Summary of Optical Fiber Communication (OFC) Conference Insights Industry Overview - The conference featured leaders from major tech companies and infrastructure providers, including Google, Meta, Microsoft, and others in the optical networking space [1][3]. Key Technologies Discussed 1. **CPO (Coherent Pluggable Optics)** - CPO is recognized as a significant technology for optical integration, but its adoption is questioned outside the Nvidia ecosystem. - Challenges include performance, serviceability, manufacturability, and limited supplier options. - Adoption is expected to be incremental, with market penetration estimates ranging from 5% to 30% in the coming years [3][4]. 2. **XPO (Next-Gen Pluggable Form Factor)** - XPO serves as a bridge between traditional pluggables and integrated optical architectures. - It offers enhancements in bandwidth density, system footprint, thermal headroom, and reliability. - XPO is applicable in various use cases, including DCI (Data Center Interconnect), and is seen as a more flexible option compared to CPO [3][4]. 3. **OCS (Optical Circuit Switching)** - OCS is gaining relevance and its Total Addressable Market (TAM) is expanding faster than anticipated. - It is valuable for AI fabric extensions and in scenarios where conventional electrical switching reaches scaling limits. - Companies are optimistic about the continued expansion of OCS use cases, despite concerns over slower switching speeds [4][5]. 4. **Coherent-Lite** - Coherent-Lite is designed for both scale-out and DCI applications, focusing on higher serial rates (e.g., 400G/lane). - It aims to improve fiber efficiency and reduce power consumption while increasing capacity per fiber pair. - The technology is transitioning from concept to deployment, with the pace of deployment being a key focus [5][6]. Additional Insights - The discussions highlighted a consensus on the importance of evolving optical technologies to meet increasing demands for data capacity and efficiency. - The varying perspectives among hyperscalers regarding the adoption of CPO and other technologies indicate a complex landscape where reliability and ease of implementation are critical factors [3][4]. Conclusion - The OFC conference underscored the ongoing evolution in optical networking technologies, with significant implications for future infrastructure and investment opportunities in the sector. The insights gathered reflect a cautious yet optimistic outlook on the adoption of new technologies like CPO, XPO, OCS, and Coherent-Lite, which are poised to shape the future of optical communications [1][3][4][5].

Summary of Optical Industry Conference (OFC) 2026 Industry Overview - The conference highlighted a strong demand for optical solutions, with supply constraints being the primary challenge faced by vendors [4][9] - Ongoing debates regarding optical architectures, particularly around Co-Packaged Optics (CPO) and Optical Circuit Switching (OCS), with a consensus that optical content is increasing as bandwidth needs rise [4][9] Key Takeaways - **Demand vs. Supply**: Demand for optical solutions is significantly outpacing supply, particularly from hyperscalers who are collaborating closely with optical vendors [4][9] - **Market Sentiment**: Vendors expressed optimism about current market conditions, although there is a caution regarding future execution and potential volatility in stock valuations [4][12] - **Investment Trends**: Increased investment in optical technologies is driven by the growing bandwidth requirements across networks, with copper reaching its limits [5][9] Technological Developments - **Co-Packaged Optics (CPO)**: - CPO remains a hot topic with debates on its adoption ranging from 5% to 30% over the next few years. NVDA is a key player in this space [10][11] - Challenges include a largely closed ecosystem and serviceability issues [10] - **Optical Circuit Switching (OCS)**: - OCS is gaining traction, with potential for significant market opportunities. It is noted for its power-saving capabilities by eliminating the need to switch back to electrical layers [10][11] - **Multi-Rail Technology**: - This technology allows for significant densification of networks, with a total cost of ownership (TCO) 50-70% lower than current solutions [10] - **eXtra-Dense Pluggable Optics (XPO)**: - Introduced by Arista, XPO offers four times the density of current solutions, addressing power challenges and appealing to hyperscalers [10] Company-Specific Insights - **Ciena (CIEN)**: - Reported 76% year-over-year growth from data center customers and aims for 28% growth in FY26, contingent on supply availability [13] - **Marvell (MRVL)**: - Positioned strongly in networking with a focus on optical circuit switching and coherent technologies, expecting significant growth in ASICs [14][15] - **Cisco (CSCO)**: - Noted a 40% share of optical in cloud orders and sees opportunities in scale-across and DCI markets, though cautious about CPO adoption [17] - **Lumentum (LITE)**: - Anticipates a growing total addressable market (TAM) for optical content, with expectations of a $1 billion+ business in OCS by 2027 [18] - **Coherent (COHR)**: - Identified a $50 billion existing serviceable available market (SAM) with additional growth opportunities in OCS and thermal solutions [19] - **Corning (GLW)**: - Highlighted innovations in fiber technology and expressed optimism about CPO revenue growth starting in 2027 [23] Market Dynamics - **Vendor Diversity**: - There is a strong desire for vendor diversity among hyperscalers, but achieving this is challenging due to the dominance of certain players like NVDA and LITE [11] - **Valuation Trends**: - Current valuations are seen as largely full, with expectations for stocks to trade towards bull cases in the near term, particularly as the AI complex continues to grow [12] Conclusion - The OFC 2026 conference underscored the robust demand for optical solutions amid supply constraints, with significant technological advancements and company-specific growth strategies shaping the future of the optical industry. The focus on open ecosystems and diverse vendor participation will be critical as the market evolves.

Summary of Lumentum Holdings Inc Conference Call Company Overview - **Company**: Lumentum Holdings Inc (LITE.O) - **Industry**: Telecom & Networking Equipment - **Market Cap**: $57,031 million - **Current Stock Price**: $649.56 (as of March 17, 2026) - **Price Target**: Increased from $520.00 to $595.00, with a bull case of $900.00 [2][13] Key Industry Insights - **Optical Content Demand**: There is a consensus that optical content is increasing rapidly, with a total addressable market (TAM) projected to grow to over $90 billion, reflecting a growth rate of approximately 40% in the coming years [4][9]. - **OCS and CPO Growth**: The OCS (Optical Communications Solutions) business is expected to ramp to over $1 billion by CY2027, driven by a new multi-billion-dollar agreement with a key customer [5][9]. The company anticipates significant scale-out CPO (Coherent Photonic Optics) revenue in 2027 and scale-up in 2028 [5]. Financial Performance and Projections - **Revenue Growth**: - FY2026 revenue is estimated at $2,915 million, a 77% increase year-over-year. - FY2027 revenue is projected to reach $4,986 million, a 71% increase year-over-year [25][47]. - **Earnings Per Share (EPS)**: - FY2026 EPS is estimated at $7.73, with FY2027 EPS projected at $14.98 [6][25]. - Quarterly EPS estimates for 2026 range from $1.10 in Q1 to $2.56 in Q4 [7]. - **Margins**: - Gross margins are expected to improve from 43.3% in FY2026 to 49.7% in FY2028, with operating margins increasing from 27.2% to 38.9% over the same period [25][48]. Investment Drivers - **CPO and OCS Adoption**: The company is positioned to benefit from the growing adoption of CPO and OCS technologies, which are expected to contribute significantly to revenue and profitability [9][19]. - **New Fab Location**: Lumentum announced the acquisition of a fifth InP fab to enhance capacity, which could potentially add $5 billion in revenue by 2028 [11]. - **Market Dynamics**: The company is navigating a tight market environment, which is expected to persist, allowing for better pricing power and revenue stability [4][9]. Risks and Considerations - **Valuation Concerns**: The stock is currently trading at a relatively high valuation of 27x FY28 estimates, which may limit upside potential unless growth expectations are met [4][13]. - **Market Dependencies**: The company's performance is closely tied to the demand for optical components and the broader AI ecosystem, which poses risks if market conditions change [13][24]. - **Geopolitical Risks**: The intricate manufacturing processes and concentration in Asia may expose the company to risks related to tariffs and supply chain disruptions [21]. Conclusion Lumentum Holdings Inc is positioned for significant growth driven by increasing demand for optical solutions, particularly in the OCS and CPO segments. The company's financial outlook is strong, with substantial revenue and EPS growth projected over the next few years. However, investors should remain cautious of valuation levels and external market risks that could impact performance.

Summary of Optical Market Opportunities Conference Call Industry Overview - The optical market is projected to exceed $65 billion by 2028, growing at a compound annual growth rate (CAGR) of approximately 30% due to increased speed and investment in AI data centers [1][8] - The current optical market is estimated at around $30 billion in 2025, having grown at a CAGR of about 40% over the past four years [3][8] Key Market Insights - Incremental optical opportunities are estimated to create an additional $23 billion in total addressable market (TAM) by 2028 [3][8] - Traditional networks are reaching their limits, necessitating the adoption of new optical technologies [1][3] - Five key markets are identified for increased optical investment: 1. Transition from copper to fiber in scale-up 2. Co-packaged optics (CPO) on-chip 3. CPO on-board 4. Optical circuit switching (OCS) 5. Passive optical for out-of-band management [3][8] Market Dynamics - The transition to optical technologies is expected to be gradual, with significant architectural changes required for implementation [11][12] - The optical transceiver market is projected to be the largest segment, estimated at around $50 billion [10][12] - Current pricing dynamics are uncertain, with potential for price increases due to tightness in the Electro-absorption Modulated Laser (EML) market [10][31] Company Valuations and Recommendations - Current valuations for optical companies are high, with many trading at 30-40 times FY28 estimates [9][26] - Corning Inc (GLW) is viewed as the best long-term opportunity due to its exposure to the copper to fiber transition, while Lumentum Holdings Inc (LITE) is seen as the most cautious investment due to high expectations built into its valuation [9][26] Risks and Unknowns - The biggest unknowns include the pace of CPO adoption and pricing stability in the optical market [10][31] - The transition to new architectures may take longer than anticipated, impacting market growth [30][31] - The potential for pricing to revert to historical declines (10-15% annually) poses a risk to current valuations [31][32] Conclusion - The optical market is poised for significant growth driven by technological advancements and increasing demand from AI data centers - Investors should be cautious of high valuations and the uncertainties surrounding market dynamics and adoption timelines for new technologies

Summary of Telecom & Networking Equipment Conference Call Industry Overview - The optical market is projected to exceed $65 billion by 2028, with a compound annual growth rate (CAGR) of approximately 30% driven by increased speed and investment in AI data centers [1][8] - The current optical market is estimated at around $30 billion in 2025, having grown at a CAGR of about 40% over the past four years due to AI data center investments [3][8] Key Market Opportunities - An additional $23 billion in total addressable market (TAM) is expected from new optical technologies by 2028, potentially bringing the industry total to around $90 billion [1][3][8] - Five key markets identified for optical investment as network speeds increase: 1. Transition from copper to fiber in scale-up applications 2. Co-packaged optics (CPO) on-chip 3. CPO on-board 4. Optical circuit switching (OCS) 5. Passive optical networks for out-of-band management [3][8] Company Insights - Price targets for key companies in the optical space have been adjusted: - Lumentum Holdings Inc (LITE): from $420 to $520 - Coherent Corp (COHR): from $200 to $250 - Ciena Corporation (CIEN): from $213 to $280 - Corning Inc (GLW): from $103 to $127 [5] Market Dynamics - The optical transceiver market is estimated to be around $50 billion, with significant players including LITE, COHR, and others [10] - The adoption of CPO in scale-out networks is projected to be around 15% by 2028, which could impact transceiver revenues negatively [10][11] - Current market conditions show tightness in pricing, with optical components experiencing price increases rather than the typical annual declines of 10-15% [10][31] Risks and Unknowns - The biggest uncertainties include the pace of CPO adoption and pricing dynamics in the optical market [10][31] - The transition from copper to fiber is expected to take time, with significant architectural changes required for widespread adoption [11][12] - The market is currently experiencing high valuations, with many stocks trading at 30-40 times FY28 estimates, leading to concerns about pricing in perfection [9][26] Future Outlook - The optical market is expected to evolve significantly over the next 5-10 years, with many innovations requiring new supply chain ecosystems [11][12] - The transition to optical technologies is driven by increasing bandwidth needs and the limitations of existing copper technologies [66][70] - Companies like GLW are viewed as better long-term opportunities due to their positioning in the copper to fiber transition, while LITE is seen as more vulnerable due to high expectations built into its valuation [9][26] Conclusion - The optical market is poised for substantial growth, driven by technological advancements and increasing demand from AI data centers. However, investors should be cautious of high valuations and the uncertainties surrounding market dynamics and adoption rates of new technologies.

Summary of 4Q25 CIO Survey Takeaways Industry Overview - **Industry**: Telecom & Networking Equipment - **Region**: North America Key Points Communications Spending Growth - The 4Q25 CIO survey indicates a year-over-year deceleration in Communications spending growth, with expectations for 2026 set at **2.2%**, down **87 basis points** from the **3Q25** survey and **27 basis points** below the **2025** expectations of **2.4%** [3][7][22] - Overall IT budgets are expected to grow at **3.4%** in 2026, a decline of **41 basis points** from **3.8%** in the 3Q25 survey [3][7] Budgetary Environment - The up-to-down ratio, which measures the ratio of CIOs expecting to revise their budgets higher versus lower, decreased to **0.5x** in 4Q25 from **0.8x** in 3Q25, indicating a more cautious outlook [3][18] - The survey results suggest a weakening overall budgetary environment, contrasting with positive checks on networking spending [3][7] Networking Equipment Priority - Networking equipment remains the **8th priority** for CIOs, consistent with the 3Q25 survey, and its defensibility improved to **8th** from **9th** in the previous survey [3][7][12] - Despite the deceleration in Communications growth, checks indicate a strong networking spending environment driven by data center and campus spending, with no signs of weakening enterprise customer sentiment [3][7] Growth Drivers for Specific Companies - Continued growth drivers for **Cisco Systems (CSCO)** and **F5 Networks (FFIV)** include product refreshes and share gain opportunities, which are expected to sustain spending for these companies [7][8] AI and Cloud Trends - **Artificial Intelligence (AI)** projects are a top priority, with **81%** of CIOs expecting to roll out their first AI project by 2026, up from **79%** in 3Q25 [14][30] - Long-term expectations for public cloud usage are rising, with CIOs anticipating **67%** of workloads to be in the public cloud by the end of 2028, compared to **47%** today [15][27] CIO Sentiment - The sentiment among CIOs reflects a cautious approach towards budget revisions and spending, with networking equipment remaining a stable priority despite overall spending deceleration [3][12][18] Additional Insights - The survey indicates that **16%** of CIOs expect AI/ML projects to have the largest spend increase, reflecting a growing focus on AI-related investments [14] - The prioritization of networking projects remains stable, with **4.0%** of CIOs expecting networking equipment to see the largest spend increase in 2026 [12][23] This summary encapsulates the key findings from the 4Q25 CIO survey, highlighting trends in communications spending, networking equipment priorities, and the impact of AI and cloud technologies on future budgets.

J P M O R G A N North America Equity Research 15 December 2025 IT Hardware/ Telecom & Networking Equipment Samik Chatterjee, CFA AC (1-212) 622-0798 samik.x.chatterjee@jpmorgan.com Joseph Cardoso (1-212) 622-9036 joseph.cardoso@jpmchase.com Manmohanpreet Singh (1-212) 622-4527 manmohanpreet.singh@jpmchase.com Hardware & Networking Cloud Capex Outlook: Growth to Exit '25 at +65%; '26 Growth Expectations Now Tracking to 50%+ Data center capex among the Top 4 U.S. CSPs continues to trend higher for 2025 follow ...

Summary of Telecom & Networking Equipment Conference Call Industry Overview - The conference call focused on the **Telecom & Networking Equipment** industry in **North America** with a specific emphasis on the **AI trade** and **optical componentry** market [1][3][4]. Key Points 1. Performance Metrics - Networking returns in 2025 were concentrated in AI and optical trades, with a **100% return YTD** for optical [1]. - The overall networking universe returned approximately **55% YTD**, outperforming NASDAQ by about **35%** [3]. - AI names saw a **110% increase** in returns, building on an **85% return** from the previous year [3]. 2. AI Trade and Optical Market - The AI trade has broadened beyond semiconductor names, positively impacting infrastructure, particularly in optical [3]. - Optical components led the AI basket performance with a **155% increase** and **40% estimate revisions** [3]. - The expectation is that the AI trade will continue, especially in optical, through the first half of 2026, but selectivity will be necessary for full-year returns [4]. 3. Investment Recommendations - Upgrades were made for **MSI** to Overweight (OW), with continued OW ratings for **AXON**, **CSCO**, and **ANET** [1][4]. - Companies expected to attract excess returns from the AI trade include **GLW**, **CIEN**, **LITE**, and **COHR** [4]. - Core networking names like **CSCO** and **ANET** are highlighted as attractive opportunities due to Ethernet's growing market share [5][9]. 4. Caution on Pricing and Market Dynamics - There is caution regarding the sustainability of pricing in the optical market due to increased competition and capacity investments [4]. - If capital expenditure (capex) data points continue to be revised positively, expectations for optical names may hold throughout the year [4]. 5. Public Safety Sector - The public safety sector, particularly companies like **AXON** and **MSI**, is viewed as well-positioned for growth due to high public safety budgets and the impact of OBBBA funding [10][60]. - Despite recent underperformance, there is optimism for recovery in public safety names as demand conditions improve [10][11]. 6. Company-Specific Insights - **Cisco (CSCO)** is expected to benefit from a multi-year campus upgrade cycle and increased AI contributions, with a price target raised to **$91** [34][37]. - **AXON** is projected to maintain a durable growth opportunity with a price target of **$713**, reflecting a strong market position in public safety [50][56]. - **MSI** was upgraded to OW with a price target of **$436**, citing reasonable valuation levels and growth drivers in public safety [60][71]. - **Ciena (CIEN)** is experiencing strong demand but is currently trading at a premium, leading to a cautious outlook despite positive near-term demand [72][74]. 7. Risks and Considerations - Risks include potential tariff impacts, macroeconomic uncertainties, and the timing of public safety spending [56][71]. - The optical component market faces challenges from increased competition and supply chain issues, which could affect pricing and margins [95][96]. Conclusion The conference call highlighted a robust outlook for the Telecom & Networking Equipment industry, driven by AI and optical components, while also emphasizing the need for selectivity in investments due to market dynamics and pricing pressures. The public safety sector remains a focal point for growth, with several companies positioned to capitalize on favorable funding and demand conditions.

Summary of J.P. Morgan's Cloud Capex Outlook Industry Overview - The report focuses on the **Cloud Capital Expenditures (Capex)** outlook for the **datacenter** sector, particularly among the **Top 4 U.S. Cloud Service Providers (CSPs)**, which include Meta, Google, Amazon, and Microsoft [1][3][8]. Key Points and Arguments 1. **Capex Growth for 2025**: - Datacenter capex growth is now projected to be nearly **+60% year-over-year (y/y)** in 2025, up from a previous forecast of **+40%** [1][3][8]. - This growth translates to an increase of over **$100 billion** in 2025, marking the largest annual increase to date, surpassing the previous record set in 2024 [1][3][8]. 2. **Capex Growth for 2026**: - For 2026, growth expectations have been revised to **+30% y/y**, representing an increase of more than **$80 billion** [1][3][8]. 3. **Investment Drivers**: - The surge in capex is primarily driven by investments in **AI** and related infrastructure, with robust double-digit growth across all U.S. hyperscalers [1][3][8]. - Additionally, investments from **Tier 2 CSPs** and **neoclouds** are expected to grow significantly, with estimates suggesting a rise to nearly **$80 billion** in 2026, up from less than **$60 billion** in 2025 [1][3][8]. 4. **Equipment Categories**: - While high-cost **servers** with advanced **XPUs** will dominate the expansion, there is also a notable increase in spending on **networking equipment** such as datacenter switches, optical transceivers, and DCI solutions [1][3][8]. 5. **Company Coverage**: - J.P. Morgan remains optimistic about companies that support AI infrastructure demands, particularly in networking. Companies highlighted include **Arista (ANET)**, **Celestica (CLS)**, **Ciena (CIEN)**, **Coherent (COHR)**, **Lumentum (LITE)**, and **Fabrinet (FN)**, all rated as **Overweight (OW)** [1][3][8]. Additional Important Insights - The report indicates that the **datacenter capex** from a sample of public Tier 2 U.S. CSPs and emerging neoclouds is expected to grow over **+100% y/y** in 2025, surpassing the average spend from the Top 4 CSPs prior to 2023 [4][34]. - The anticipated growth for Tier 2 and neoclouds in 2026 is projected at **+35% y/y**, again outpacing the Top 4 CSPs [4][34]. - The report emphasizes that the sample excludes many private companies, which are also expected to show robust spending intentions for 2025 and beyond [4][34]. This summary encapsulates the critical insights from the J.P. Morgan report on the cloud capex outlook, highlighting significant growth trends and investment opportunities within the datacenter sector.

Summary of Cisco Systems Inc Conference Call Company Overview - **Company**: Cisco Systems Inc (CSCO.O) - **Industry**: Telecom & Networking Equipment - **Market Cap**: $280,765 million - **Current Stock Price**: $70.40 - **Price Target**: Increased from $70.00 to $73.00 Key Financial Highlights - **FQ4 Earnings**: Reported non-GAAP revenue of $14.7 billion and EPS of $0.99, exceeding expectations of $14.6 billion and $0.97 respectively [10] - **Product Orders Growth**: Achieved 7% year-over-year growth in product orders, surpassing the expected 5% [3][7] - **AI Orders**: Recorded $800 million in AI webscale orders for the quarter, up from $500 million in the previous quarter, totaling over $2 billion for FY25 [7][8] - **Networking Segment**: Strong performance with double-digit growth in networking product orders, despite limited contribution from the Cat9K refresh cycle [8][10] Segment Performance - **Security Segment**: Grew by 9% year-over-year, below the expected 17%, with revenue of $1,952 million compared to the estimate of $2,095 million [8][10] - **Public Sector**: Orders declined by 6% year-over-year, indicating ongoing weakness in this area [8][10] - **Networking Strength**: The networking segment's growth is expected to continue with the upcoming Cat9K refresh cycle, which is anticipated to drive multi-year growth [8][10] Future Outlook - **FY26 Guidance**: Management maintains a top-line growth estimate of 5%, aligning with street estimates, with Q1 guidance suggesting approximately 6.5% year-over-year growth [9][10] - **Potential Risks**: The company faces risks from macroeconomic uncertainties and potential changes in tariffs, which could impact growth [11][12] Investment Thesis - **Overweight Rating**: The stock is rated as Overweight, with a price target of $73, reflecting an 18x multiple on a projected FY26 EPS of $4.03 [11][13] - **Bull Case Drivers**: Future multiple expansion is contingent on acceleration in security and AI opportunities, particularly in sovereign and enterprise sectors [7][11] - **Splunk Integration**: The acquisition of Splunk is expected to provide long-term growth opportunities, although immediate expectations are minimal [18][30] Additional Insights - **Gross Margins**: Non-GAAP gross margins were reported at 68.4%, benefiting from reduced tariff impacts [10] - **Order Growth**: Management has not observed any significant pull-forward in demand, which bodes well for the second half of the calendar year [8][10] - **Market Dynamics**: The networking market is expected to grow positively, supported by the Cat9K refresh and modernization efforts ahead of AI integration [18][30] Conclusion Cisco Systems Inc is positioned for continued growth, particularly in its networking segment, with strong performance in AI orders. However, challenges in the security segment and public sector demand highlight areas of concern. The company's strategic focus on AI and networking modernization, along with the integration of Splunk, presents a favorable long-term outlook.