Network Equipment Vendors Shift Toward AI Cloud Builds
Summary
Ribbon and ADTRAN say big network vendors are shifting to AI cloud builds, leaving Tier 2 carriers underserved; Ribbon won two new US Tier 2 customers.
Ribbon Communications (RBBN) and ADTRAN Holdings (ADTN) both said on their third-quarter 2026 earnings calls, on October 27 and November 3, that large network equipment vendors are shifting attention and resources toward the cloud companies building AI data centers. Both described mid-sized telecom carriers as a market that is now underserved, and both said they intend to win that business [1][2].
How hyperscaler AI orders pull big vendors away from Tier 2 carriers
Telecom carriers connect data centers, businesses and homes using optical transport equipment on fiber lines and IP routers that forward traffic. The vendors range from large players such as Nokia and Ciena to much smaller companies such as Ribbon and ADTRAN. Beyond the national carriers, there is a group of regional and mid-sized operators the industry calls Tier 2 carriers. Ribbon's CEO said these operators each invest double-digit millions of dollars a year in fiber infrastructure and IP routing [1].
The customer mix at the large vendors is changing fast. Nokia's sales to AI and cloud customers rose 123% in the third quarter [3]. In its prior quarter, Ciena's direct cloud provider revenue grew more than 80% and its backlog reached $8.5 billion [4]. Staff and production capacity naturally tilt toward these large accounts, and in November 2025 Nokia moved its microwave radio business into a non-core segment slated for a strategic review in 2026 [5]. Mid-sized carriers have not stopped upgrading their networks. When they choose suppliers, they put more weight on responsiveness and technical support, which is where smaller vendors are strongest.
New Tier 2 customers and order data at Ribbon and ADTRAN
Ribbon's change shows up mainly in the US. US sales in its IP Optical Networks business rose more than 150% from a year earlier in the third quarter, and it won new projects with two US Tier 2 service providers for the first time, with ongoing programs expected, including data center connectivity [1]. An analyst asked whether larger competitors' focus on hyperscalers was opening an opportunity for Ribbon. The CEO said that is exactly what the company is seeing, that the segment is "somewhat underserved," and that customers want responsiveness, deep technical support and a lot of attention [1].
ADTRAN's CEO raised the point unprompted in his opening remarks: some competitors are putting their focus and resources on hyperscalers, while ADTRAN is deliberately staying focused on the carriers that connect them and intends to capture the opportunity those competitors leave behind [2]. Its third-quarter optical networking revenue was $114.5 million, up 11% year over year [2].
These figures alone do not show that market share is moving. ADTRAN attributes most of its US optical growth to carriers upgrading their networks to carry data center traffic, which is demand growth in its own right. It is also chasing hyperscalers itself: its revenue from cloud providers grew more than 200% year over year in the third quarter [2]. Ribbon's IP Optical bookings rose about 9% year over year in the third quarter, for a book-to-bill ratio of about 0.82, and much of the quarter's growth came from working through first-half backlog [1].
Where Tier 2 carrier spending on optical and routing could go next
If large vendors keep tilting resources toward cloud providers, part of mid-sized carriers' spending on optical transport and routing could move from the big vendors to smaller vendors that specialize in carriers. For Ribbon and ADTRAN, that shift would appear first in first-time customer wins and US carrier orders, and only later in revenue and market share.
There is clear evidence on the other side. Ciena said carrier spending is also growing and has given no sign of stepping back from carrier customers; its long lead times look more like a supply constraint than a deliberate retreat [4]. The next things to track are whether Ribbon's IP Optical book-to-bill ratio recovers and whether both companies keep disclosing new Tier 2 customers.
Which companies this change could affect
- Ceragon Networks (CRNT): It sells microwave transport equipment to carriers, the same business Nokia classified as non-core. On its second-quarter call, its CEO said two major competitors are effectively out of the market and customers are looking to Ceragon to fill the gap, with first-half bookings the highest in 10 years [6]. That claim still needs to be tested by newer quarterly data.
- Aviat Networks (AVNW): Its core business is microwave transport for small and mid-sized operators. Fiscal 2026 revenue was $439.7 million, and after Nokia announced its microwave changes Aviat built a pipeline of potential projects it expects to convert in the March and June 2027 quarters [7]. For now these are potential orders only.
Sources
[1] Drillr · Ribbon Communications (RBBN) · 2026-10-27 · Q3 2026 earnings call
[2] Drillr · ADTRAN Holdings (ADTN) · 2026-11-03 · Q3 2026 earnings call
So while we are growing with cloud providers, we are deliberately staying focused on the service providers that connect them, where our deep customer relationships and differentiated technology give us a strong position. and as some competitors turn their attention elsewhere, we intend to capture the opportunity that they create.
[3] Drillr · Nokia (NOK) · 2026-10-22 · Q3 2026 results news
[4] Drillr · Ciena (CIEN) · 2026-09-03 · Fiscal Q3 2026 earnings call
[5] Converge Digest · Nokia reorganizes into two segments · 2025-11-19 · Industry media report · https://convergedigest.com/nokia-reorganizes-into-two-segments-for-the-ai-era/
[6] Drillr · Ceragon Networks (CRNT) · 2026-08-11 · Q2 2026 earnings call
[7] Drillr · Aviat Networks (AVNW) · 2026-08-27 · Fiscal Q4 2026 earnings call
This content highlights industry changes and companies that may be overlooked. It is not a stock recommendation.