Lumentum(US:LITE)2025-12-08 16:42Lumentum Conference Call Summary Company Overview - Lumentum is primarily an infrastructure provider focused on data centers, offering semiconductor components and systems to hyperscalers and data center operators [5][6][10] Core Business Segments - Lasers and Transceivers: Lumentum specializes in two main types of lasers used in data centers: Continuous Wave (CW) lasers and Externally Modulated Lasers (EMLs). The company predominantly manufactures EMLs, holding approximately 50% to 60% of the global EML market [9][10] - Emerging Technologies: The company is also exploring ultra-high power lasers for scale-up and scale-out applications within data centers [10] Market Dynamics - Demand vs. Supply: Lumentum is currently facing a supply-demand imbalance, estimating to be 30% behind demand by mid-2026 despite plans to increase capacity by 40% [18][19] - Capacity Expansion: The company is virtualizing its indium phosphide fabs to optimize production and meet increasing demand [20][21] Product Development and Trends - 200 Gig EMLs: The company anticipates that 200 gig EMLs will constitute 10% of volumes in Q1 2026, increasing to 25% by Q4 2026, which will positively impact revenue and margins [22][25] - Optical Circuit Switches (OCS): Lumentum sees significant growth potential in the OCS market, with expectations to grow from $10 million in Q1 to $100 million by Q4 2026 [38][40] Competitive Landscape - Vertical Integration Risks: While competitors are exploring vertical integration, Lumentum has opted to focus on components rather than integrated modules, which may mitigate risks associated with competition [16][17] - Co-Packaged Optics: The company views co-packaged optics as a growth opportunity, with expectations for material revenue contributions starting in the latter half of 2026 [46][50] Future Outlook - Growth Drivers: Lumentum anticipates strong contributions from OCS, scale-out, and scale-up optics in 2026, which are not yet reflected in current financial projections [64][65] - Market Position: The company believes its core business, particularly in EMLs and emerging technologies, positions it well for future growth, with optimism about the optics market resurgence [63][66] Key Takeaways - Lumentum is strategically positioned in the data center infrastructure market, focusing on lasers and transceivers, with a strong emphasis on EMLs - The company is addressing supply chain challenges while expanding capacity to meet growing demand - Future growth is expected from new product developments and market opportunities, particularly in OCS and co-packaged optics, indicating a positive outlook for the company in the coming years [64][65]