康宁公司

Corning's second-quarter results beat guidance, with non-GAAP sales rising 17% year over year to $4.7 billion and non-GAAP operating margin rising 190 basis points year over year to 20.9%. Shares sold off nearly 20% intraday July 28 as guidance appears to have disappointed the market.

Why it matters: The selloff looks overly punitive to us, and guidance met our expectations. We see no change to the strong optical fiber growth opportunity ahead of Corning, but investors have grown pessimistic on artificial intelligence stocks of late. We like this reactive selloff as a buying opportunity. Optical fiber remains Corning's primary growth driver, and enterprise sales rose 65% year over year. We expect 50% annualized growth through 2030 for enterprise fiber revenue, led by AI buildouts and long-term supply agreements with the likes of Meta and Amazon. We see optical fiber growth enduring over the medium term, supported by continued AI spending, and increasing optical penetration in AI infrastructure, including scale-up networks. We believe scale-up optics can lead to a growth acceleration in 2028 and beyond.

The bottom line: We maintain our $155 fair value estimate as results and guidance met our model, and our long-term forecast is largely unchanged. With shares are down more than 50% in the last month, and no meaningful change to fundamentals, Corning looks attractive for long-term investors. We believe too much optimism was priced in at Corning's latest peak in June 2026 (at $255 per share), but now AI fears have overshot to the downside. We expect stellar total revenue growth, at 20% annualized through 2030, and investors can now get this growth at a discount. To support our valuation, investors need to believe in management's Springboard targets, with Corning reaching $40 billion annualized revenue exiting 2030. We model in line with this, which implies us valuing Corning at just 15 times 2030 earnings.

Our fair value estimate of $155 per share implies a 2026 price/adjusted earnings multiple of 48 times, an enterprise value/sales multiple of 7 times, and a free cash flow yield of 1%. Against our estimates of 2027 and 2028 earnings, our valuation implies multiples of 37 times and 27 times, respectively.

Through 2030, we expect Corning to increase revenue at a compound annual rate of 22%. We forecast the highest sales growth for optical fiber, which is also Corning’s largest revenue driver at 40% of sales. Optical fiber demand is soaring due to data center buildouts to serve generative AI, and Corning is capitalizing on demand with its technology leadership and cost advantage, along with high supply levels. Corning’s fiber also benefits from telecom buildouts and connections between data centers, but we see internal data center demand as the higher-growth opportunity. All in, we expect more than 35% annualized growth for optical fiber through 2030, driven primarily by data center and AI demand. Our model has optical sales nearing 70% of total revenue by 2030.

We expect the firm's more mature glass innovations segment (combining the legacy display glass and specialty glass segments) to grow modestly in the medium term. This segment doesn’t offer significant growth but offers Corning’s highest profit margins and cash flow. We expect increases in average screen size offsetting mid-single-digit pricing declines for large panel glass. We also expect mid-single-digit growth for device cover glass, helped by increasing glass content over low growth for unit sales. Together, display glass and optical sales make up two-thirds of Corning’s revenue. Outside of these primary segments, we see mid-single digit growth for automotive glass and pharmaceutical glass. In both of these segments, we see growth being driven primarily by increased glass content, rather than significant unit growth. Finally, we expect double-digit growth for Corning’s solar business, where it is well positioned as a subsidized US producer. We model management reaching its $2.5 billion target for solar revenue in 2028.

Corning has high operating leverage, with over half its costs across the business being fixed in the short term. Corning's display and optical businesses drive firm profits, with the former being the highest-margin segment historically. We forecast adjusted gross margin of 40% and an adjusted operating margin above 28% in 2030, the final year of our explicit forecast, compared with 38% and 19% in 2025, respectively. Structurally higher profitability levels in our forecast result from significant leverage on massive optical volumes during the firm’s AI growth spurt.

We note our model meets or exceeds Corning’s “Springboard” plan for rising revenue through checkpoints in the fourth quarters of 2026, 2028, and 2030, as updated in May 2026. Corning models for $6.5 billion in incremental annualized revenue exiting 2026 versus exiting 2023, with that rising to $17 billion cumulative incremental revenue exiting 2028. We currently model in line with the 2028 target. In 2030, Corning is targeting $40 billion in annualized sales exiting the year, implying $10 billion in the fourth quarter of 2030. We model above this target. We believe the firm’s nascent opportunity in co-packaged optics for “scale up” networking in AI infrastructure will drive the upside we model.

We award Corning a narrow Morningstar economic moat rating, based on a firmwide cost advantage and intangible assets in multiple segments. Corning is the global low-cost producer across its two largest segments of display glass and optical fiber, which make up the majority of revenue. This enables it to earn positive economic returns that we see as durable over the next 10 years.

While its six segments sell into very different applications, Corning is a leader in each one because of its proficiency in materials science, gained through 175 years of operation and innovation. These markets are typically characterized by specialized competition, and Corning is the only company that plays in all six, boasting a leading share in the four largest (display, optical, cover glass, automotive).

Corning uses steady, large, and centralized investment in R&D to push production costs down in each of its six segments and earn healthy profits. To us, heady investment also allows the firm to advance technology across product families, which allows it to generate higher volume and profits across a large fixed cost base. This creates intangible assets for Corning, with leading technology across end markets, and also leads to the company being the low-cost producer in its markets, particularly for display glass and optical fiber.

Corning operates in a so-called 3-4-5 framework, with three core technologies (glass science, ceramic science, optical physics), four manufacturing and engineering platforms, and five market access platforms. Management focuses 80% of its resources on opportunities that leverage at least two of these technologies and platforms. We believe this framework allows Corning to reduce its fixed cost base in each segment to a lower level than specialized competitors. Centralized investments also lead to manufacturing innovations for Corning that allow it to raise volume (and thus profit) across a stable fixed capital base.

We could see arguments for a wide moat rating for Corning, based on low competitive threats across its served markets and its ability to gain share. However, Corning’s high capital intensity, slim economic profit margins, and need for consistent cost reductions hurt our confidence in its enduring moat over a 20-year time horizon.

In the optical fiber segment, we see the firm’s cost advantage rooted in its ability to produce high-quality raw fiber strands at a lower cost than competitors. We believe this cost advantage is augmented by Corning’s vertical integration, packaging fiber into cables, assemblies, and components. With low-cost fiber at the core of these products, Corning can earn higher profits while selling at prices similar to or lower than competitors.

Corning owns every step in the fiber process, going so far as to manufacture its own furnaces and production machinery. It has patented processes for its optical fiber manufacturing that result from decades of innovation (after inventing optical fiber in the 1970s) and R&D investment, which we don’t see as replicable by competitors. Management has credited investments in the 3-4-5 framework for doubling the length of fiber produced from the same amount of glass, which has generated higher volume over a similar fixed cost base. We see these innovations continuing with more R&D, which underpins the intangible assets Corning holds in fiber production.

While many firms produce their own optical fiber cabling (by outsourcing for the fibers themselves), far fewer manufacture fiber from scratch, with vertically integrated leaders Corning, Prysmian, and Yangtze Optical Fibre and Cable being the largest. Of these three, Corning holds the top market share and the highest profit margins, all while investing significantly more in R&D.

In Corning’s display technologies segment, we see a cost advantage exhibited in the firm’s ability to produce large areas of ultrathin glass at a lower cost than competitors. This has also resulted in a commanding share of the largest screen sizes for TVs, which Corning dubs Generation 10.5 and equates to producing glass for 65-inch displays. These are also the most profitable to produce.

The display glass market is an oligopoly, with Corning, AGC, and NEG taking up an estimated 95% share, of which Corning accounts for half. Display glass is a relative commodity with little pricing power. Corning is able to bring market prices down with its own cost-downs, which in turn erodes competitor profitability. Its profit margins in display glass are highly stable over time, which shows us that the firm is able to consistently guide marketwide cost-downs while earning the best profits in the industry. AGC and NEG post less than half the profit margins of Corning while Corning invests more than double the R&D, both on an absolute basis and relative to sales. We expect continued R&D investment to maintain Corning’s pace of cost-downs and maintain its profit gap over competitors.

We also see switching costs in display glass as a result of co-location and co-investment. Due to the inherently fragile nature of sheets of glass as large as 100 square feet in area and as thin as 0.5 millimeters, the firm’s display plants are located adjacent, if not directly attached, to panelmaker customer plants to reduce the risk of lost inventory and to save on travel time and expense. Additionally, when Corning builds a display glass plant, it secures over 75% of the initial investment outlay from customers and partners. These plants can cost up to $7 billion to build, creating a strong incentive for customers to maintain their relationship and earn a return on their large investment.

Outside of display glass and optical fiber, we see Corning’s centralized cost advantage benefiting its automotive and specialty materials segments. In automotive, we also see switching costs, and we see intangible assets in specialty materials with Corning’s smartphone cover glass, which we see as best-of-breed across consumer devices.

Corning is the dominant supplier of optical fiber into hyperscale data centers and AI networks, giving it a robust growth opportunity.

Corning’s stranglehold on the global display glass market earns it heady cash flow, which it uses to reinvest in all of its businesses.

Corning's debt has the longest average time to maturity of the entire S&P 500, giving it ample time and liquidity to fulfill its obligations.

Corning operates in highly capital-intensive markets that limit its economic returns.

Corning is growing more concentrated in optical fiber, which opens it up to end-market cyclicality and exposes it to the risk of a correction or slowdown in AI spending.

Corning relies on a hefty R&D budget to maintain its leadership position in its markets. Any slowdown in its pace of innovation could allow a competitor to close the gap.