AI fiber prices may run 5 times 2025 levels, but Corning's CEO says price is not the profit story
TrendForce says AI fiber prices will average more than five times 2025 levels on a shortage stretching to 2028, and Corning reports in one week. But CEO Wendell Weeks says price is not how the company drives profit, so the 61.7 P/E is paying for a story the seller himself discounts.
Richard Tang · 3 min read
TrendForce now forecasts AI-grade fiber prices averaging more than five times their 2025 levels this year, on a 180 million fiber-kilometer shortage, 92% capacity utilization and 18 to 24 months to add a plant 12. That is the bull case for Corning+1.92% — the bull case for Corning, up 1.92 percent today, and it is the case its own CEO has just half-disclaimed. Before the October 27 print, decide which story you are paying 61.7 times earnings for. 12
The demand is real, but it is sold out for years
The shortage is real and the contracts are signed. Corning's Optical Communications segment grew sales 32% to $2.07 billion in the June quarter, with segment net income up 77% 13. Meta+3.51% — Meta, up 3.51 percent today has a supply agreement worth up to $6 billion through 2030, Verizon−2.16% — Verizon, down 2.16 percent as of its last quote committed to more than 80 million miles of fiber for 2027 through 2032, and AT&T−6.23% — AT&T, down 6.23 percent today signed for more than $3 billion in September. 13
The CEO himself discounts the price story
But Wendell Weeks told Wolfe Research's analyst that higher fiber prices "really isn't how we're driving that profitability improvement." He credits higher-value connectivity products that make networks cheaper to build, and says Corning could sell more of them if it had the capacity. So the price-and-shortage thesis trades at a premium to the seller's own account of his margins. 1
Watch the cash, not the earnings line
That capacity is not paid for yet. The June quarter's cash flow covered capital spending only with $880 million of customer deposits and incentives, and Corning opened a $2 billion at-the-market stock sale with Goldman Sachs three days after the Verizon announcement. 3
Insiders sold $112 million over twelve months with no purchases, and Pomerantz is investigating the offering's disclosures 234. Wilmington just approved a $5 million incentive package toward a $585 million plant the company has not yet committed to 234. Watch the 10-Q, not the earnings line: if shares have already been sold, the buildout is financed years ahead of the revenue. 234
Two camps, and Weeks leads one of them
The targets split exactly on this question: Citi+0.93% — Citi, up 0.93 percent as of its last quote at $220 and UBS at $201 are buying the shortage; Bernstein's $140 is buying Weeks. 15
I side with Weeks, with a twist he did not offer: a committed fivefold price rise means the contracts signed at yesterday's prices are cheap for the buyers and costly to honor, which is why the ATM, the deposits and the equity dilution matter more than the optical segment's growth rate. Start from the first hop, the prices, and walk to the last, who funds six years of construction.
Wall Street's targets split by more than $80 on the same shortage
Data
| Value | |
|---|---|
| Citi | 220 |
| UBS | 201 |
| Truist | 182 |
| Bernstein | 140 |
Meta reports Wednesday, Corning on October 27 1. The verdict on the shortage story arrives with the 10-Q that follows. 1
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