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Lumentum targets $600M quarterly revenue by June 2026 amid accelerating AI-driven demand
Aug. 12, 2025 10:23 PM ET
AI-Generated Earnings Calls Insights
Earnings Call Insights: Lumentum Holdings Inc. (LITE) Q4 2025
Management View
- CEO Michael E. Hurlston stated that "Lumentum is at the forefront of the cloud and AI revolution," emphasizing the company's leadership in advanced photonics and the transformative impact of AI on market demand. He highlighted innovations such as "200-gig EMLs, 1.6T transceivers, optical circuit switches and ultra-high power lasers for co-packaged optics," positioning Lumentum for significant growth in what are projected to be multibillion-dollar markets within five years.
- Hurlston reported that "cloud revenue is growing well over 20% annually" and that "[Combi] gross margins are set to surpass 40%." He announced that the company now expects to surpass "$600 million in quarterly revenue by the June 2026 quarter or earlier."
- The CEO described exceptional growth in the Cloud & Networking segment, noting a 16% sequential and 67% year-over-year increase, driven by hyperscale cloud customers. He also highlighted a record-setting performance in EML shipments and the ongoing expansion of the wafer fab to support higher volumes.
- Hurlston disclosed a "substantial order for 200-gig lane speed EML chips," and projected 2026 to be "a breakout year for laser chip sales of both 100-gig and 200-gig lane speeds."
- The company recognized its "first revenue" from optical circuit switches, with shipments to two hyperscale customers and a third committed for 2026. Hurlston emphasized the acceleration of in-house OCS manufacturing capacity.
- For co-packaged optics, Hurlston revealed the "largest single purchase commitment in company history" for ultra high-power lasers and ongoing investment in the U.S. indium phosphide wafer fab, supporting a significant revenue ramp in CPO by the second half of 2026.
- In the Industrial Tech segment, revenue decreased 6% sequentially but increased 6% year-over-year. Profitability improved due to cost reductions.
- CFO Wajid Ali stated, "Fourth quarter revenue of $480.7 million and non-GAAP EPS of $0.88 were both above the high end of our revised guidance ranges."
- Ali highlighted that "fourth quarter non-GAAP gross margin was 37.8%, which was up 260 basis points sequentially and up 1,000 basis points year-on-year due to better manufacturing utilization and favorable product mix as a result of increased Datacom laser shipments."
Outlook
- Ali provided guidance for Q1 fiscal 2026, projecting net revenue in the range of $510 million to $540 million, noting that "the midpoint of this range represents a new all-time quarterly revenue record for Lumentum."
- Cloud & Networking is expected to be up sequentially with strong growth, while Industrial Tech is projected to be flat with a modest decline in industrial lasers offset by a seasonal uptick in 3D sensing.
- Ali projected first quarter non-GAAP operating margin to be "in the range of 16% to 17.5%" and diluted net income per share to be "in the range of $0.95 to $1.10."
- Management reiterated targeting operating margins above 20% and gross margins approaching 40% as the business scales.
Financial Results
- Fourth quarter revenue was $480.7 million and non-GAAP EPS was $0.88.
- GAAP gross margin was 33.3%, GAAP operating loss was 1.7%, and GAAP net income per share was $2.96.
- Non-GAAP gross margin improved to 37.8%, up 260 basis points sequentially and 1,000 basis points year-on-year.
- Non-GAAP operating margin reached 15%, non-GAAP operating profit was $72.3 million, and adjusted EBITDA was $98.7 million.
- Cloud & Networking segment revenue was $424.1 million, with segment profit at 23.6%.
- Industrial Tech segment revenue was $56.6 million, with segment profit of 6%.
- Cash and short-term investments increased to $877 million, and $59 million was invested in CapEx to expand manufacturing capacity.
Q&A
- Simon Matthew Leopold, Raymond James: Asked about the OCS award timing and customer count. Hurlston explained, "We see a tremendous level of demand, but we are limited by how much we can supply."
- Leopold also inquired about the CPO opportunity and competitive landscape. Hurlston said, "We feel good about our ability to maintain a competitive moat here... at least as far as we know, we're sole-sourced."
- Thomas James O'Malley, Barclays: Sought details on contributions to the $600 million revenue target. Hurlston described components and cloud modules as primary drivers, with OCS expected to provide "meaningful revenue contributions in the first half, significant revenue contributions for OCS in the second half" of fiscal 2026.
- Samik Chatterjee, JPMorgan: Pressed on the timing for reaching $600 million quarterly revenue. Hurlston emphasized, "Our slope is definitely up, and you can kind of draw your own conclusions as to where you think we end up, but we definitely are on a pretty good run at the moment."
- Chatterjee also asked about tariff risks. Ali responded that "our products are exempted from any of the tariffs that would be applicable in that new guidance."
- Multiple analysts focused on EML capacity, pricing dynamics, and the profitability of OCS, with management indicating supply constraints, pricing leverage, and above-average margins from OCS products.
Sentiment Analysis
- Analysts' tone was positive to slightly bullish, with repeated questions about the acceleration of revenue targets, product ramps, and competitive positioning in high-growth segments.
- Management’s tone was confident and assertive in both prepared remarks and Q&A, with frequent references to strong demand, supply constraints, and a robust competitive position. Hurlston stated, "We feel good about the business across the board."
- Compared to the previous quarter, both analysts and management displayed increased optimism, particularly regarding growth in cloud modules, OCS, and EML capacity expansion.
Quarter-over-Quarter Comparison
- Revenue guidance increased, with the Q1 2026 midpoint representing a new all-time high, compared to prior guidance for Q4 2025.
- Management shifted from focusing on hitting a $500 million quarterly revenue run rate to targeting $600 million by June 2026 or earlier.
- Gross and operating margins improved sequentially and year-on-year, with management emphasizing sustained margin expansion.
- Analysts in the current quarter focused more on the timing and magnitude of new product ramps, OCS, and CPO adoption, while prior quarter questions were more focused on supply constraints and margin recovery.
- Management confidence strengthened, frequently referencing competitive advantages and significant customer wins.
Risks and Concerns
- Management acknowledged ongoing supply constraints, especially in EML and laser components, limiting the ability to meet demand.
- The tariff environment remains fluid, though current product exemptions minimize immediate risk, as Ali stated, "for now, no material changes in our business operations or the impact from tariffs would be our view."
- Capacity expansion and the transition to larger wafer sizes were cited as critical to meeting future demand.
- Management highlighted the need to maintain innovation leadership to defend market share.
Final Takeaway Lumentum management emphasized that the company is poised for significant growth, driven by accelerating demand for AI and cloud infrastructure. The business is set to surpass $600 million in quarterly revenue by June 2026 or earlier, supported by robust performance in cloud modules, components, and new product lines such as OCS and CPO. Margin expansion, disciplined cost control, and strategic investments in manufacturing capacity underpin management’s confidence in delivering sustained top-line growth and long-term shareholder value.
Read the full Earnings Call Transcript
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