Open Source Securities: The commercialization of optical communication has been validated, and the timing for fiber optic cable configuration has arrived.

KYG Securities released a research report stating that capital expenditure by overseas giants is on the rise, and the commercialization of optical communications is being validated simultaneously. The rapid expansion of cloud revenue indirectly confirms the acceleration of commercialization processes and the expedited implementation at the application level. The leading optical fiber companies have reported better-than-expected performance, and demand certainty remains evident. The firm believes that the substantial demand for optical fibers driven by AI infrastructure development is notable, and the leading optical fiber companies that occupy core market shares both domestically and internationally are expected to continue benefiting from this trend. The firm remains optimistic about investment opportunities in optical fibers and cables. Key views from KYG Securities are as follows: Capital expenditure by overseas giants is rising, and the commercialization of optical communications is being validated simultaneously. North American AI giants have increased their capital expenditures on computing power, with clear plans for AI business expansion, further confirming the sustainability of trends in the optical communications industry. Overall, the combined capital expenditure of the four major cloud providers in North America is projected to exceed $170 billion in the second quarter of 2026, with annual guidance upgraded to approximately $745 billion. Specifically, Google raised its capital expenditure forecast to $195 to $205 billion (previously $180 to $190 billion), Amazon raised its forecast to $220 billion, reflecting a 10% increase, and Meta adjusted its expectations to $130 to $145 billion (previously $125 to $145 billion). "Capex guidance meets expectations - high growth in optical module usage - the upturn in the optical communications supply chain is initially confirmed." In terms of commercialization, the AI investments from various giants are gradually converting into performance: Google Cloud achieved revenue of $24.8 billion, a year-on-year increase of 82%; Microsoft's Intelligent Cloud business reported revenue of $39.3 billion, a year-on-year increase of 32%; Amazon's AWS cloud business reported revenue of $42.2 billion, a year-on-year increase of 37%. The rapid expansion of cloud revenue indirectly confirms an accelerated commercialization process and expedited implementation at the application end. Leading optical fiber companies have exceeded expectations, and demand certainty for optical fibers both domestically and internationally remains evident. On July 14, Yangtze Optical Fibre And Cable Joint Stock announced a performance forecast for the first half of 2026, estimating a net profit attributable to shareholders of 2.4 to 3.0 billion yuan, a year-on-year increase of 711% to 914%, with a median of 2.7 billion yuan, a year-on-year increase of 812%. The net profit excluding non-recurring losses is estimated to be 2.0 to 2.6 billion yuan, a year-on-year increase of 1349% to 1784%, with a median of 2.3 billion yuan, a year-on-year increase of 1567%. For the second quarter of 2026, the estimated net profit attributable to shareholders is expected to be 1.905 to 2.505 billion yuan, a year-on-year increase of 1223% to 1640%, with a quarter-on-quarter increase of 285% to 406%, and a median of 2.205 billion yuan, a year-on-year increase of 1431%, with a quarter-on-quarter increase of 345%. The expected net profit excluding non-recurring losses is estimated to be 1.539 to 2.139 billion yuan, a year-on-year increase of 1537% to 2176%, with a quarter-on-quarter increase of 234% to 364%, and a median of 1.839 billion yuan, a year-on-year increase of 1856%, with a quarter-on-quarter increase of 299%. On July 28, Corning released its second-quarter 2026 financial report, reporting sales of $2.07 billion for its optical communications business, a year-on-year increase of 32%, and a net profit of $438 million, a year-on-year increase of 77%, with a net profit margin reaching a high of 21% for the first time. Among these, the enterprise network business grew by 65%, and the growth rate of AIGC-related products was significant. In the first half of the year, the company established significant long-term collaborations with Amazon and NVIDIA, and signed a memorandum of understanding with BOE in May to explore collaboration opportunities. The firm believes that the substantial demand for optical fibers driven by AI infrastructure construction is noteworthy, and demand certainty remains evident. Leading optical fiber companies that occupy core market shares domestically and internationally are expected to continuously benefit from this trend. Plans for optical fiber acquisitions have been successively shelved, and cross-industry capacity expansions are not easy. On August 1, Lingyi Itech announced the termination of its participation in the restructuring investment of Futong Jiaxin. The company originally planned to acquire control over the restructuring assets and operations of Futong Jiaxin for no more than 4 billion yuan to enter the field of optical communication materials application, but ultimately abandoned the investment due to an inability to timely make a reasonable value judgment on the targeted assets. They continue to view investment opportunities in optical fibers and cables positively. Recommended targets include Hengtong Optic-Electric, Jiangsu Zhongtian Technology, and Far East Smarter Energy; beneficial targets include Yangtze Optical Fibre And Cable Joint Stock, YOFC, Tongding Interconnection Information, Jiangsu Etern, Hangzhou Cable, Fiberhome Telecommunication Technologies, TRIGIANT, Shenzhen SDG Information, Yangtze Optical Electronic, and Wuhan Changjin Photonics Technology. Risk warnings: AI development may fall short of expectations, domestic GPU supply may not meet expectations, and cabinet installations may also underperform expectations.