26 August 2025 | 5:50PM CST Optical Transceiver Incremental strength on scale advantage/supply tightness; raise Innolight/Eoptolink TPs; Buy Three key factors prompt us to raise our EPS estimates for Innolight/Eoptolink: 1) The tight capacity should incrementally benefit Innolight/Eoptolink given their scale advantages and lead in silicon photonics (Innolight in particular); 2) the removal of near-term tariff overhang makes us more confident of the shipment outlook; and 3) a slower ASP decline than our prev ...

Summary of Conference Call Records Industry Overview - The conference call discusses the optical communication sector, focusing on two companies: Lumentum (LITE) and Coherent (COHR) [1][2]. Key Points from Lumentum (LITE) - **Revenue Growth**: LITE reported a 55.9% year-over-year increase in revenue to USD 480.7 million for 4QFY25, with a turnaround to a GAAP net income of USD 213.3 million from a net loss of USD 252.5 million a year prior [2][4]. - **Future Guidance**: Management provided guidance for 1QFY26E revenue between USD 510 million and USD 540 million, indicating a quarter-over-quarter growth of 6% to 12% and a year-over-year growth of 51% to 60% [2][4]. - **Product Demand**: Strong demand from hyperscale cloud customers is driving growth, particularly in the Cloud and Networking segment, which saw a 67% year-over-year increase [2][4]. - **EML Chip Shipments**: Achieved an all-time high in EML chip shipments, nearly doubling revenue compared to the previous year. Transitioning from 3-inch to 4-inch wafers to increase capacity, with potential future moves to 6-inch wafers [4]. - **Major Orders**: Received a substantial order for 200G EML chips, expected to be fulfilled in the December quarter, with 2026 anticipated as a breakout year for 100G and 200G laser chip shipments [4]. - **OCS Expansion**: Expanding Optical Circuit Switch (OCS) capacity in Thailand, with leadership in optical performance expected to capture demand ahead of competitors [5]. Key Points from Coherent (COHR) - **Revenue Performance**: COHR recorded a 16.4% year-over-year revenue growth in 4QFY25, reaching USD 942 million in the data center and communications segment, which contributed 62% of total revenue [6][7]. - **Guidance Shortfall**: Management's guidance for 1QFY26 revenue between USD 1.46 billion and USD 1.60 billion indicates an 8% to 18.6% year-over-year growth, but this fell short of market expectations [6][7]. - **Transceiver Development**: The company began shipments of its 1.6T transceiver in 4QFY25, with expectations for meaningful revenue contributions in FY26. Development of 3.2T transceiver products is ongoing [7]. - **Divestiture Strategy**: The divestiture of the Aerospace & Defense business for USD 400 million is a strategic move to streamline COHR's portfolio, expected to close in 1QFY26 [7]. Additional Insights - **Market Dynamics**: The strong demand for AI infrastructure from global hyperscale AI and cloud players is expected to support sequential growth for optical transceiver players in China [1]. - **Supply Chain Considerations**: Continued supply tightness of key components, particularly optical chips, may benefit optical chip manufacturers [1]. This summary encapsulates the essential insights from the conference call, highlighting the performance and strategic outlook of Lumentum and Coherent within the optical communication industry.