Lumentum Stock Pops. Is More Upside Ahead?

Core Insights - Lumentum Holding (LITE) stock has increased by 240% this year, driven by AI-driven demand, transforming it into a leading cloud infrastructure company [1] - The company achieved record revenue in Q1 of fiscal 2026, with expectations for continued growth [1][2] Financial Performance - In Q1, Lumentum recorded $533 million in revenue, a 58% year-over-year increase, marking the highest revenue in its 10-year history [2] - Adjusted earnings per share rose to $1.10 from $0.18 in the prior year quarter [2] - The company has revised its growth targets, now expecting to reach a quarterly revenue midpoint of approximately $650 million in Q2, ahead of its previous timeline [2] Revenue Composition and Growth Drivers - Over 60% of total revenue is derived from cloud and AI infrastructure, indicating strong demand from hyperscale customers and related sectors [3] - The transition from a telecom subsystem provider to a primary supplier of AI-scale optics is progressing well [3] - Gross margin improved to 39.4% due to better manufacturing utilization and increased volumes of data center laser chips [3] - Management anticipates that cloud transceivers, optical circuit switches, and co-packaged optics will be the main growth drivers in the coming years [3]