Summary of Key Points from the Conference Call Industry Overview - **Industry**: Telecom & Networking Equipment in North America [1] Core Company Insights Lumentum Holdings Inc (LITE.O) - **Price Target Change**: Increased from $85.00 to $92.00 [2] - **Performance Expectations**: Anticipated a revenue beat of less than 2% and approximately 5% EPS increase for the upcoming quarter [16] - **Growth Drivers**: Recovery in telco and demand from Google and EMLs are expected to contribute positively [10] - **Long-term Targets**: No changes expected to long-term targets; however, upside potential exists due to strong demand in Cloud Light business [10] - **Revenue Estimates**: Expected revenue growth of $1,359 million in 2024, increasing to $2,511 million by 2027 [36] Coherent Corp (COHR.N) - **Price Target Change**: Increased from $92.00 to $97.00 [2] - **Performance Expectations**: Expected revenue beat of 2.5% to 4% and an EPS increase of 8% to 10% for the upcoming quarter [16] - **Growth Drivers**: Strength in datacom and telecom segments expected to drive revenue growth [10] - **Long-term Outlook**: Analyst Day laid out a roadmap, but near-term upside is needed to maintain momentum [10] - **Revenue Estimates**: Expected revenue growth of $5,779 million in 2025, increasing to $6,628 million by 2027 [57] Market Dynamics - **Cloud Capex Revisions**: Positive revisions in cloud capex are driving optimism in optical AI stocks, with expected growth of 54% in 2025 [4] - **Investor Sentiment**: Investors are favoring a pair trade strategy of long LITE and short COHR post-FQ4 prints, reflecting a preference for COHR due to its better positioning [4][7] - **Multiple Expansion**: Current multiples are hovering around one-year averages, indicating limited opportunity for further expansion in the near term [4] Risks and Considerations - **Tariff Impacts**: Tariffs are expected to materially limit earnings and multiple in the near term, particularly affecting gross margins [34][43] - **Market Volatility**: The volatility in end markets and uncertainty around AI spending may cap the multiples for both companies [43][49] - **Operational Challenges**: COHR faces challenges in executing its vision laid out during the Analyst Day, which could limit changes to its margin profile [49] Additional Insights - **Investor Feedback**: Investors are generally optimistic about the recovery in telco and the potential for both companies to outperform in the upcoming quarter [4][10] - **Long-term Growth Opportunities**: Both companies are positioned to benefit from secular growth trends in AI and datacom, although challenges remain in the industrial and consumer electronics markets [49][62] This summary encapsulates the key points discussed in the conference call, focusing on the performance expectations, market dynamics, and potential risks associated with Lumentum Holdings Inc and Coherent Corp.

Investment Rating - The report upgrades Aspeed Technology from Equal-weight to Overweight with a price target of NT$5,000 and raises Montage Technology's price target to Rmb100 from Rmb88 [6][35]. Core Insights - The report indicates a shift in perspective on cloud semiconductors, moving from a neutral stance to a positive outlook as a potential trough in cloud capital expenditures (capex) is anticipated in 4Q/1Q26, with US tariff impacts already priced in [2][33]. - Strong growth in US cloud capex is projected, with a year-over-year increase of 38% in 2025, marking it as the third strongest year of capex growth in the past decade [10][12]. - The report highlights that the market may be underestimating the upside risks associated with CPU and non-standard AI server demand, particularly with the ramp-up of GB racks and increased semi content in servers [9][4]. Summary by Sections Cloud Semiconductor Outlook - The report suggests that the cloud semiconductor cycle is likely to trough soon, with earnings revisions expected to bottom out and improvements in GB rack yield [2][3]. - General server demand has exceeded expectations in the first half of the year, driven by inference demand and alternative GPU solutions, indicating sustained demand into the second half [3][4]. Company-Specific Insights - Aspeed's earnings downgrades are believed to have reached a bottom, prompting an upgrade to Overweight due to anticipated earnings momentum [5][41]. - Montage is expected to benefit from the adoption of advanced interfaces by China server brands, with a projected earnings growth of 25% CAGR from 2024 to 2027 [5][33]. Financial Projections - The report raises earnings estimates for Aspeed by 9% for 2025, 8% for 2026, and 31% for 2027, while Montage's earnings are raised by 9% and 11% for 2026 and 2027, respectively [5][33]. - Montage's valuation appears attractive at 38x the estimated EPS for 2026, especially given the forecasted earnings growth [5][41]. Market Trends - The report notes that the cumulative capex from the top 11 global cloud players is expected to reach US$392 billion in 2025, representing 16.6% of their revenue, which is an all-time high [10][12]. - The anticipated increase in semi content in servers is linked to enhanced security functions, which will likely benefit companies with comprehensive product offerings [4][9].

Core Insights - Ciena Corp. reported a quarterly revenue growth of 23.6% to $1.13 billion, surpassing analyst expectations of $1.09 billion, but the adjusted EPS of 42 cents fell short of the consensus estimate of 52 cents [1] - The adjusted gross margin decreased by 250 basis points to 41%, while the adjusted operating margin increased by 140 basis points to 8.2% [1] Analyst Ratings and Price Targets - Rosenblatt analyst Mike Genovese maintained a Neutral rating on Ciena and reduced the price target from $85 to $78, citing concerns over margins due to customer and product mix [2] - Needham analyst Ryan Koontz reiterated a Buy rating with a price target of $90, expressing optimism about Ciena's technology and market position despite mixed fiscal second-quarter results [2][8] Revenue and Margin Insights - Genovese noted that the gross margin was impacted by a heavy sales mix of new line systems, which typically have lower margins initially [3] - Ciena's Cloud and Service Provider DCI markets are expected to drive multi-year growth above 8% to 11%, with potential revenue growth exceeding this range before the end of fiscal 2025 [4] Future Projections - Genovese projected fiscal 2025 revenue of $4.58 billion and adjusted EPS of $2.24, while Koontz projected revenue of $4.57 billion and adjusted EPS of $2.25 [6][9] - Both analysts highlighted that the fiscal second-half guidance indicates higher revenue growth but lower gross margin and EPS than previously expected [6] Market Dynamics - The strong performance in the Cloud segment, which grew 88% year-over-year, contributed to Ciena's outperformance, although new products with lower gross margins are increasing in mix faster than anticipated [7] - Increased tariff costs are expected to impact gross profit by approximately $10 million per quarter, raising concerns about potential worsening conditions [7] Competitive Landscape - The outlook for Datacom companies and Telecom- and DCI-exposed names remains positive, as Ciena's gross margin issues are considered company-specific [5] - Koontz views the stock pullback as a buying opportunity, anticipating continued share gains and emerging intra-data center opportunities in fiscal 2027 [8]