Key Takeaways Lumentum's OCS backlog surpassed $400M, with most shipments set for the second half of 2026.Lumentum's CPO wins, including a multi-million laser order for 2027, expand its AI photonics pipeline.The Zacks Consensus Estimate pegs LITE's Q3 revenues at $805.39M, up 89.41% year over year.Lumentum (LITE) is at an inflection point in two of the most strategically significant optical technologies powering the AI infrastructure buildout. Optical circuit switches (OCS) and co-packaged optics (CPO) are ...

Financial Data and Key Metrics Changes - Lumentum reported a record quarterly revenue of $665.5 million, representing over 65% year-over-year growth and a non-GAAP operating margin increase of more than 1,700 basis points [6][20] - Non-GAAP gross margin for Q2 was 42.5%, up 310 basis points sequentially and 1,020 basis points year-on-year, driven by better manufacturing utilization and increased pricing [21] - Non-GAAP operating margin reached 25.2%, up 650 basis points sequentially and 1,730 basis points year-on-year, primarily due to revenue growth in components products [22] Business Line Data and Key Metrics Changes - Components revenue was $443.7 million, a 17% sequential increase and 68% year-over-year growth, driven by demand for laser chips and assemblies [24][14] - Systems revenue reached $221.8 million, reflecting a 43% sequential increase and 60% year-over-year growth, with cloud transceivers being the main contributor [24][17] Market Data and Key Metrics Changes - The order backlog for optical circuit switches (OCS) surged past $400 million, with most shipments expected in the second half of the calendar year [9] - Demand for cloud transceivers has significantly increased, with revenue growing and expectations for continued growth in Q3 [10][19] Company Strategy and Development Direction - Lumentum aims to capitalize on three primary growth drivers: cloud transceivers, optical circuit switches (OCS), and co-packaged optics (CPO), with a focus on scaling production and improving profitability [8][12] - The company is exploring opportunities in the broader external light source (ELS) market to diversify its customer base and increase its serviceable market [11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in surpassing the previously projected $750 million in quarterly revenue, with guidance for Q3 indicating a midpoint of $805 million, representing an 85%+ year-over-year increase [7] - The company acknowledged ongoing cyclical softness in the industrial market but highlighted strong demand in cloud-related businesses [18] Other Important Information - Lumentum's cash and short-term investments increased by $33 million to $1.16 billion, while inventory levels rose by $39 million to support expected growth [24] - The company is actively negotiating with leading customers to offset capital requirements in exchange for long-term supply assurances [12] Q&A Session Summary Question: Can you provide more details on the OCS market and the impact of price increases? - Management noted that the OCS market is developing better than expected, with a backlog exceeding $400 million and significant customer demand [30] - Price increases are positively impacting both top line and gross margin, with modest overall revenue impact expected [31] Question: What is the status of indium phosphide capacity ramp and potential new fabs? - Management confirmed that capacity increases are ahead of schedule, with expectations for better than 40% capacity growth [38] - Discussions about new fabs are ongoing, with a focus on increasing overall capacity [43] Question: How is the transition to 1.6T transceivers progressing? - The transition is primarily driven by EMLs, with expectations for significant growth in both EML and silicon photonics [51] - Management remains committed to vertically integrating CW lasers for transceivers, with timelines slightly pushed out [55] Question: What is the outlook for CPO and its competitive landscape? - Management expressed confidence in their position in the CPO market, highlighting reliability and customer engagement as key advantages [56] - The company anticipates significant growth in CPO, with a multi-hundred million dollar order expected to ramp in early 2027 [65] Question: How has the supply-demand imbalance affected long-term agreements with customers? - The supply-demand imbalance remains significant, with long-term agreements in place that provide pricing flexibility and stability [78] - Customers are increasingly seeking additional capacity beyond what is covered in LTAs, allowing for incremental pricing discussions [80]

Key Takeaways Lumentum expects Q1 fiscal 2026 revenues of $510-$540 million and EPS of $0.95-$1.10. Cloud & Networking strength, led by Datacom lasers and AI demand, drives top-line momentum. Tariff pressures and telecom supply constraints could weigh on Lumentum's quarterly growth. Lumentum (LITE) is scheduled to report first-quarter fiscal 2026 results on Nov. 4, 2025.For the quarter, LITE expects revenues to be between $510 million and $540 million. Non-GAAP earnings are expected to be between $0.95 and ...