over the coming quarters.
With that, let's take a look at the financial results for the second quarter of 2025.
Adran second quarter performance reflects an improving industry environment and our ability to deliver strong operating results.
We are adding new customers and expanding our presence with existing ones, driving market, share gains. And we are continuing to scale our business
Addran, delivered second quarter. Revenue of 265.1 million up 17% year-over-year and 7% sequentially. Exceeding, the high end of our original guidance range and reinforcing strong execution and momentum,
Our Network Solutions segment, contributed revenue of 219.5 million accounting for approximately 83% of total revenue in Q2.
Compared to 79% in the prior year.
Our services and support segment. Generated 45.6 million of Revenue. Representing 17% of Revenue in Q2 2025 compared to 21% in Q2 2024 largely resulting from the significant growth in outperformance in Network Solutions.
Moving on to product categories, our Optical networking Solutions, Revenue was 90.1 million or 34% of total revenue.
As predicted, Optical networking Solutions, Revenue was higher growing by 22% year-over-year.
As an aggregation, delivered revenue of 91.2 million or approximately 34% of total revenue.
And increased 30% year-over-year.
Or 32% of total revenue, increasing 2% year-over-year.
Revenue. Accounted for 55% of the total while us Revenue comprised 45%.
Additionally, 1 customer represented more than 10% of our Q2 Revenue.
This quarter's non-gaap gross margin was 41.4%.
While gross margin was in line with previous Trends. The quarter over. Quarter decline was primarily driven by product and customer mix higher Transportation costs. As we strategically, reposition products to mitigate terrific exposure.
We maintain our longer-term target ratio of 42% to 43%.
Non-gaap operating expenses were 101.7 million up from 195.5 million in q1 and 93 million in Q2 last year, mainly due to currency fluctuations and higher sales commissions.
Non-gaap operating profit was 8 million, or 3% of Revenue above the midpoint of our 0 to 4% Outlook.
This compares to 9.8 million or 3.9% of Revenue in q1 2025.
And 1.4 million or 6% of Revenue 1 year ago.
The year-over-year operating margin and profitability Improvement was primarily driven by higher Revenue. Although we tightly manage our costs Opex increased due to fluctuations in European currencies and higher sales related expenses.
Currency fluctuations were a meaningful factor this quarter.
While we are generally well-positioned from a natural hedging standpoint on profitability, we believe that looking ahead, currency will continue to play a role in our financial results.
Since joining adtran in March, I prioritize strengthening effex management, taking early steps to build a more robust hedging strategy.
These efforts support a broader goal of enhancing transparency and resilience in a more complex global environment.
Non-GAAP tax expense in Q2 2025 was $628,000, reflecting higher taxable income in the U.S.
We reported a non-gaap, net loss of 256,000 or 0 cents on an earnings per share basis.
This compares to non-GAAP net income of 3 cents per share in Q1 2025.
And a net loss of 13 cents per share in Q2 2024.
Turning to the balance sheet and cash flow statement.
In the second quarter, we continue to make meaningful progress in our financial position.
6.6 million supported by a continued reduction in inventories and stronger collections.
Trade accounts, receivable were 164.8 million at quarter, end resulting in DSO of 57 days and improvement from 60 days in the prior quarter.
Inventory levels decline to 240.1 million. At the end of the quarter, a decrease of 13.6 million sequentially.
Correspondingly, days inventory outstanding significantly decreased by 17 days to 1,135 days in Q2 2025.
Accounts payable were 178.3 million with days payable outstanding of 70 days.
Strengthening our balance sheet remains a key strategic priority.
As mentioned before, operating cash flow was $32.2 million and we had a cash flow of $18.3 million for Q2 2025.
This is compared to 24.5 million in q1 2025 and 3.9 million during Q2 2024 we ended Q2 with 106.3 million in cash and cash equivalents
5 million sequential increase reflecting solid improvement in our liquidity.
It is worth noting that this increase was achieved. Net of certain networks, SE share repurchases under our dlca agreement.
Underscoring our disciplined cash management and strong operational execution.
We remain focused on materially strengthening our financial position in 2025. With the ultimate goal of achieving a positive, net cash position.
As mentioned earlier, we continue to evaluate opportunities to monetize certain non-core assets, including some of our Huntsville properties.
Although we were close to closing a deal, this past quarter that deal is not yet finalized and we continue to work on finding additional purchases for this unique property.
Further with our improved credit positioning, we are evaluating a sale lease back transaction on our East Tower.
We are approaching these decisions thoughtfully and increasingly from a position of strength.
We are pleased with our second quarter performance and encouraged by the signs of continued improvement across the industry.
We are beginning to experience the benefits of scale and expect that momentum to build in the second half as Revenue growth continues.
Foreign exchange has generally had a positive impact on our business in Q2, although it contributed to slightly higher operating expenses largely due to the weaker US dollar relative to the euro.
On a constant currency basis, we expect Opex to remain consistent with prior quarter levels.
As I mentioned since joining in March, I prioritize building stronger effex management and Reporting capabilities.
Our capital allocation remains focused on deleveraging and continuing to evaluate opportunities to streamline the portfolio.
before turning to our outlook for the third quarter, I want to briefly address our approach to guidance
A few weeks ago we issued a press release. Pre-announcing that Q2 Revenue would exceed our prior guidance range,
While that intraday disclosure update may have seen a typical. It was required under German disclosure rules. We inherited through the ad of a merger.
These regulations mandate rapid public disclosure of any material deviation, positive, or negative, from previously issued guidance.
As such we provide, quarterly guidance rather than annual guidance to remain compliant and avoid unnecessary disclosure burdens.
looking ahead to the third quarter of 2025
We expect revenue between $270 million and $280 million, and anticipate a non-GAAP operating margin of 3% to 7%.
This Outlook excludes potential, tariff, impacts due to ongoing uncertainty surrounding global, trade policy and broader macroeconomic conditions.
Additional Financial details are available at investors.adt.com.
This concludes our prepared remarks.
I'll now turn the call back to the operator for Q&A.
Thank you. We will now begin the Q&A session. At this time, I would like to remind everyone that in order to ask a question, press star, then the number 1 on your telephone keypad.
Our first question comes from the line of Brian Coons with nitam and Company, your line is open.
Strength in your large SPS, I assume that's coming from Europe. And, um, Tom, can you kind of, uh, you know, maybe, uh, lay out, uh, kind of the trends you're seeing there, either in some of your larger existing accounts or some of the new ones you're actively ramping in Europe.
Yeah, sure. Um, first of all I you're right. There was a lot of strength in Europe.
um, and uh,
Yeah, I mean the large accounts did well, but we also saw strength.
Specifically in Optical in the US large uh service providers as well. So that was kind of a
That was good to see. Um,
In general, the strength there is is just the momentum. There is just continuing to grow. I mean we really don't see any slowdown. We think that the
German carriers are getting or German customer is getting stronger uh and more able to deploy.
What's going on in the UK? I think you're aware of is um, continuing to
Really kind of be where we had hoped it to be, so it's just continuing to move upward. Um, the market itself is continuing to move towards, um,
Let's say uh more and more towards uh making sure that they have the right vendor base, right and and remove the Eastern vendors.
Yep. Uh, we announced a, uh,
When last quarter, and I think we called it a Southern European.
Um, it was in Italy, and we actually—that's been quick. So we've actually started shipping towards the tail end of that quarter some optical gear to that customer as well. So, um, yeah, I would say everything looked positive.
That's great. Uh,
and maybe another
talked about in the prepared remarks, uh, when we were ofc, we heard a little bit about
Uh, you know, emerging DCI opportunities and this concept of mofa networks where uh the you know the big cloud providers are Contracting, local SPS to build. Can you update us on that? Uh are you seeing that as an important trend is it is it meaningful at this point and you know, how would you characterize that that opportunity for you, you know? Yeah, the there is a host of different rfps out there right now.
Um, with service providers who are
Um, in some of these are actually customer-driven. So some of these are, you know, you may have a big, um,
ICP came in and said that they want to be able to cover this. Then there are others that are just kind of more opportunistic and trying to make sure that their network is ready.
Um, but there's a ton of activity. I would say, we we have won some business there, um, but I would say it's, it's still early that that, um,
There's just a lot of activity right now.
Got it. Great. And maybe just 1 last if I could on the on the balance sheet look like there were some redemptions of adversaries, you know, how should we be, how should we, how should investors, think about that relative to your expectations? Yeah, let me touch on that and see if there's anything else to add to it, Tim. But about half of that was actually we disclosed last quarter and then
half of that, uh, was
This quarter disclosure. And in that case it was the same person we have been in discussions with them for quarters. And I would I would say it was very uh
Uh, it was very well managed and it was okay. I think we were glad to be able to get those shares back at the price that we were able to get those shares back at
Anything else Tim?
I just say that that you know that was largely an orderly transaction again, we're in contact with these investors and
You know, done in an orderly way it reduces the shares outstanding which long term is a is a very positive thing.
That's great. Uh thanks for the questions and uh nice job in the quarter.
Thank you.
Your next question comes from the line is Michael genovis with rosenblat Securities. Your line is open.
Uh, great. Thanks very much. Um, uh, Tom you mentioned a couple times in the script. Uh, you talked about market share gains. So could we just double click on that and get some more thoughts on, uh, what you're seeing there?
Uh, yes. So we
Well, you know, you know what's going on in Europe, and I would say there's probably nothing big there that changed other than the Italian one that we brought on; we picked up.
market, share in the
I'll call it the Tier 2 space, but the kind of competitive carrier space here in the U.S. as we won some additional optical business.
About. I'm, I'm going to guess here about 50% of that new business was where we added
A.
Are not buying. Um, and that was really good to see, cuz that was kind of the premise of
you know, the acquisition that we did what 3 court orders or 3 years ago,
um,
tier 2 tier 1, tier 3's. We added somewhere around.
10 or 11 carriers. During the quarter, just for fiber access alone. And I mentioned we we added 20 customers on the subscriber space. The majority of those were carriers. Um and then the next largest segment was in government municipalities so that space as you earlier continues to be very active.
All right, thanks. Um, and then, um, you know, if we go back a couple quarters ago on your reporting, um, there was a big emphasis on operating leverage, and then last quarter, you know, we had the, um, the Forex.
Uh, you know, pop up, but it sounds like you're hedging that again, uh, or hedging that out now. So, so, so I guess my question is, is, um,
You know.
Are we going to start? Do you expect to start talking about operating leverage again as being a key part of the story? Because, you know, again we had that thread and it kind of got lost and I've been waiting for it to come back. So uh any thoughts on that issue would be helpful. Thank you.
You know, I think I'll highlight just on the Forex side. You know, it was generally EPS neutral because we are largely naturally hedged.
What I'm working on internally with our bank groups and, and with some of our advisors is, is a hedging strategy that keeps it that way. Um, you know, the challenge is you do see some volatility in the individual line items again back to to, you know, FX if I'm sorry Opex, if you back out uh, the impact occurring largely flat,
But at an EPS level, it was neutral to slightly positive for the company. So what we really want to do is hedge against any further changes in the U.S. dollar, which is an active strategy. You know, ideally what I have is a constant currency model, which again I've been here a quarter, so we're still working on some things internally and building out some additional capabilities within my team.
But with constant currency reporting, there will be more transparency to the true impact of FX and the benefits of our hedging strategies. And I'm just, you know, just on a percentage basis, right? We are starting to see that this quarter. You know, if you take a look at the midpoint of our guidance on...
Our EBIT, um, you'll see that that's moving up from where we ended up and where we were going to last quarter. So I think we're right at that tipping point now to where you'll start seeing that leverage, um, FX or no FX. You'll see that leverage. So, um,
yeah, we're we're we don't want to get too ahead on what we're projecting because
You know, things happen, but I would say we're right at that point right now.
Okay, that's good. Um, that's great for me. I'll pass it on. Thanks again, okay?
Your next question comes from the line of Christian Schwab with Craig Hallam Capital Group. Your line is open.
Mr. Christian, your line is open.
I was on mute. Uh,
Thank you for staying with me. Um,
just a follow-up on the currency question, you know, in the hedging, you know you assume constant currency can you just tell us, you know, your assumption for the dollar to euro exchange rate for the quarter which you're assuming it will be until all your head strategies are in place.
Well, again, on an EPS basis, we're we're largely naturally hedged, so I expect on an EPS basis us to remain relatively neutral. Uh, we are net, positioning a, a, a strong, uh, Improvement in the dollar, but no material movements, uh, in the next 3 months.
Great. And then my my second question is regarding the US, uh, Revenue strength. Um, are are you guys benefiting this quarter and do you anticipate benefiting in the second half of the year, uh, due to the bankruptcy of DCs?
Um, yeah, we we we write off of the bat started getting calls. We've started shipping to multiple customers now in the US.
Um,
predominantly in the US, I think we have some International businesses as well but
Um, that's affected that. That'll be a positive movement for us, both on the OLT side on the infrastructure side, as well as on the subscriber side.
It already has been. It's already started, impacting us.
To come or or the positive impact that you received this quarter?
Um, I don't really have that number. That's getting pretty granular. I would say across the business, it's probably in the 10- million.
But, you know, that's when it is all rolling, but some of these things are still competitive, they're going out to RSP.
Some of them, we have interoperable products. So, we're an easy plug-in. Um, so where people were really, um,
Really in a bind, they kind of called us. But um, yeah. I mean I wouldn't it's it's I would say it's
It's probably material, but it's not overly. So,
From the line of George Nutter with wolf researcher line is open.
Hi, thanks a lot, guys. Uh, Tim, I think you mentioned um...
Your efforts on the sale of the north south tower. Is it sounds like from your comments that that's
Uh, you know you've had a particular buyer kind of walk away from the process. Is that correct? And what do you think the outlook is for getting a transaction done there? Thanks.
Yeah, let let me start with the first piece and then I'll turn it back over to Tim. We didn't have a a buy or a walk away. We had a buyer that has been closed slow to close.
So they are still actively trying to uh, get their side of the deal done but based off of the timing differential, you know, we're we're now. Now looking at offering it to other people.
Um, and before that, for a period of time, we were not, we had taken it off, and we were trying to close a deal, that's still an active negotiation, but we are now looking at other offers as well. Tim anything you want to add to that? I just say we're. We're
Exactly, you know, we are under an exclusivity period. We were, we have an Inked deal but uh, you know, there's contingencies that have kept us from moving that forward and and those remain in place we're tired as you are with some of these things moving. So it's a unique property, it's a tough property, but it's a gorgeous property. So um, you know, we're not willing to give the property away for an amount that's at a fire sale and
We're also very selfishly aware of who's going to be our, our neighbor.
So we're working with some new parties to help us re-market the facility in parallel. And also, I mentioned, you know, re-exploring with our renewed strength and, and capital position, a sale East back transaction, on the, uh, East Tower.
Thank you.
Bye. You're not. Your next question comes from the line of Tim Savage with Northland, Capital markets. Your line is open.
Hey, good morning, and congrats on the outlook in particular.
And some of that operating leverage that you're starting to, uh, to show.
And along those lines. I think you mentioned um an expectation for subscriber Solutions.
Um, to grow in Q3, but I'd be looking for any other color.
From a segment or geographic perspective about, you know, where you expect that sequential growth to come from, I can follow up from there.
Yeah, so yeah, we explicitly like you're right, I explicitly did point out subscriber Solutions. And that's just
Um, backlogging that area continues to grow. So um we kind of have more visibility.
Um,
As to what we expect, their Optical business will probably have a very strong quarter as well. That business and its backlog continue to grow. Access backlogs are probably not as big because we do have a lumpy order pattern. But, um,
yeah, it's it's, it's
Positive. I mean the the business itself is definitely trending positive. I don't our visibility as you know, is usually as strong as in the next quarter and then it gets a little weaker and a little weaker. Um,
All of the signs that we have right now are looking upwards. So,
um,
Yeah, and I would say across all the products segments, probably the strongest.
Single area right now is Optical because they have the most uh, ground to make up. They had the inventory depletion.
Cure itself, the latest at this point in time, I would say it's cured.
Um, and we're just seeing strong activity there.
Did that answer your question, hopefully?
sure did and and leads very well into the next 1, which is, you know, time you've mentioned
I mean should we take that?
As implying an expectation for a continued sequential growth into Q4. You know, you do at times have some seasonal, headwinds there or I know it's early, but I want to see if I'm interpreting that positive um correctly.
Yeah, I'm going to, um, we take, we don't give, as you know, guidance past the quarter. But I would say...
The momentum is strong enough to where I would not be surprised if we were to overcome any seasonal patterns at this point.
Great. And
Um, maybe the last one for me. Um, you did see a good amount of, um,
Sequential growth in the U.S. this quarter. I've talked about that, um, to some degree.
but you know, should we?
I guess to what extent should we associate that with inventory?
Um,
You know, burning off versus maybe some of the new wins you announced last quarter with the tier twos in the US. Or what what makes the factors would you say it was driving that that us growth in particular?
Yeah, I I think you literally hit the mix. I think we did win some tier 3s as well, but they tend to be smaller buyers. So you have to really have a big mass and I would say we don't have a big Mass yet.
Tier twos can move the needle, they have started buying our Optical products as well. So it was tier twos. And the tier ones here in the US are probably are. What drove the most Enterprise also did good.
Um, but those 2, drove the most, I'm trying to think of the numbers.
Um, those 2 definitely had the biggest impact.
Okay, thanks very much.
Okay.
Your next question comes from the line of build the zelle in with titanium capitals. Your line is open
Uh, thank you, uh, relative to the strength that you were talking about really around the globe.
Are, are you able to?
Either ranked or, um, kind of highlight, what's the true driver between, you know, the expanding bandwidth, the AI, the data centers vendor replacement? You know, there are all these factors that I think you've highlighted our favorable contributors. But are there 1 or 2 that are truly the meaningful drivers?
Um, I I would say the biggest driver right now is upgrade of the network at least for us, right? Is upgrade of the network.
For residential Broadband, that that's driving. The biggest piece of our
kind of Revenue growth over the last few quarters. The next biggest driver. It gets Optical returning to normality,
Would definitely be the next 1. And I will tell you, you know, like I said, we're expecting a strong second half there.
Um that it and that normality, it's not just normality its new application win. So you know, I mentioned, we won some in Europe, we won some additional
projects in Europe, that include 5G densification, for instance, which is kind of
Nice to see. Um,
And then we're seeing some of the work and have won some business around kind of getting just general bandwidth upgrades, and some of that is AI-driven.
So uh it's kind of hard Optical is multiple different things affecting Optical.
Um, but I would, so if you would just let me say, "Fiber to the Prime plus Optical" that would be the right answer, because the Fiber to the Prime is also affecting our subscriber business. Of course.
That that's helpful. Thank you Tom. And then in the US, do you see any opportunity to uh to crack into um any of the tier ones that you are not currently uh a meaningful player with
We sell to the other. Well uh, let me read. Let me Define Tier 1 2 for you, if you don't mind.
We Tier 1 carrier customers, Telco customers.
Um, we sell to them, but I don't see any real big change in trajectory in the near term there.
For MSO customers. I think there's a difference. I think that we have products, well, positioned and the larger mso's here.
And we could see some movement there.
Um, did that answer your question?
Yes, but it certainly does lead to another to expand on that last comment about winning additional sounds like large MSO business.
Right. Where, um,
Um, I I think we're well positioned. We want, you know, until I see that big Poe coming in, I'm not going to
Really.
Excited. But we're we're we're approved and ready to go.
All right, great. Congratulations on a uh on a really nice quarter. All right, thank you very much. I think with that we are out of questions for
Um, today, I appreciate everybody joining us on the call, and we look forward to talking to you next quarter.
Thank you, ladies and gentlemen.
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