Corning's Optical and AI Bets Push Ninth Straight Growth Quarter
Corning posted 17% core sales growth to $4.74 billion in the second quarter, its ninth consecutive quarter of year-over-year gains, while naming Amazon and NVIDIA as new optical-networking partners.
Corning (GLW) reported core sales of $4.74 billion in the second quarter, up 17% from a year earlier, extending a streak of year-over-year growth to nine consecutive quarters. The glass and optical-technology maker's core earnings per share rose 30% to $0.78, matching the growth rate posted in the first quarter, when core sales grew 18% to $4.35 billion and EPS grew 30% to $0.70.
The quarter's headline was less the pace of growth than where it is coming from. Optical Communications sales rose 32% year over year to $2.07 billion, a deceleration from 36% growth in the first quarter, but within that segment Enterprise Networks — the piece of the business tied to generative-AI data-center buildouts — grew 65%, a driver Corning called out by name for the first time. The company disclosed a multiyear, multibillion-dollar optical fiber, cable and connectivity agreement with Amazon and a partnership with NVIDIA aimed at a tenfold expansion of U.S. optical connectivity capacity and more than 50% growth in fiber capacity, following two undisclosed hyperscale customer agreements flagged in the first quarter.
Profitability metrics moved in the same direction as sales, if at a more measured clip. Core gross margin expanded 120 basis points year over year to 39.6%, matching the prior quarter's expansion rate, while core operating margin expanded 190 basis points to 20.9%, down from 220 basis points of expansion in the first quarter. Core return on invested capital rose 180 basis points to 14.9%, also a slight deceleration from the 190-basis-point gain reported three months earlier.
Solar was the exception. Segment sales accelerated to 90% year-over-year growth, reaching $438 million, yet the segment swung to a net loss of $7 million from net income of $7 million in the first quarter and $2 million a year earlier. Corning attributed the loss to an extended maintenance shutdown and equipment upgrade at its solar wafer facility, a cost it had flagged in its first-quarter release as a $30 million incremental expense versus the prior period, and expects Solar profitability to recover in the third quarter.
Cash generation improved sharply alongside the sales gains. GAAP operating cash flow reached $1.72 billion in the quarter, nearly five times the $362 million reported in the first quarter, and adjusted free cash flow rose to $1.42 billion from $451 million a year earlier.
For the third quarter, Corning guided to core sales growth of approximately 16%, to $4.9 billion to $5.0 billion, and core EPS growth of approximately 28%, to $0.85 to $0.89. Both figures represent a step down from the second quarter's actual 17% sales growth and 30% EPS growth, though they exceed the 14% sales and 25% EPS growth guided for the second quarter back in the first-quarter release, indicating that quarter's guidance was exceeded even as the growth rate is expected to continue easing.
Corning also used the release to formalize an upgrade to its multiyear Springboard Plan, first previewed in the first-quarter release ahead of a May 6 investor day. The company now targets an annualized sales run rate of $20 billion by the end of 2026, $30 billion by the end of 2028 and $40 billion by the end of 2030, alongside a newly disclosed 19% sales compound annual growth rate target from the fourth quarter of 2026 through the fourth quarter of 2030.
The results also reflect two accounting changes that complicate direct comparisons with prior periods. Corning restructured its segment reporting in the first quarter, folding its former Display and Specialty Materials segments into a new Glass Innovations segment and creating the standalone Solar segment from Hemlock Semiconductor and its wafer and module businesses, with prior periods recast. Separately, effective April 1, the company replaced its constant-currency adjustment methodology for non-GAAP core metrics with a new adjustment for hedged exposures; prior-period figures were not recast under the new method, which management said would have shown higher year-over-year growth in core sales, net income and EPS than the method it previously used.