Clearfield secured its first significant hyperscale data center order shortly after the end of its fiscal third quarter, landing a $22 million project that expands the fiber connectivity company’s addressable market beyond its traditional broadband customer base.
The $22 million order is expected to begin shipping in early fiscal 2027. For perspective, the single hyperscale order is equivalent to roughly half of Clearfield’s $43.9 million of fiscal Q3 sales from continuing operations.
Clearfield is seeking to apply the fiber connectivity, fiber management and labor-saving network design expertise it developed for broadband networks to increasingly bandwidth-intensive data center infrastructure. Management described the hyperscale order as an important step in positioning Clearfield for its next phase of growth.
The order is particularly notable relative to Clearfield’s existing backlog. Quarter-end backlog stood at $21 million, down 34% sequentially from $31.6 million and 32% year-over-year. Because the $22 million hyperscale order arrived after quarter-end, it was not included in that June 30 backlog balance.
Fiscal Q3 sales from continuing operations increased 13% to $43.9 million from $38.8 million. Operating income from continuing operations increased 68% to $2.6 million, while net income from continuing operations increased 29% to $3 million. Diluted EPS from continuing operations increased to $0.22 from $0.16.
Profitability during the quarter was affected by several unusual inventory and tariff items. Gross margin declined to 31.8% from 35.3%, including a $2.6 million inventory charge associated with an order Clearfield no longer expects to fulfill. That charge reduced gross margin by approximately 5.9 percentage points.
The impact was partially offset by $1.1 million of net inventory recoveries, which added approximately two percentage points to gross margin, and $655,000 of tariff recoveries, which added about 1.5 percentage points. Clearfield said the tariff recoveries are not expected to recur. On a net basis, the unusual items reduced Q3 gross margin by approximately 1.8 percentage points.
Operating expenses declined 6% year-over-year to $11.4 million and fell 14% sequentially, partly because of a $1.7 million reduction in performance-based compensation accruals.
Despite the hyperscale win, Clearfield reduced its fiscal 2026 outlook because of broader industry demand constraints. Full-year continuing-operations sales are now expected between $151 million and $155 million, while Q4 sales are expected between $38 million and $42 million. Management also cited potential optical fiber supply constraints and uncertainty surrounding tariffs.
Clearfield repurchased approximately 31,000 shares for $0.9 million during Q3 and had approximately $15 million of repurchase authorization remaining at quarter-end.
KEY QUOTES:
“As we continue to execute on our core business, we are increasingly focused on positioning the Company for its next phase of growth. That progress was highlighted shortly after the close of the third quarter, when we received our first significant order for $22 million to support a hyperscale data center project.”
“We remain focused on executing our strategy, promoting the expertise Clearfield has built in fiber connectivity, fiber management and labor-saving network design well beyond our traditional broadband markets. At the same time, we remain committed to the customers and communities that have always defined Clearfield.”
Cheri Beranek, President And Chief Executive Officer Of Clearfield
“Our balance sheet and strong cash generation continue to provide the flexibility to invest in meaningful long-term growth opportunities. As customer demand evolves, we believe Clearfield is well positioned to capitalize on opportunities across both broadband and data center connectivity.”
Dan Herzog, Chief Financial Officer Of Clearfield
