Infinera Corp. Keeps on Winning

Infinera announced strong first-quarter results Tuesday, delivering $186.9 million in revenue -- nearly a 31% year-over-year increase -- and $0.16 per share in earnings, cruising past analyst consensus of $0.11. Infinera's shares have been red-hot since late October 2014, and the company keeps on winning.

Let's take a closer look at thedigital optical networks manufacturer's quarterly results and forward guidance.

Strong revenue and gross profit margins for the quarterDuring the company's earnings call, CEO Tom Fallon said "broad strength across customer verticals" pushed Infinera's revenue near the high end of the $180 million to $190 million range it guided to for the quarter.

The company's gross profit margin for the quarter came in at 47.8%, which easily surpassed the high end of the guidance range of between 43% and 45%, helping to drive the company's bottom-line beat.

CFO Brad Feller attributed the better-than-expected gross profit margin to a number of factors. These included improved cost structures thanks to the company's vertical integration; "strong capacity adds on existing networks" (i.e., the higher-margin "blade" sales in a typical "razor-razorblade" business model); and better margins in services revenue, powered by a "decrease in deployment services."

Strong guidance, tooThe company is guiding for second-quarter revenue of between $195 million and $205 million, which Feller said represents year-over-year growth of "nearly 21%." The company also projected earnings per share of $0.16 at the midpoint of its guided range of $0.14 to $0.18, crushing the $0.12 consensus.

Feller said there is "continued demand" from the company's customer base, and that Infinera is "building momentum" with its Cloud Xpress platform and looks forward to "seizing the opportunities that the 100 gig metro market will present."

Speaking of the metro marketEarlier this month, the company offered to acquire Transmode, which Infinera said would complement its long-haul optical transport business and its "early lead in the metro Cloud market."

During the company's earnings call, Fallon said a Transmode acquisition would "accelerate [its] planned expansion across the metro market." Fallon added that Infinera's portfolio, complemented by Transmode's, would allow it to "more than double" its total addressable market.

Fallon said the acquisition should add to earnings in 2016, following the anticipated close of the deal in the third quarter of this year.

Did somebody say leverage?During the call, both Fallon and Feller talked about the "leverage" in the company's business model. In a typical business, particularly a research-and-development-intensive operation such as Infinera, operating expenses tend to grow alongside revenue.

After all, the more money you bring in, the more you should invest in your future, right?

Infinera's management has indicated that while it still plans to invest in the company's future, it will do so in a way that the company can grow profitably. In Feller's words, "[Infinera] plan[s] to grow overall operating expenses at a slower rate than revenue growth."

The story looks solidAll told, Infinera seems to be executing well. It has good exposure to high-growth markets, it's actively trying to expand its total addressable markets through internal product development and acquisitions, and it seems to be improving its profitability. What more could Infinera investors ask for?

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Ashraf Eassa has no position in any stocks mentioned. The Motley Fool recommends Infinera. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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