Lumentum(US:LITE)2025-11-04 23:02Financial Data and Key Metrics Changes - In Q1, revenues surged more than 58% year-over-year, reaching $533 million, the highest revenue in a single quarter in the company's history [6][17] - Non-GAAP gross margin improved to 39.4%, up 660 basis points year-on-year, while non-GAAP operating margin increased to 18.7%, up 1,570 basis points year-on-year [17][18] - Non-GAAP net income was $86.4 million, with non-GAAP EPS at $1.10, reflecting strong operational performance [17][18] Business Line Data and Key Metrics Changes - Components revenue was $379 million, up 64% year-over-year, driven by strong demand in data centers [10][19] - Systems revenue was $155 million, up 47% year-over-year but down 4% sequentially, with cloud transceiver revenue remaining flat as manufacturing capabilities were increased [13][19] - The company initiated CW laser deliveries for 800-gig transceiver manufacturers, marking a significant milestone in its product roadmap [11] Market Data and Key Metrics Changes - Over 60% of total revenue now comes from cloud and AI infrastructure, indicating a strong alignment with market trends [7] - Shipments of narrow linewidth laser assemblies for data center interconnect grew over 70% year-over-year, demonstrating robust market demand [12] - The demand-supply imbalance for EML products has increased, with a shortfall of 25%-30% relative to total customer demand [77][78] Company Strategy and Development Direction - The company has reorganized to report financials as a single segment, allowing for quicker responses to market changes and better resource allocation [9] - Future growth drivers identified include cloud transceivers, optical circuit switches, and co-packaged optics, with expectations for sustained growth in cloud transceivers [8][15] - The company aims to leverage its strong market position to drive long-term shareholder value through expanded manufacturing capacity and new product ramps [15][21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in sustaining growth due to improved execution and customer ramp participation, particularly in transceivers [27] - The company anticipates a revenue midpoint of approximately $650 million for Q2, surpassing previous targets [8][20] - Management highlighted the importance of software qualification for new products, particularly in the optical circuit switch market, as a key milestone for future revenue [92] Other Important Information - The company expects to see a significant increase in shipment volumes in the second half of calendar 2026 as adoption accelerates [12] - Cash and short-term investments increased by $245 million to $1.12 billion, benefiting from a convertible notes transaction [19] Q&A Session Summary Question: Can you discuss the confidence in sustaining growth in transceivers? - Management highlighted improved execution and participation in early customer ramps as key factors driving confidence in growth [27] Question: What does the 40% increase in capacity for data comm chips mean for revenue? - The increase in capacity is expected to layer on top of existing growth, with a shift towards 200 gig lasers contributing to revenue increases [31] Question: How do you view the continuous wave laser output market opportunity? - The company is targeting CW lasers for internal transceivers, with expectations for full production by mid-2026 [37] Question: What is the competitive environment for narrow linewidth lasers? - The company holds a strong market share in this area, with challenges in ramping laser capacity being a key focus [40][41] Question: How should we think about the split between components and systems for indium phosphide capacity? - The majority of output will be sold into the external market, with a small portion allocated for internal consumption [45] Question: How has the supply-demand imbalance for EML changed? - The demand-supply imbalance has increased to 25%-30%, indicating a significant shortfall relative to customer demand [77][78] Question: What is the approach to pricing given the supply-demand imbalance? - The company is using the demand-supply imbalance to impact pricing, with targeted price increases expected [80]