The inclusion of a pilot tone as a modulation of an optical data signal reduces the optical signal to noise ratio (OSNR). Methods and apparatus for receiving an optical signal are provided that compensate for at least a portion of the pilot tone modulation to reduce the pilot tone induced OSNR penalty. An initial waveform is processed to generate a compensated waveform, the processing including dispersion compensation. An intensity waveform is calculated in accordance with the compensated waveform. The intensity waveform is processed to obtain a pilot tone frequency, a modulation depth, and a phase of the pilot tone. The compensated waveform is multiplied with a pilot tone compensation factor that is a function of the pilot tone frequency, the modulation depth, and the phase of the pilot tone to generate a modified compensated waveform. A symbol carried by the modified compensated waveform is determined.