Summary of Lumentum FY Conference Call Company Overview - **Company**: Lumentum (NasdaqGS: LITE) - **Date of Conference**: December 10, 2025 Key Industry Insights - **Industry**: Optical and Photonic Technologies - **Current Market Dynamics**: - Unprecedented demand in AI and optical technologies - Capacity constraints across all product lines due to high demand exceeding supply [10][12][121] Core Points and Arguments 1. **Capacity Constraints**: - All product lines are currently capacity constrained, with demand exceeding supply [10] - Specific products like indium phosphide lasers and scale-across optics are particularly tight [10][11] - EML lasers are sold out for 2026 and largely booked through 2027, indicating strong demand [13] 2. **Pricing Dynamics**: - Pricing is expected to increase due to the seller's market, with longer-term contracts not offering discounts [18] - Larger customers are willing to commit to longer contracts, which helps secure supply [18] 3. **Customer Supply Allocation**: - Supply allocation is based on customer commitment and strategic importance, ensuring no favoritism among major clients [25] - The company aims to support all cloud customers fairly [25] 4. **Product Capacity Increase**: - A 40% capacity increase for EMLs is on track, with incremental improvements expected over the next quarters [26][30] - Multiple tools are being utilized to address capacity needs, rather than a single bottleneck [32][34] 5. **Market Trends**: - Silicon Photonics (SiPho) is expected to gain market share, but EMLs currently have better gross margins [39] - The transition to 1.6T technology is anticipated, with flexibility in capacity allocation between EML and SiPho lasers [46][50] 6. **Optical Switching (OCS)**: - OCS is projected to grow significantly, with expectations of reaching around $100 million per quarter by December 2026 [70] - OCS is currently supplementing packet switching rather than cannibalizing it, with a growing interest from AI model companies [78] 7. **CPO Technology**: - CPO (Co-Packaged Optics) is expected to see significant adoption by 2027, with projections of 40%-50% of switches being CPO-based by 2028 [91] - The transition to scale-up architectures is anticipated but will require careful planning due to power consumption and capacity considerations [97] 8. **Optical Ports Growth**: - Estimated optical ports for 2026 are projected to be around 60-75 million, nearly doubling year-over-year [104][106] - The majority of these ports will be driven by hyperscalers, indicating strong demand in the data center market [116] 9. **Customer Relationships**: - The company is focusing on serving its three major customers effectively, as demand from these clients is high [120] - Capacity remains the primary constraint in meeting customer demand, with a need to ensure reliable production [121] 10. **Broad-Based Growth in Telco**: - The telco business is experiencing broad-based growth, driven by increased demand across various product lines [141] - The company anticipates continued strong growth in data center optics and related technologies [142] Additional Important Insights - The company is cautious about expanding its customer base due to current capacity constraints, focusing instead on existing relationships [121] - The supply chain for OCS is still developing, which may limit growth in the short term but is not expected to face the same constraints as laser technologies [82] - The overall market for optical technologies is expected to grow rapidly, with significant opportunities for Lumentum in both existing and new applications [142]

Equity Research e] Sector Report | Technology Dec 8, 2025 AI Networking: The Key Move in 2027 to be CPO in NVIDIA's Scale Up Alicia Xia Jeff Pu, CFA Evan Lee aliciaxia@gfgroup.com.hk jeffpu@gfgroup.com.hk evanlee@gfgroup.com.hk What's new Following Google's adoption of OCS optical interconnection, we believe that NVIDIA (NVDA US Buy) may incorporate CPO (rack to rack optical interconnection within Kyber) into the scale-up networking of one version of its 2027 Rubin Ultra architecture. As for NVIDIA's OIO so ...