Lumentum(LITE) The Motley Fool·2025-02-14 22:50Core Viewpoint - Lumentum Holdings is experiencing significant growth driven by the increasing demand for its optical components in AI applications, particularly in the cloud and networking sectors, which is expected to continue into 2025 [1][3]. Financial Performance - Lumentum reported a 10% year-over-year increase in fiscal Q2 revenue to 1.6 billion, with further growth anticipated in the following years [7]. Business Segments - The cloud and networking segment now constitutes 84% of Lumentum's total revenue, indicating its critical role in the company's growth trajectory [5]. - Demand from hyperscale cloud customers is robust, with increased orders from existing customers and new customer engagements expected to contribute to future growth [6][8]. Market Opportunities - The data center interconnect (DCI) market, which Lumentum is targeting, is projected to grow by 71% over the next four years, with AI playing a central role in this expansion [9]. - Lumentum's externally modulated lasers (EMLs) shipments reached record levels, driven by AI-related demand, suggesting a strong market position [8]. Profitability and Margins - The company's non-GAAP operating margin improved by six percentage points year-over-year, contributing to a 75% increase in earnings per share to 1.75 this year, with continued strong growth expected in subsequent years [11]. Stock Price Potential - If Lumentum achieves projected earnings of 131, representing a 60% increase from current levels [12].