Due to fiber shortage, Corning (GLW.US) Q2 net profit soared 77%, but its stock price fell short

According to Woofun AI, the average price of fiber for AI data centers has soared to more than five times the 2024 level this year, and Corning (GLW.US) has taken a key position in the industry's supply and demand imbalance with the $6 billion supply agreement signed with Meta (META.US).

The gap between supply and demand is profoundly reshaping the industry landscape. TrendForce predicts that there will be a shortage of 180 million fibre-kilometer fiber in global fiber supply this year, and this tense situation is likely to continue until 2028. According to data compiled by Woofun AI, the current industry capacity utilization rate has reached 92%, inventory is only enough to maintain supply for one month, and the production expansion cycle is 18 to 24 months.

Against this backdrop, Corning (GLW.US) optical communications business saw strong second-quarter revenue growth of 32% to US$2.07 billion, while net profit rose sharply by 77% to US$438 million.

Faced with market questions, management clarified the profit-driving logic. In the July earnings call, in response to Wolf Research analyst George Knott's concerns about soaring prices and reliance on long-term agreements, Corning (GLW.US) CEO Wendell Weeks pointed out that what really increases profitability is higher value connectivity products, not simply fiber price increases. These products help customers build networks quickly and at a lower cost. The agreement between Corning (GLW.US) and Meta (META.US) is valid until 2030 and covers optical fiber, cable and connectivity products, and Meta (META.US) will be the main customer of Corning (GLW.US)'s North Carolina cable plant expansion project, providing a stable demand guarantee for capacity release.

The capital market is markedly divided on the outlook for Corning (GLW.US). Despite strong demand, its stock price has fallen by nearly half since hitting a record high in June. UBS (UBS.US) maintained a “buy” rating and raised the target price to $201, Citibank (C.US) gave a target price of $220, while Bernstein cautiously set it at $140. According to Polymarket data, traders believe that the probability of Corning (GLW.US) optical communications business revenue exceeding US$2.3 billion in the third quarter is only 28%, and the relevant trading volume is US$3,500;

At the same time, the probability of a decline in the AI industry was priced at 9%, with a transaction value of over $3 million. Meta (META.US) will release financial results on Wednesday, October 21, and Corning (GLW.US) will follow suit by disclosing results on October 27.