Key Takeaways Lumentum shares surged 98.5% in a month, beating the sector and peers. LITE faces tight laser supply but has backlog over $400M and new CPO orders into 2027. Lumentum guides Q3 FY26 revenues of $780-$830M and 30-31% operating margin. Lumentum Holdings (LITE) shares have surged 98.5% over the past month, outperforming the Zacks Computer and Technology sector’s drop of 2.9% and the Zacks Communications Components industry’s surge of 52.3%. The stock has outperformed competitors including Coheren ...

Core Insights - Lumentum Holdings Inc. experienced a significant stock increase of 40.87% week-on-week, reaching an all-time high due to its profitability in Q2 FY2026 [1][3] - The company reported a net profit of $78.2 million in Q2, a turnaround from a loss of $60.9 million in the same quarter last year, with net revenues rising by 65% to $665.5 million [3][5] - Lumentum's forward guidance indicates over 85% year-over-year revenue growth, driven by strong demand in optical circuit switches and co-packaged optics [4] Financial Performance - The net profit for Q2 FY2026 was $78.2 million, compared to a loss of $60.9 million in the same period last year [3] - Net revenues surged to $665.5 million, up from $402.2 million year-on-year, hitting the high end of previous guidance [3] - The revenue growth outlook for Q3 is projected between $780 million to $830 million, implying a growth of 83% to 95% from $425.2 million reported in the same quarter last year [5] Strategic Opportunities - Lumentum is focusing on two key areas: optical circuit switches (OCS) and co-packaged optics (CPO), with a backlog exceeding $400 million in OCS [4] - The company has received a multi-hundred-million-dollar order in CPO, expected to be delivered in the first half of 2027 [4] - The results underscore the strength of Lumentum's roadmaps for optical components and systems, positioning the company as critical to AI leaders [4]

Core Insights - Lumentum Holdings Inc. (NASDAQ:LITE) achieved a new all-time high stock price of $507.55, closing at $504.42, marking an 8.35% increase on the day [1] - The company reported a net profit of $78.2 million for the second quarter of fiscal year 2026, a significant turnaround from a loss of $60.9 million in the same period the previous year [2] - Net revenues increased by 65% year-over-year, reaching $665.5 million, surpassing previous guidance [2] Financial Performance - Lumentum's revenues for the third quarter are projected to be between $780 million and $830 million, indicating an expected growth of 83% to 95% compared to $425.2 million in the same quarter last year [4] - The company’s earnings per share and profitability exceeded prior expectations, reflecting strong operational performance [2] Future Outlook - The company anticipates over 85% year-over-year revenue growth, driven by substantial opportunities in optical circuit switches (OCS) and co-packaged optics (CPO) [3] - Lumentum has a backlog exceeding $400 million in OCS and has secured a multi-hundred-million-dollar order in CPO, to be delivered in the first half of calendar 2027 [3]

Financial Data and Key Metrics Changes - The company 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 the second quarter was 42.5%, up 310 basis points sequentially and 1,020 basis points year-on-year [21] - Non-GAAP operating margin was 25.2%, an increase of 650 basis points sequentially and 1,730 basis points year-on-year [22] Business Line Data and Key Metrics Changes - Components revenue reached $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 was $221.8 million, reflecting a 43% sequential increase and 60% year-over-year growth, primarily from cloud transceivers [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][30] - The company anticipates a significant increase in revenue from cloud applications, with guidance for Q3 revenue between $780 million and $830 million [25] Company Strategy and Development Direction - The company is focusing on three primary growth catalysts: cloud transceivers, OCS, and co-packaged optics (CPO), with a strong emphasis on scaling production capabilities [8][12] - A new growth driver, optical scale-up, is being developed to replace copper connections in data centers, expected to begin shipments by late 2027 [12][19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in surpassing the previously projected $750 million quarterly revenue milestone, now expecting a midpoint of $805 million for March [7] - The company is actively negotiating with customers to secure long-term supply assurances, indicating strong demand for its technology [13][43] Other Important Information - The company is investing in manufacturing capacity to support cloud and AI customers, with a CapEx of $84 million in Q2 [24] - The company has established long-term agreements (LTAs) with customers, which have improved pricing stability and allowed for incremental pricing discussions [78][80] 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, although the overall revenue impact is modest [31] Question: What is the status of indium phosphide capacity ramp and potential new fabs? - The company confirmed that it has front-loaded capacity increases and is exploring options for new fabs to meet growing demand [38][43] Question: How is the transition to 1.6T transceivers progressing? - Management indicated strong demand for EMLs and silicon photonics, with expectations for continued growth in transceiver products [51][52] Question: What is the outlook for CPO and its competitive landscape? - The company feels confident in its position in the CPO market, highlighting the reliability of its products and the growing customer engagement [56][58] Question: How is the supply-demand imbalance affecting long-term agreements? - The supply-demand imbalance remains significant, with all EML capacity spoken for under LTAs, allowing for pricing flexibility [78][80]

Financial Data and Key Metrics Changes - Fourth quarter revenue was $480.7 million, exceeding the high end of revised guidance, with non-GAAP EPS of $0.88 [16] - Fiscal year 2025 net revenue was $1.65 billion, up 21% from fiscal year 2024 [19] - Non-GAAP gross margin for the fourth quarter was 37.8%, up 260 basis points sequentially and 1,000 basis points year over year [17] - Non-GAAP operating margin for the fourth quarter was 15%, up 420 basis points sequentially and over 2,000 basis points year on year [17] Business Line Data and Key Metrics Changes - Cloud and networking segment revenue for Q4 was $424.1 million, increasing 16% sequentially and 67% year over year [20] - Industrial tech segment revenue was $56.6 million, down 6% sequentially but up 6% year over year [21] - Cloud and networking segment profit was 23.6%, up 360 basis points sequentially and 1,350 basis points year over year [21] Market Data and Key Metrics Changes - The company expects to surpass $600 million in quarterly revenue by June 2026 or earlier, driven by strong demand in cloud and AI applications [6][7] - Cloud revenue is growing over 20% annually, with expectations for continued strength in components and cloud modules [6][37] Company Strategy and Development Direction - The company is focusing on three significant growth areas: cloud modules, optical circuit switching (OCS), and co-packaged optics (CPO) [10] - The company is positioned to capture significant value from the AI infrastructure market, with technologies projected to become multibillion-dollar markets within five years [6] - The company is expanding its manufacturing capacity to meet high demand, particularly in the cloud and networking segment [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in sustained growth driven by the rapid adoption of AI, highlighting the effectiveness of their strategy and operational resilience [14] - The company anticipates a breakout year for laser chip sales in 2026, with demand expected to outpace supply [9] - Management noted that the tariff situation is fluid but does not expect material changes to business operations due to tariffs [53][56] Other Important Information - The company invested $59 million in CapEx during Q4, primarily focused on manufacturing capacity to support cloud customers [20] - The company is transitioning from three-inch to four-inch wafers to increase capacity [102] Q&A Session Summary Question: Update on OCS award and revenue trajectory - Management indicated that the OCS revenue is ramping better than expected, with significant revenue anticipated in early 2026 and a more meaningful inflection point in the second half of 2026 [29][30] Question: CPO opportunity and competitive landscape - Management feels confident in maintaining a competitive edge in the CPO market due to unique power levels and reliability of their lasers [32] Question: Contributions to the $600 million revenue target - Management expects continued strength in components, significant contributions from cloud modules, and revenue from OCS to help achieve the target [37] Question: Semiconductor tariffs impact - Management believes their products are exempt from new tariffs and does not expect material impacts on operations [53][56] Question: EML wafer fab capacity and pricing dynamics - Management confirmed they are transitioning to larger wafers to increase capacity and anticipate pricing discussions to become more significant due to limited supply and high demand [102][104] Question: Profitability of OCS product offering - Management stated that OCS will be significantly above corporate margin averages and will be accretive to margins as volume ramps up [110]