ADTN and DELL Team Up to Boost AI Networking for U.S. Federal Agencies

Nokia Corporation NOK recently revealed it has secured a five-year extension of its agreement with Microsoft, strengthening its position as the key supplier for Azure cloud infrastructure. The deal will accelerate Microsoft’s global footprint expansion initiatives and effectively support massive growth in compute workloads.

SONiC (Software for Open Networking in the Cloud) is an open-source network operating system extensively used by large-scale cloud data centers and service providers. Nokia boasts a strong research and innovation foundation on SONiC (Software for Open Networking in the Cloud) capabilities. Over the past six years, MSFT has collaborated with Nokia engineers to develop routers running based on SONiC. The recent agreement is built on this existing partnership around open-source SONiC technology.

Nokia is set to supply its 7250 IXR-10e platform, which provides multi-terabyte-scale interconnectivity to address the growing bandwidth demands within Microsoft datacenters. Nokia will also deploy SONiC-based routers and data center switches to facilitate Microsoft’s transition to 400GE connectivity from 100GE. These advanced solutions will augment the speed and reliability of Microsoft’s data center infrastructure, enabling it to maintain a competitive edge in a rapidly growing cloud service market.

Will This Venture Drive NOK’s Share Performance?

The deal will expand Nokia’s global footprint to over 30 countries and also strengthen the company's position as a strategic and reliable supplier for tier-one hyperscale companies like Microsoft. With the surging demand for general compute and data traffic, enterprises worldwide are looking to enhance their data center infrastructure to improve network capacity. With its comprehensive data center portfolio, Nokia is well-positioned to gain from this emerging market trend.

NOK’s Stock Price Performance

Shares of Nokia have gained 18.4% over the past year compared with the industry’s growth of 39.1%.

It has been about a month since the last earnings report for Plexus (PLXS). Shares have added about 10.2% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Plexus due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Plexus Q4 Earnings Top Estimates

Plexus reported adjusted earnings per share (EPS) of $1.85 for fourth-quarter fiscal 2024. The figure rose 12% year over year. The bottom line outpaced the Zacks Consensus Estimate of $1.53.

Revenues of $1.05 billion increased 2.6% year over year and beat the Zacks Consensus Estimate by 4.3%. The top-line expansion was driven by strong regional performance (Asia-Pacific and Europe, Middle East and Africa) and strength in the Aerospace/Defense and Industrial sectors. Management expects continued growth for the Aerospace/Defense sector in fiscal 2025. It also expects the Industrial segment to gain from strength in SemiCap market offsetting near-term industrial demand uncertainty.

In the reported quarter, revenues from Asia-Pacific and Europe, the Middle East and Africa rose 11% and 18.5%, respectively. Revenues from America declined 13.9% to $335 million.

In the fiscal fourth quarter, Plexus won 26 manufacturing programs, which are estimated to contribute $230 million in annualized revenues once fully ramped into production.

For fiscal 2024, the company reported revenues of $3.96 billion, down 5.9% from the fiscal 2023 level. Adjusted EPS of $5.72 declined 11.5% year over year.

Market Sector Details

Industrial sector’s revenues were up 8.4% year over year to $452 million, contributing 43% to total revenues.

Healthcare/Life Sciences’ revenues declined 7.6% from the year-ago quarter’s levels to $415 million, contributing 39% to total revenues.

Revenues from Aerospace/Defense increased 16.5% year over year to $184 million, contributing 18% to total revenues.

The company’s top 10 customers accounted for 52% of net revenues in the fiscal fourth quarter.

Operating Details

Gross profit on a GAAP basis increased 11.6% year over year to $107.9 million. Gross margin came in at 10.3% from 9.4% year over year.

Selling and administrative expenses increased 24.6% from the year-ago quarter’s actuals to $54.1 million.

It reported an adjusted operating income of $64.7 million, up 9.4% year over year. Adjusted operating margin expanded 40 basis points to 6.2%.

Balance Sheet & Cash Flow

As of Sept. 28, 2024, Plexus had cash & cash equivalents worth $345.1 million compared with $269.8 million as of June 29.

As of Sept. 28, 2024, the company had long-term debt and finance lease obligations, net of the current portion of $90 million compared with $90.7 million as of June 29.

In the quarter under review, the cash flow from operations was $220.1 million. Plexus reported a free cash flow of $193.8 million.

Plexus repurchased $19.5 million of the company’s shares at an average price of $117.91 per share under its repurchase program. Plexus’ board of directors approved an additional $50 million worth share repurchase plan in August 2024.

Q1 Outlook

For first-quarter fiscal 2025, revenues are projected to be between $960 million and $1 billion.

Non-GAAP operating margin is expected to be between 5.7% and 6.1%. Non-GAAP EPS is expected to be in the band of $1.52-$1.67.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision.

The consensus estimate has shifted 11.45% due to these changes.

VGM Scores

Currently, Plexus has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Plexus has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.

Zacks Investment Research

Verizon Communications Inc. VZ recently announced that it has deployed an Open RAN-based Distributed Antenna System (DAS) at the Austin Convention Center and the University of Texas to deliver reliable 5G services. This marks the first commercial deployment of the DAS systems with multi-vendor interoperability using O RAN interfaces in the Verizon network.

In recent deployments, Samsung virtualized Distributed Unit (vDU) was utilized in conjunction with Commscope DAS connected through an O-RAN interface. This advanced setup facilitates the delivery of Verizon’s 5G Ultra-Wideband services, ensuring high-speed, reliable Internet availability in the venues. The solution eliminates the need for RF equipment, thus lowering the power consumption, space requirements and need for cooling systems. This ensures significant cost reduction compared to legacy setups.

Over the last few years, Verizon has shifted toward cloud-based architecture, virtualization and O-RAN integration. Verizon’s aggressive adoption of O-RAN standards has played a key role in its network evolution. The company has been a pioneer in fostering O-RAN implementations in commercial environments, with around 130,000 O-RAN capable radios already deployed across its network.

Will These Developments Drive VZ’s Share Performance?

The open framework of O-RAN eliminates the risk associated with vendor lock-in and allows customers to choose from the best components from different suppliers as per their requirements. This optimizes operators' expenses. It also opens up market opportunities for new entrants, creating a healthy competitive environment that accelerates innovation. The deployment flexibility, scalability and cost-saving attributes are driving the O-RAN adoption and investments in Open RAN are expected to grow substantially in upcoming years. Verizon is well-positioned to capitalize on this emerging market trend.

Moreover, the successful deployment of O-RAN-based DAS systems serves as a testament to Verizon’s industry-leading network portfolio. This achievement is laying the foundation for the broader adoption of multi-vendor, interoperable networks in highly demanding venues such as stadiums, airports and more.

VZ’s Stock Price Performance

Shares of Verizon have gained 14.1% over the past year compared with the industry’s growth of 37.7%.

Altice USA Inc. ATUS subsidiary Optimum has reached a milestone of 100% fiber connectivity across 500,000 residential customers. The unique feat was achieved on the back of significant investments to expand its fiber network footprint across its service areas. These include a $40 million investment in Long Island this year and a multi-million-dollar infrastructure upgrade in the Northeast markets over the last several years.

Altice has also forayed into new markets to strengthen its regional presence. The company has expanded in markets like Montclair and West Orange, NJ, to bring Optimum Fiber services to key communities, while solidifying its fiber network presence across the broader New York tri-state region.

The company remains on track with its five-year plan to build a fiber-to-the-home (FTTH) network and deploy its home communications hub. It believes that the FTTH network will be more resilient with reduced maintenance requirements and lower power usage. Altice is building a fiber network to deliver broadband speeds of up to 10 Gbps, which underscores its investment in technology.

ATUS Focusing on Inorganic Growth

Altice subsidiary Lightpath is also set to significantly boost its fiber network capabilities through the proposed acquisition of United Fiber and Data (“UFD”). UFD operates a 323-route mile high-fiber network stretching from New York City to Ashburn, VA, a critical link between the largest U.S. population center and the world's leading data center hub. Additionally, UFD’s 79-route mile metro network in New York City and New Jersey connects more than 350 enterprise and data center locations. This includes a high-fiber crossing of the Hudson River, enhancing Lightpath's existing infrastructure.

UFD’s vast geographical network complements Lightpath's current infrastructure, expanding its network to more than 20,000 route miles and enhancing its connectivity with over 140 data centers and seven cable landing stations. This will allow Lightpath to offer more regionally diverse, high-capacity services across the East Coast, particularly benefiting high-demand areas like Manhattan and the Ashburn data ecosystem.

With the acquisition, Lightpath will significantly increase its enterprise and data center coverage in Manhattan. Altice’s connectivity solutions stand to witness robust enhancement through Lightpath’s acquisition of UFD. The buyout not only expands Lightpath's fiber network footprint and technological capabilities but also reinforces its position in high-growth markets, promising substantial benefits for both companies and their customers.

ATUS Stock to Reap the Benefits?

Altice is focused on expanding its network for increased market penetration and fiber network upgrades for long-term sustainable growth. It plans to bring 100% fiber broadband to more than two-thirds of its footprint over the next few years to reach a total of 6.5 million FTTH passings by the end of 2025. Strategic acquisitions allow Altice to benefit from greater scale and operating efficiency while expanding its fiber footprint.

This expanded service capability is expected to attract more customers and increase market share. This, in turn, is likely to translate into incremental revenues and boost the stock.

Zacks Rank

Altice carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other Players Operating in the Space

Arista Networks, Inc. ANET, carrying a Zacks Rank #2 (Buy) at present, is likely to benefit from strong momentum and diversification across its top verticals and product lines. The company has a software-driven, data-centric approach to help customers build their cloud architecture and enhance their cloud experience. Arista has a long-term earnings growth expectation of 16% and delivered an earnings surprise of 14.8%, on average, in the trailing four quarters.

It holds a leadership position in 100-gigabit Ethernet switching share in port for the high-speed data center segment. Arista is increasingly gaining market traction in 200 and 400-gig high-performance switching products and remains well-positioned for healthy growth in data-driven cloud networking business with proactive platforms and predictive operations.

NVIDIA Corporation NVDA, currently flaunting a Zacks Rank #1, is another key pick in the broader industry. It is the worldwide leader in visual computing technologies and the inventor of the graphic processing unit or GPU. Over the years, the company’s focus has evolved from PC graphics to AI-based solutions that now support high-performance computing, gaming and virtual reality platforms.

The company’s GPU platforms are playing major roles in developing multi-billion-dollar end-markets like robotics and self-driving vehicles. NVIDIA has a long-term earnings growth expectation of 35.7% and delivered an earnings surprise of 9.8%, on average, in the trailing four quarters.

Workday Inc. WDAY, carrying a Zacks Rank #2, has a long-term earnings growth expectation of 21% and delivered an earnings surprise of 9.1%, on average, in the trailing four quarters. It is a leading provider of enterprise-level software solutions for financial management and human resource domains.

Workday’s cloud-based business model and expanding product portfolio have been the primary growth drivers. Moreover, the growing clout of Workday Prism Analytics and Adaptive Insights business planning cloud offerings holds promise.

Zacks Investment Research

Dell Technologies DELL is scheduled to report its third-quarter fiscal 2025 results on Nov. 26.

Dell expects third-quarter revenues in the range of $24-$25 billion, with a midpoint of $24.5 billion, indicating 10% growth. Earnings are expected to be $2 per share (+/- 10 cents).

The Zacks Consensus Estimate for revenues is pegged at $24.53 billion, suggesting 10.25% growth from the figure reported in the year-ago quarter.

The consensus mark for quarterly earnings is pegged at $2.05 per share, unchanged over the past 60 days and suggesting year-over-year growth of 9.04%.

Dell’s earnings beat the Zacks Consensus Estimate in all of the trailing four quarters, with an earnings surprise of 16.32%, on average.

Dell Technologies Inc. Price and EPS Surprise

Dell Technologies Inc. price-eps-surprise | Dell Technologies Inc. Quote

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Let’s see how things have shaped up for DELL shares prior to this announcement.

Key Factors to Note for DELL

Dell is well-poised to report solid results in the fiscal third quarter, driven by its portfolio strength and an expanding partner base that includes NVIDIA NVDA, Advanced Micro Devices AMD, Intel INTC, and Nokia, among others.

Dell’s fiscal third-quarter results are expected to have benefited from the robust demand for AI-optimized servers. In the fiscal second quarter, AI-optimized server demand increased to $3.2 billion, up 23% sequentially, with shipments up to $3.1 billion.

However, declining consumer revenues and flat commercial client revenues in the fiscal second quarter reflect weakening demand across key segments.

Sluggish PC shipments in the consumer segment are expected to have hurt DELL’s top-line growth in the to-be-reported quarter amid continued consumer demand challenges and competitive pressures.

Per Gartner’s latest report, DELL witnessed the largest decline in worldwide PC shipments in the third quarter of 2024, with a 3.9% year-over-year drop, followed by ASUS, which saw a 3% decline. Dell and ASUS were the only vendors to report year-over-year shipment decreases.

DELL Shares Outperform Sector

Year to date, Dell shares have returned 81.6%, outperforming the broader Zacks Computer & Technology sector’s return of 27.4% and the Zacks Computer-Micro Computer industry’s return of 19.8%.

Except for NVIDIA, Dell Technologies shares have outperformed peers, including HPQ, Apple, and Lenovo. Year to date, NVIDIA, HPQ and Apple have returned 196.1%, 26% and 18.7%, respectively. Lenovo shares have lost 15.2% year to date.

Year-to-Date Performance Chart

In its upcoming report, Workday (WDAY) is predicted by Wall Street analysts to post quarterly earnings of $1.72 per share, reflecting an increase of 12.4% compared to the same period last year. Revenues are forecasted to be $2.13 billion, representing a year-over-year increase of 14%.

Over the past 30 days, the consensus EPS estimate for the quarter has been adjusted downward by 0.3% to its current level. This demonstrates the covering analysts' collective reassessment of their initial projections during this period.

Ahead of a company's earnings disclosure, it is crucial to give due consideration to changes in earnings estimates. These revisions serve as a noteworthy factor in predicting potential investor reactions to the stock. Numerous empirical studies consistently demonstrate a strong relationship between trends in earnings estimate revision and the short-term price performance of a stock.

While investors usually depend on consensus earnings and revenue estimates to assess the business performance for the quarter, delving into analysts' forecasts for certain key metrics often provides a more comprehensive understanding.

Given this perspective, it's time to examine the average forecasts of specific Workday metrics that are routinely monitored and predicted by Wall Street analysts.

It is projected by analysts that the 'Revenues- Subscription services' will reach $1.96 billion. The estimate suggests a change of +15.6% year over year.

The collective assessment of analysts points to an estimated 'Revenues- Professional services' of $170.39 million. The estimate indicates a change of -2.4% from the prior-year quarter.

The average prediction of analysts places 'Subscription Revenue Backlog' at $21.93 billion. Compared to the present estimate, the company reported $18.45 billion in the same quarter last year.

View all Key Company Metrics for Workday here>>>

Shares of Workday have experienced a change of +13.2% in the past month compared to the +1.7% move of the Zacks S&P 500 composite. With a Zacks Rank #2 (Buy), WDAY is expected to outperform the overall market in the near future. You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here

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