Lumentum Holdings Inc. Stock Price: Quote, Forecast, Splits & News (LITE)

Perplexity Finance

LITE

Lumentum Holdings Inc.

LITE

NASDAQ

Market Open

Monday, June 16, 2025

$88.05

+$5.59

6.77%

Jun 16, 11:15:03 AM EDT

Change

+$5.59

6.77%

Financial Profile

Prev Close

$82.47

Market Cap

$6.11B

Day Range

$83.42 - $88.21

Open

$83.42

P/E Ratio

-13.6

52W Range

$38.29 - $104.00

24H Volume

$60.65M

Dividend Yield

0.00%

EPS

-6.46

Earnings

Report Date

May 6, 2025

Reported Revenue

425.2M

Miss -6.87%

Avg 1d Change

9.69%

Report Period

Q3 2025

Reported EPS

0.57

Beat +14%

Implied Move 1d

12.01%

Transcript

10m 38s

This is Kathy Ta, Lumentum's Vice President of Investor Relations. Joining me today are Michael Hurlston, President and Chief Executive Officer Wajid Ali, Executive Vice President and Chief Financial Officer and Wu Pan Rian, President cloud and networking. Today's call will include forward looking statements including statements regarding our strategies, trends and expectations for our products and technologies, including demand, our customers, our end markets and market opportunities, our expectations and beliefs regarding recent acquisitions, including Cloudlight, macroeconomic trends, including the impact of tariffs, and other trade regulations, and our expected financial and operating performance, including our guidance, as well as statements regarding our future revenues. Financial model and margin targets. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our current expectations. Particularly the risk factors described in our SEC filings. We encourage you to review our most recent filings with the SEC particularly the risk factors described in our most recent 10 ks, and in our 10 Q that will be filed soon. The forward looking statements provided during this call are based on Lumentum's reasonable beliefs and expectations as of today. Lumentum undertakes no obligation to update these statements except as required by applicable law.

12m 15s

Please also note that unless otherwise stated, all financial results and projections discussed in this call are non GAAP. Non GAAP financials, not to be considered as a substitute for or superior to financials prepared in accordance with GAAP. Lumentum's press release with the fiscal third quarter results and accompanying supplemental slides are available on our website. At www.lomentum.com under the Investors section. With that, I'll turn the call over to Michael.

12m 49s

Thank you, Kathy, and good afternoon, everyone.

12m 52s

Before diving into our third quarter results, I want to reflect that my first ninety days as CEO of Lumentum. I joined because of the immense cloud and AI opportunity. And the more I've seen, the more confident I am that we're poised for success. Having said that, we have opportunities to accelerate revenue growth. Improve margins and focus spending. As many of you know, part of my core philosophy is that gross margins reflect the value customers place on our products. As we indicated at OFC, we see a path to take gross margins above 40%. Meanwhile, we can and should be able to improve operating margins by cutting spending in non core areas. At OFC, we outlined a path to drive revenue $750,000,000 a quarter gross margins above 40% and operating margins greater than 20%. Based on my initial observations and the plan we have in place, these targets are all achievable. Our markets are growing at unprecedented rates. Greater than 25% compound annual growth rate over the next five years driven by an accelerating convergence of optics and electronics. Our strength in optical components is unmatched, We build from virtually every type of network, At OFC, we showcased our 400 gig lane speed lasers alongside our proven 100 gig and 200 gig solutions.

14m 25s

We also demonstrated differential drive VMLs that boost signal integrity and power efficiency. We're building momentum in the transceiver market with three cloud transceiver customers already on board, and more wins expected in the pipeline. What sets us apart is that our components are embedded across the ecosystem, even in competitors' transceivers. That means we often win regardless of who supplies the module. We're one of the few companies with true end to end capabilities from long haul to metro to inside the data center. Our scale and breadth make us a truly differentiated solutions provider. Let's now turn to our third quarter results. In Q3, we exceeded the high end of our guidance for both revenue and EPS, driven by strong demand from cloud customers and recovering networking market. Despite ongoing macroeconomic volatility, growth in cloud continues to be a key element of our financial performance. Revenue in our Cloud and Networking segment grew 8% sequentially, and 16% year over year, fueled by robust demand from hyperscale cloud customers. As mentioned earlier, when we execute well, the opportunity ahead is significant. And our components business is performing at an exceptional level. We set another record for EML chipset shipments this quarter and remain on track to more than double this business by the end of calendar 2025, relative to our June 2024 baseline.

16m 14s

We continue to ship 200 gig lane speed EMLs to multiple customers, With our set of design wins, we're well positioned in the next generation of 800 gig and 1.6T transceivers supporting AI workloads. Our wafer fab expansion remains on track. Supporting higher volumes of EMLs and other indium phosphide lasers and photodetectors. In addition, we are ramping production in CW lasers for silicon photonics transceiver applications in the quarter. As our indium phosphide capacity grows, we expect to ship an increasing mix of CW lasers. In addition to supplying components into the transceiver market, we took an early lead in co packaged optics or CPL. We have a highly differentiated ultra high power laser that was announced as a key component in a CPO solution at GTC last quarter. We have already shipped early production units of that product and expect meaningful revenue in the second half of calendar twenty twenty six. At OFC, we introduced the R300, a 300 by 300 port optical circuit switch or OCS engineered to significantly improve the scalability performance and efficiency of AI clusters and intra data center networks. The device replaces traditional switches Power benefits by keeping signaling in the optical domain.

17m 56s

Our OCS solutions build on decades of engineering expertise and the successful deployment of high performance MEMS technology in demanding telecom environments. With over 1,000,000,000,000 mirror operating hours in the field. And a robust patent portfolio, our optical switches are designed for high reliability and energy efficient performance in AI driven data centers. At present, we have beta samples being qualified by multiple hyperscaler customers and expect to see early production volumes at the end of the calendar year. We're accelerating our optical trend production at our Thailand manufacturing campus and remain on track to begin shipments to our second announced Hyper data center customer, in June, as previously communicated. At the same time, we continue to shift to our third announced customer and we are expanding our product offerings and ramping in shipment volume to our largest cloud hyperscale customer. In Q4, we expect our overall cloud transceiver revenue to grow over 50% sequentially. We're also experiencing growing demand for our DCI and long haul transmission solutions. We achieved another sequential increase in shipments of narrow line width lasers essential to ZR and ZR plus module deployments and in transponders for cloud customers. This marks the fifth sequential quarter of shipment growth for narrow linewidth lasers.

19m 38s

Even as we ramp additional capacity in Thailand, our shipments will not be able to satisfy demand for the balance of the calendar year. In addition, pulp lasers and line subsystems were up driven by cloud infrastructure demand. Looking ahead to Q4, we anticipate strong sequential growth in our cloud and networking segment, driven by new capacity coming online across our global operations, the continued ramp of customer programs and strengthening demand from network equipment manufacturers. Now let me move to our Industrial Tech segment. Industrial Tech segment revenue decreased 5% sequentially, but was up 14% from the same quarter last year. Industrial laser revenue declined sequentially, but the drop was less than anticipated. While three d sensing revenue followed expected seasonal trends. In Q3, ultrafast laser shipments held steady at near record levels driven primarily by growing demand from a leading tool supplier supporting high volume solar cell manufacturing. We're also actively collaborating customers on new ultrafast laser opportunities. As the minimal thermal impact of ultra short pulse technology continues to gain traction in advanced packaging, display technologies and next generation semiconductor processes. Consistent with earlier remarks, we have taken actions to rationalize the industrial tech portfolio. Closing two R and D sites, and stopping development activities in three exploratory product areas.

21m 25s

With these actions, and more focus on the core business, we expect to see increasing profit in this segment over the next handful of quarters. Looking ahead to fiscal Q4, we expect a sequential decline in Industrial Tech revenue reflecting both the ongoing macroeconomic headwinds impacting industrial laser demand. Than the typical seasonal decline in three d sensing revenue. As I reflect on my first ninety days at Lumentum and look ahead, I'm energized by the momentum we're building. Our strong Q3 performance, combined with the strategic positioning we shared at OFC, reinforces that we're on the right path. We're executing on a focused strategy, investing in high growth, high impact areas where our differentiated technologies provide a lasting competitive advantage. From delivering record EML chip shipments to partnering with AI hyperscalers on connectivity innovation, we're demonstrating that our products are essential to powering the future of cloud and AI. While macro uncertainty tariff dynamics and export controls present near term challenges, Lumentum has taken recent actions and delivered steps over the years to build resilience. Through a globally diversified manufacturing footprint a flexible supply chain and active engagement with customers. We remain focused on what we can control, pricing, disciplined spending, and flawless execution.

23m 3s

These fundamentals are positioning us to succeed across a variety of market environments. Finally, strong demand for cloud and AI continues to support our confidence in achieving the medium and long term financial targets we outlined at OFC. We remain on track to exceed a $500,000,000 quarterly run rate as we exit the calendar year. There's still work ahead, but the opportunity in front of us is substantial. Our ability to deliver differentiated optical solutions across our portfolio provides a strong, resilient foundation for sustainable growth. Now I'll hand the call over to Wajid. Thank you, Michael. Third quarter revenue of $425,200,000 and non GAAP EPS of $0.57 were both above the high end of our guidance ranges. GAAP gross margin for the third quarter was 28.8%, GAAP operating loss was 8.9%, and GAAP net loss per share was $0.64 Turning to our non GAAP results. Third quarter non GAAP gross margin was 35.2%, which was up two ninety basis points sequentially and up six fifty basis points year on year. Due to better manufacturing utilization and favorable product mix due to increased datacom laser shipments. Third quarter non GAAP operating margin was 10.8% which was up two ninety basis points sequentially and up 1,100 basis points year on year. [indiscernible] driven by improved cloud and networking profitability.

24m 55s

Third quarter non GAAP operating profit was $46,100,000 and adjusted EBITDA was $71,000,000 Third quarter non GAAP operating expenses totaled $103,400,000 or 24.3% of revenue. An increase of $5,100,000 from the second quarter and a decrease of $2,400,000 from the year ago quarter. This demonstrates our disciplined cost management across the organization even as we ramp investments in our growing cloud opportunities and absorb the typical payroll fringe reset that takes place each year in our third fiscal quarter. Q3 non GAAP SG and A expense was $40,100,000 non GAAP R and D expense was $63,300,000 Interest and other income was $2,900,000 on a non GAAP basis. Third quarter non GAAP net income of $40,900,000 and non GAAP diluted net income per share was $0.57 Our fully diluted share count for the third quarter was 72,200,000.0 shares on a non GAAP basis. Turning to the balance sheet. During the third quarter, our cash and short term investments decreased by $30,000,000 to $867,000,000 Our inventory levels increased sequentially to support the expected growth in our cloud and networking revenue. In Q3, we invested $59,500,000 in CapEx, primarily focused on expanding clean room capacity at our Thailand manufacturing site and increasing equipment capacity for indium phosphide wafer production to support EML chip manufacturing.

27m

Nearly all of our CapEx investment was directed toward our cloud and networking business. Turning to segment details. Third quarter Cloud and Networking segment revenue at $365,200,000.0 increased 8% sequentially and 16% year on year. Cloud and networking segment profit at 20% increased three eighty basis points sequentially and increased five forty basis points year on year on higher revenue and favorable product mix. Our third quarter Industrial Tech segment revenue at $60,000,000 was down 5% sequentially and up 14% year on year. Third quarter industrial tech segment profit of 4.3% decreased sequentially on lower revenue and increased year on year on higher revenue. Now let me move to our guidance for the fourth quarter of fiscal twenty twenty five which is on a non GAAP basis and is based on our assumptions as of today. I want to acknowledge that the impact of tariffs on our supply chain along with broader geopolitical dynamics, remains highly uncertain. The guidance we're providing reflects our best assessment based on the current environment. This outlook includes an estimated hundred basis point reduction in overall company gross margin primarily driven by higher material costs and tariffs on shipments to U. S. Destinations where we serve as the importer of record.

28m 47s

For clarity, despite this 100 basis point headwind, we expect a sequential improvement in gross margins from Q3. To Q4. We expect net revenue for the fourth quarter of fiscal twenty twenty five to be in the range of $440,000,000 to $470,000,000 This Q4 revenue forecast includes the following assumptions: Cloud and networking to be up sequentially with strong growth in product addressing cloud, and AI applications. And industrial tech to be down sequentially with declines in both industrial lasers and three d sensing. We project fourth quarter non GAAP operating margin to be in the range of 13% to 14% and diluted net income per share to be in the range of $0.70 to $0.80 per share. Our non GAAP EPS guidance is based on a non GAAP annual effective tax rate of 16.5%. These projections also assume an approximate share count of 72,700,000 shares. With that, I'll turn the call back to Kathy to start the Q and A session. Kathy?

30m 14s

Thank you, Wajid. To allow everyone an opportunity to ask questions, please keep to one question and one follow-up. Jasung, let's begin the Q and A session.

30m 31s

Our first question is from Samik Chatterjee with JPMorgan. Your line is now open. Hi. Good evening. Thanks for the question. This is Joe Cardenso on for Sonic. I guess first question and maybe just a big picture question. I noticed you guys didn't necessarily talk about the $500,000,000 revenue target that you initially laid out achieving by the end of the calendar year. I guess kind of recent performance in the June guidance, you know, how are you thinking about achieving that target by the December? You know, is there the possibility that you can achieve that a bit earlier? You know? And and what are the puts and takes to the your expectations there? And then I have a follow-up Yeah. Let me take that one. This is, Michael Hurlston. So we did outline that We're still very much on track for the $500,000,000 by the end of the year. We're obviously not guiding. We're guiding a quarter at a time. We feel pretty pleased about where the company is setting up and still as we said in the remarks, are very much on track for the $500,000,000 quarter.

31m 43s

Did you have a follow-up, Joe?

31m 45s

And then maybe just a yes. Yes. Definitely have a follow-up. So maybe just talk maybe just touching on the Datacom chip business. You know, I think you were initially targeting a 40% increase in volumes by the June. You know, I I I guess just wanted to get an update there in terms of how it's tracking relative to your initial outlook. And whether you're outperforming your initial expectations both on volume and ASP front. And similar question, but obviously more related to kind of the calendar '25. Outlook. It does look like you're you're kinda outperforming your initial expectation in terms of where you were gonna track towards the end of the calendar year. But any kind of color in terms of how you're thinking about ASPs trending there And then sorry for the long question, but, you know, just curious what's the contribution that you're expecting from CW lasers now that you're talking about rent those up, as well as, you know, thanks. Yeah. I'm going to take the first part of the call question and then turn it over to Wu Pen. So what I would say, look, we're obviously tracking very well. We've increased our capacity in the indium phosphide fabs.

33m 1s

We feel like demand is still outstripping supply. On our EMLs. So we even as we ramp supply we're still very much sold out. That being said, as we increase the capacity, we feel like there's room to add CW into the mix. And the reason for that is it really extends our serviceable market. So we feel like we want to do that to get a foot in that door. Our design, we think, is differentiated and gives us an opportunity to meaningfully participate in CW. But the predominant focus is and remains EMLs. From an ASP standpoint, again, given the supply constraints obviously, there's opportunities there to continue to our price and we're looking at that We have opportunities as we think about now transitioning from 100 to 200 gig lasers and obviously going up to 400 gig. But maybe, Wupen, you want to add some color on the tech and how we think about it?

34m 11s

Yeah. So I'll just comment a little bit on the on the Seattle laser ramp. We're at the very beginning. Right? We just won a couple of customers at several lasers as Michael pointed out. Plus our fab capacity continue to be ramping up. Would like to be able to play in that market which increase our SAM. So we're at the very initial phase of the ramping. Not huge numbers yet, but we will continue to see that volume going up as time goes by.

34m 39s

Thanks, Joe.

34m 41s

Thanks, guys. Appreciate it. Our next question is from Simon Leopold with Raymond James. Your line is now Thank you very much. I I wanted to see if you could maybe unpack what's in your assumptions around the the tariff headwind. You you quantified it around a hundred basis points, which we appreciate I I guess what I'm trying to get at is trying to get a sense of how much business or manufacturing do you still have in China in that assumption? I I I understand you're moving more to Thailand. And what are the other underlying assumptions you've made? Then I've got a quick follow-up.

35m 23s

Yeah. Sure, Simon. I'll start off, and then certainly, Mupin and Michael can jump in. Yes. So like you mentioned in our prepared remarks, we did talk about the 100 basis point headwind to gross margins and therefore operating margins, during the quarter. A lot of that headwind is coming from increased component costs, so called in feed costs. Where we are having to pay the tariff associated with sub mount products as well as capacitors. And so wherever we see that, we're having to pay a tariff associated with that. For most of our customers, we are trying to move our production from from China into our Nava facility. In Thailand. We're starting off with our data center interconnect products. But we are eventually going to also be moving products from our Dongong facility for cloud modules into Nava as well. So what we've baked into the forecast right now is our current production ramp for the quarter. But we'll see improvements in that our fiscal Q1 and Q2 as more of our Dongguan production moves to our Nava facility for cloud modules. So certainly, the impact from that perspective will diminish. Thanks. And then just as my follow-up, longer term question, is I'd like to get your your latest thinking on what contributions and what role you can play in CPO.

36m 59s

I I it's nice to see that you were announced within the ecosystem back in March. I assume you're providing products like CW lasers, but we could get an idea of maybe some dollar content and and forecasting of how you see this affecting your business over the intermediate or longer term. Thank you.

37m 23s

Hey, Simon. This is Lumentum speaking. I think the, you know, CPO, frankly speaking, there's still some times away. Right? We talk about ramp volume in second half of the next calendar year. Number one. So therefore, in the meantime, the module is gonna be continue to be a ramping business for us. That's gonna be, you know, be a a foreseeable you know, strong growing business for us and for the for the industry to come. On the other hand, you know, in addition to the laser being a important component in the CPO ecosystem, We're also looking at adding other components in the longer term. There'll be other optical chips that will be needed in the CPO world in the in the longer term. That's very much we're actually looking into as well. I would say that's really a multiyear prospect In the near term, it's gonna be the laser components, plus the cloud module ramping. In the cloud interconnect world.

38m 20s

Thank you.

38m 21s

Thank you so much, Simon.

38m 25s

Our next question is from Blayne Curtis with Jefferies. Your line is now open. Hi, Ezra Wiener on for Blayne. Thanks for taking my question.

38m 34s

Just a quick one and then probably a follow-up. Just look at the transceiver business, 50% plus growth for next quarter is great and clearly a lot of traction. Can you talk about what you're seeing there from an EML versus CW laser perspective and the plan for insourcing versus externally sourcing there? Yeah.

38m 57s

Near term, all of our products are using CW lasers. So we're using silicon photonics approach for all of that including all the the revenue growth that you just cited. And all of it is externally sourced. So we have not yet incorporated our own lasers in our transceivers, but we would expect to do that sometime early in the calendar year next year. That's kind of the plan. We obviously have a number of big ramps in front of us with multiple customers that we talked about, but we our next phase of growth will incorporate our internal lasers. Wooten, anything to add? Okay. Good.

39m 41s

Thanks for the question. Just a quick follow-up in terms of yeah. Thanks. So, would be three customers all using CW lasers just kind of wondering what that means for the industry in terms of what you're seeing from people choosing CW or EML.

40m 2s

Yeah. I mean, I you know, obviously, as we've talked about a second ago, our EML are very much sold out. In fact, it really is a chase for us to keep up with the demand We are basically choosing to allocate our supply toward EML. One, because of differentiation two because of pricing. So we've really focused our capacity capacity as much as we possibly can on the EML product. As we said, we're really increasing the capacity quarter on quarter, year on year. And as we sort of hit a space where we think we have a bit of room We think there's an opportunity now to reallocate just a bit towards CW, so we can start participating in that market. First externally, right? We'll source those to third party transceiver customers. But then strategically, to your point, we will begin insourcing those. So it will be mostly CW that we end up in sourcing And that's why strategically it is important for us to develop that muscle.

41m 17s

Our next question is from Meta Marshall with Mortgage Stanley. Your line is now open.

41m 23s

Great.

41m 24s

Thanks. Would you maybe just some clarity on the margin improvement that you saw on the cloud and networking business. You know, how much of that is from some of the yield improvements on Cloud Lite versus just kind of pricing mix advantages on EMLs? And then I have a second question.

41m 46s

Yeah. Sure, Meta. I mean, we're seeing a across all the product lines, a nudge of improvement, I would say. On our data center interconnect products, we are moving a lot of that production from CMs to our own internal manufacturing in Thailand. And so the margin dollars that used to accrue to them are now accruing to us. So that's certainly helping us both in Q3 and more substantially in Q4 And actually, expect to increase that capacity moving into the back half of the calendar year So that will continue to benefit us. On the datacom chip side, Michael and Wu Pen both mentioned earlier that demand is ahead of supply. And so as that production has improved year over year and sequentially, that's also providing a tailwind for us. To your earlier question on modules to the first part of your question on modules, yes, yields have improved. And so the yield issue that we had in our December, which caused a bit of a headwind on our gross margin line, that situation has improved into Q3, and that certainly helped us And into Q4, that's also helping us, especially as revenues are expected to increase 50% sequentially, the benefit of improved yields are accruing to our gross margin.

43m 3s

So I'd say kind of across the board, we're seeing a nudge of improvement across multiple product lines, and that's helping us.

43m 11s

And Meta, mean, just from a perspective, we said this in the prepared remarks, but we're sorry, mean, we're going to continue to focus on gross margin. I think there's opportunity on pricing and on our cost line to continue to improve that. So we'd expect a pretty nice ramp toward the 40% target Wajid outlined at OFC.

43m 36s

Okay. Got it. And just as a second question, obviously a very fluid situation with tariffs currently. But assuming kind of the 100 basis point headwind that you guys are talking about is within that kind of ninety day ninety day exemption period kind of considering current tariffs as of that. And just kind of wondering what your thinking is you know, if there are kind of greater that come from Thailand, just, you know, our thoughts about eventually moving production out of Thailand It sounds like you're moving more production there for now, but just kind of overall thinking if there ends up being tariffs on Thailand. Thanks.

44m 18s

Yeah. I mean, obviously, there are tariffs on Thailand that will have headwind that we'll have to work through. Yes, we are moving more of our production to Thailand, whether it's from our CMs to us or whether it's from our cloud module business in Dongguan, China, to us in Thailand. So we are making that manufacturing shift that's been in place for a number of quarters now. So I think from an infrastructure and strategy standpoint, that certainly is there. If there's tariffs that accrue post kind of July 8 because of that, then we'll have to work through that with our customers. And as you can appreciate, as there's been noise on tariffs, we've been speaking to our customers about how we work through the pricing impact to them. That is associated with those tariffs. But up until now, for the large part, most of our shipments that come to The U. S, we are not the importer of record. Because we are not the importer of record, those conversations have been a lot simpler, I'd say. So that's really how we're thinking about it.

45m 27s

Great.

45m 28s

Thanks. Thank you, Meta.

45m 32s

Our next question is from Christopher Rolland with SIG. Your line is now open. Hi. This is Dylan Olivier on for Chris. Thanks for taking my question.

45m 44s

So for my first question, I wanted to follow-up on the 50% sequential growth in the optical transceiver business. So which of your transceiver customer programs will be responsible for that growth? And how should we expect transceiver shipments to trend for the rest of the calendar year? You guys think that level is sustainable? And are you guys expecting to grow from there as you add customer programs? Thank you.

46m 10s

Yes. On the transceivers, I mean, don't want necessarily outline specific customers that driving it, but it's predominantly the customer that we've had shipping for quite some time. Will be most of the contribution. We would expect this business to continue to grow. I think we're really well positioned. Obviously, generally speaking, our share is relatively modest. We think that we've put some of the issues behind us relative to some issues transferring products into manufacturing and getting those into production. And we would expect from here to continue to grow. Will we grow at this growth rate, Hard to say, but certainly, we would expect to continue to grow this business, and it will be a major growth driver for us in 2026. Lupin, any comments from you?

47m 6s

Yes.

47m 6s

And also, as Michael said, as the more programs started ramping, we will see this to be more broader based than this one major customer ramp. Other programs will be gradually brought be brought into the ramping phase as well. So we're going to see that going forward.

47m 27s

Did you have any follow ups? Got it.

47m 28s

That's great. Yes. So for my follow-up, I wanted to ask about 200 gig EMLs. So it sounds like you're getting solid traction there already. When should we expect that to ramp? And do you expect it to quickly cannibalize a hundred hundred gig EMLs or just to layer on top initially?

47m 51s

Yeah.

47m 51s

This is speaking. I think the timing wise, it's gonna be toward the end of this calendar year. That's when 200 email will start to ramp. And we don't see this being a cannibalization of hundred gs EML. Because there's still a very large growing demand for hundred g EML for 800 g modules. 1.6 modules or solutions will be on top of the hundred g demand. For quite a while to come. So this should be additional opportunities than a cannibalization opportunity.

48m 26s

Thank you.

48m 27s

Great. Thank you.

48m 32s

Our next question is from Ryan Koontz with Needham and Co. Your line is now open. Thanks for the question. Maybe stepping back a little bit on the datacom transceiver market here.

48m 45s

Relative to, you know, the strong Chinese players. What are you hearing from your customers your major cloud oriented customers about their interest in moving away from Chinese suppliers interest in bringing those products in house. Thanks.

49m 3s

Yeah. No. I I There's definitely an interest to move away from Chinese supply. I mean, I think the problem right now is that collectively we can't meet the demand. So they are going to continue I think to buy from Chinese suppliers until U. S. Suppliers can ramp to a level to meet what looks like a relatively insatiable demand. Generally speaking, is some design in sourcing going on. Some of the customers are doing their own designs. But the outsourcing is the by far the dominant pole working with third party transceiver manufacturers and we obviously are a small player at the moment, We expect, given the number of designs that we have in flight, we expect to be a more meaningful participant in the market starting next quarter, but then really growing into the quarters beyond that.

50m 2s

That's great. You for And then maybe I do. Yeah. Thanks. On the on the telecom side of the business. What kind of mix shift you're seeing there? Obviously, DCI is driving the boat there in terms of growth. As you think about that mix shift, is it kind of in line with your expectations? Should investors think about the shift toward DCI and how it affects your business, whether it's measured on gross profit or, you know, revenue per unit, these sorts of things. You know, wallet share. But can just step back and explain how investors should think about these shifts in telecom. Be helpful. Thank you.

50m 38s

Yeah. I mean, I think that the traditional telecom business targeted to operators and target to MSOs is still obviously meaningful, but the long pole now is the hyperscalers. So DCI very important. Even these guys are now participating in our long haul business. So we talked in the call and the prepared remarks about pump lasers, We've seen really an increase in that business. A lot of the backbone now is being supplied by the hyper scalars and we're participating in that with our traditional telecom products, but now more targeted toward toward the hyperscalers. So that's been a surprising growth driver. I think, quite frankly, we haven't seen this business perform at these levels in quite some time. So it's really a nice surprise. Mean technology wise, we've had any other things that you're seeing from a trend line?

51m 33s

Yes. Certainly, I think the overall, we should think about the the AI driving force is not just about data center internal. Data has to be transmitted across data centers. All these actually have the same driving source. Right? We see the VR being growing very strong and therefore, Tenable Lasers doing really well. Even the long distance transmission coherent components are doing very well because of the the terrestrial long haul requirements and also the pump lasers for fiber capacity. So all in all, we're seeing a very strong you know, DCI kind of traffic growth, and that's driving our so called telecom part of the portfolio as well.

52m 15s

I'll just add an additional comment, Ryan. Around your question on gross profit dollars, DCI products are accretive to us from a gross margin standpoint, not only where we're currently operating from a gross margin standpoint, but also versus the 40% target that that Michael laid out earlier it's even accretive to that. And so the combination of increased demand and our increased capacity internally at Thailand is certainly a tailwind for us that that is driving lot of the confidence that you're hearing from the team around our gross margin abilities is coming from the secular demand along with internal manufacturing along with the pricing power that we believe we have on our data center products. So it's all adding up together.

53m 12s

Thank you, Ryan. Super, really appreciate Our next question is from Carl Ackerman with BNP Paribas. Your line is now open.

53m 26s

Yes. Thank you. I have two. I believe you said that your cloud transceiver revenues would grow 50% sequentially on the, on the contribution from all three of your cloud customers. I have to ask, though, is is this tied to it sounds like it's tied to a new GPU or ASIC program ramping at least at one of them. But you know, I guess, how much of this, if at all, is from customers pulling forward transceiver demand ahead of potential tariffs. And if if not, how do you manage that supply and demand balance with these three customers? I have a follow-up, please.

54m 3s

Yeah. Hey, Carl.

54m 4s

Michael Hurlston. So first of all, we don't see any pull forward. I mean, it's been a race for us to keep up. We kind of alluded to this in one of the previous questions. We definitely had an issue ramping. We went through a ramp phase and then a qualification phase. And really, this is a product that's driving a lot of the increase that was something that's been in our hopper now for a couple of quarters. So we certainly don't see a pull forward effect And again, with that layering in with the additional two customers beginning to ramp this quarter, we feel we don't see any effect on pull ahead. I'm going have Wilpin talk a little bit about what those are tied to relative to kind of customer tech Yeah. I think the from the product release point of view, definitely, I think those ramps are tied to the the the dominant, you know, GPU ramp and and also some other accelerator ramp. There's some loose association with the with those kind of introduction of the accelerator products. But also though that the I think the demand is is pretty broad based. It's not specifically only to those two three accelerators that they're being introduced now into the market.

55m 32s

Kyle, did you have a follow-up?

55m 35s

I I did one, if I may. Rajeed, you spoke of moving production away from, contract manufacturers to in house solutions.

55m 43s

I'm curious, is that for your industrial tech products, or does that relate more toward cloud and networking? And similarly, do you need to add substantial capacity to move that production in house please? Thank you.

55m 56s

Yes. So it's revolved around our data center in interconnect products.

56m 1s

And so that those CapEx decisions were made six to nine months ago. And actually, the CapEx is showing up this fiscal quarter and it's expected to improve our capacity for data center interconnect products by 50% exiting this calendar year. And so that is the production that instead of providing to our contract manufacturers, we're still keeping them going at full speed. But the incremental supply is coming from our Nava facility for CapEx that is being put in place this quarter and that will fully ramp by the end of this calendar year and give us another 50% more capacity. On data center interconnect products, specifically tunables.

56m 49s

Thanks, Karl.

56m 55s

Our next question is from Mike Genovese with Rosenblatt Securities. Your line is now open. Great. Thanks. Not sure if I missed this in the prepared remarks, but did we just get an did we get an update on telecom performance in the quarter and the sort of product issue last quarter, which is getting supply, if that if that has been solved yet?

57m 20s

Yes. Sure. So I'll start off, I'll let Wu Pan also jump in. So telecom performance performance came in exactly as expected. We had shortages on pumps, We had shortages on tunables. We had shortages on CDM products. From our classic transmission product lines. And so all of those products we were working through supply constraints throughout the quarter. We are expected to see improvements in supply for all three product lines moving into Q4 and into at the back half of the year. The earlier question was around our tunables products where we mentioned that we have CapEx that we're putting in place in our Thailand facility to increase the production capacity by 50% over the remaining part of this calendar year. So with that increased capacity, we're going to see the telecom part of our business improve as we move through the quarters for the rest of this calendar year. Maybe you want talk about pumps a little bit more, Wilpin?

58m 21s

Yes. I think the overall from a demand and supply perspective, we don't expect that our capacity can really fulfill all the demand for the next several quarters because of the demands being really strong. Although we're doing better than we we we were able to, So we continue to ramp capacity, continue to get more supply into the picture, but you know, we we're gonna be in a pretty tight supply situation for next at least couple of quarters.

58m 50s

Did you have a follow-up, Mike? [indiscernible] Yeah. And I guess I want to revisit the question whether there's any caution in the guidance for the back half of the year related to macro or tariffs. If I just take the transceiver comment, 50% sequentially, I mean, to me, that that gets us 30,000,000 more revenue. That that gets us the whole growth in the guide. I know industrial is supposed to be down, but you've got EMLs growing, you've got telecom that's should be up. Is there an extra dozen conservatism in here? Am I overthinking this?

59m 24s

I'd say you're not overthinking it, Mike. I mean, we're in an environment where there's a lot of uncertainty. We're quite confident in the guide that we provided. But if you just listen to some of the capacity improvements that we've got, there is certainly opportunity to deal with any type of headwinds that come our way during the fiscal quarter. As far as the back half of the calendar year, looks across all of our product lines, we continue to see an uptick in demand, whether that's datacom chips whether that's data center interconnect products or whether that's modules. Even our industrial lasers product line that is going to that is expected to come down in fiscal Q4 has new ultrafast products that are ramping in the back half of the calendar year. Demand for those products is quite strong. But offsetting that, we're seeing some some headwinds from customers that take kilowatt products. So but overall, the trend is up and our supply plan is up. So So we see improvements from here. To the $500,000,000 target that Michael spoke about. But again, I think the macro uncertainty none of us have a great crystal ball on that.

1h 45s

Thanks, Mike.

1h 48s

Our next question is from David Bach with UBS. Your line is now Thanks guys for taking my question. I just want go back to the telecom business for a second.

1h 59s

You know, I, you know, I I jumped on late, and I apologize. Was there anything in the quarter that was similar to last quarter? What I mean by that, there was some channel normalization last quarter even in the quarter before. Just trying to get a sense for what's core underlying demand particularly in the face of tariffs or the risk of tariffs or the potential tariffs? I'll give you my follow-up. And I might have missed this because I jumped on late. Did you share with us sort of how the core transceiver business grew the March relative to either last year or last quarter.

1h 1m 27s

Thanks. Yeah. Maybe, I mean, look, on the telecom business, obviously, we we feel pretty pretty good. I mean, I think there's a lot of opportunities for us to continue to grow Wu Penn talked about the narrow line with lasers. We actually said that in the prepared remarks. So we think that business continues to grow through the balance of the calendar year and into next year. And it's not just that. I think we talked about pump lasers. That really has been a strong product area for us. So across the board on telecom, which as Wajid said correctly, is a gross margin enhancer. It's accretive on the gross margin line. We would expect to see that to continue to creep up. Large portion of growth will be cloud modules.

1h 2m 20s

And so as you think about us across the next couple of quarters, in order to keep the gross margins up we are going to need to see improvements in telecom because we think that that's an area for us that has accretive gross margins. On the datacom transceivers, the second part of your question, essentially that was flat on quarter. We didn't see a lot of of growth. I think the growth for us we talked about it, I think, in previous discussions that we'd hit a bit of an air pocket to execution on some ramping some of our our datacom transceivers. We're past that at this point. We would expect to see the growth in this subsequent quarter in the guide. And then we'd expect to see pickup from there. So on balance, look, we feel really good about the way the business is is shaping up. Wajid gave a correctly a right amount of prudence around tariffs and macroeconomic uncertainty. But if we don't have that, we feel really good about where all of our business is landing right now.

1h 3m 28s

Great. Thanks, guys. And Dave, did you have a follow-up?

1h 3m 32s

Nope. Those are my two.

1h 3m 33s

Thank you. Oh, okay. Excellent. Thank you. Just on I think we have time for just one more question.

1h 3m 43s

Okay. Our last question is from Alec Valero with Capital. Your line is now open.

1h 3m 50s

Hey, guys. Thank you for taking my questions. This is Alec calling for have a question on co package optics. What's your view on when co package optics truly have a chance to gain traction in data center and provide competition to transceivers.

1h 4m 8s

Yeah. This is Lumentum speaking. I think the Kobatch optics would take some more time. The technology is pretty complex. A lot of engineering challenges, I think, yet to be worked through. As as the the leading AI customer talk about in their conferences, This year, will be some a a first system release And next year, as you are 26, will be another system release based on the Ethernet switch We believe that's the timing We're gonna see some level of adoption of the CPO update However, though, we do believe that the the plug will continue to be the dominant form factor going forward. Think it will take the next several years really to gradually ramp the CPO optics to be a meaningful share.

1h 5m 3s

And the benefit of CPO is clear. But the adoption will take time for people to figure out how to use it very effectively. Got it.

1h 5m 13s

That's very helpful. And just as a quick follow-up, can you remind us the economic difference between transceivers and co package optics?

1h 5m 26s

The the difference is the difference between transceiver Oh, so so, basically, if take any kind of a a switch box, for example, the the the transceiver basically is at the front panels. So you have the connection between the DSP sorry, the the switch chip in the signal all the way to the front panel of the box, which can be 20, 30, inches actually away from the from the switch chip. The quadratic optics basically remove all that put the optics directly onto the switch chip. Thereby removing all the signal losses and the complexities associated with that that transition. That in essence is what a CPO optics does. And then that lowers the power consumption, reduce the cost, reduce the the complexity, But in a sense, you actually move the complexity from optical modules onto the switch chip. Which then is some engineering you know, work to be done, right, to make sure that is a reliable solution.

1h 6m 30s

Got it. And and Thank you, Alex. With with the [indiscernible] Okay. Thank you.

1h 6m 36s

Go ahead.

1h 6m 39s

Yeah. No. I was gonna ask, does does co package optics come with a ASP increase compared to transceivers?

1h 6m 52s

Well, it's a different pricing model. You know, today, the the consumption model is the the switch chip is purchased separately. The box is made by somebody else. And the modules are purchased, you know, through third party manufacturers such as us. And, you know, it's a very different consumption model than the CPO optics which basically means that the switch vendor will control the entire you know, ASIC plus the optics. It's very hard to say how they're gonna price it. And and therefore, how to say that which one's gonna be cheaper it really depends on the on the competition and benefit and so on and so forth. Very, very hard to give an estimation at this point.

1h 7m 37s

Thanks, Alec.

1h 7m 38s

Got it.

1h 7m 39s

Thank you again.

1h 7m 40s

Thank you everyone for your questions. That's all the time we have for questions. Look forward to connecting with all of you at upcoming investor conferences and meetings this quarter. And with that, I'd like to thank you for joining us today.

1h 7m 57s

That concludes the conference call. Thank you for your participation. Enjoy the rest of your day.

Key Insights

Lumentum exceeded Q3 guidance with revenue of $425.2M and non-GAAP EPS of $0.57, driven by strong cloud customer demand and a recovering networking market; Cloud and Networking segment revenue grew 8% sequentially and 16% year-over-year.
The company remains on track to achieve a $500M quarterly run rate by the end of the calendar year, with Q4 revenue guidance of $440M–$470M, non-GAAP operating margin of 13–14%, and non-GAAP EPS of $0.70–$0.80.
Cloud transceiver revenue is expected to grow over 50% sequentially in Q4, with continued strong demand for EML chipsets and ramping of 200G and 400G lasers; capacity expansions in Thailand are underway to support growth.
Gross margin improvement is attributed to better manufacturing utilization, favorable product mix (notably increased datacom laser shipments), improved yields, and insourcing of production; Q3 non-GAAP gross margin was 35.2%, up 290 bps sequentially.
Tariffs and supply chain shifts remain a headwind (estimated 100 bps impact on gross margin in Q4), but Lumentum is mitigating risk by moving production from China to Thailand and expects further margin improvement as more capacity comes online and internal manufacturing increases.

Recent Transcripts

Q3 revenue and EPS exceeded guidance, driven by strong cloud demand and margin improvements.

May 06

Q3 2025

Revenue Growth

+16% YoY (Cloud & Networking)

Gross Margin

35.2% Non-GAAP, +650bps YoY

Q2 revenue and EPS exceeded guidance, driven by strong cloud and networking demand.

Income Statement

Revenue

	2020	2021	2022	2023	2024
Revenue	$1.7B	$1.7B	$1.7B	$1.8B	$1.4B
Cost of Revenue	$1B	$960M	$924M	$1.2B	$1.1B
Gross Profit	$650M	$783M	$789M	$569M	$252M
Gross Profit %	39%	45%	46%	32%	19%
R&D Expenses	$199M	$215M	$221M	$308M	$302M

2020

2021

2022

2023

2024

Revenue

$1.7B

$1.8B

$1.4B

Cost of Revenue

$1B

$960M

$924M

$1.2B

$1.1B

Gross Profit

$650M

$783M

$789M

$569M

$252M

Gross Profit %

39%

45%

46%

32%

19%

R&D Expenses

$199M

$215M

$221M

$308M

$302M

Cash Flow

Net Income

	2020	2021	2022	2023	2024
Net Income	$136M	$397M	$199M	-$132M	-$547M
Dep. & Amort.	$192M	$177M	$167M	$256M	$261M
Def. Tax	$15M	-$200K	$0	$29M	$0
Stock Comp.	$73M	$93M	$103M	$148M	$129M
Chg. in WC	$65M	$1.5M	-$91M	-$137M	$139M

2020

2021

2022

2023

2024

Net Income

$136M

$397M

$199M

-$132M

-$547M

Dep. & Amort.

$192M

$177M

$167M

$256M

$261M

Def. Tax

$15M

-$200K

$29M

Stock Comp.

$73M

$93M

$103M

$148M

$129M

Chg. in WC

$65M

$1.5M

-$91M

-$137M

$139M

Balance Sheet

Cash

	2020	2021	2022	2023	2024
Cash	$298M	$774M	$1.3B	$859M	$437M
ST Investments	$1.3B	$1.2B	$1.3B	$1.2B	$450M
Cash & ST Inv.	$1.6B	$1.9B	$2.5B	$2B	$887M
Receivables	$234M	$213M	$262M	$246M	$195M
Inventory	$189M	$196M	$250M	$409M	$398M

2020

2021

2022

2023

2024

Cash

$298M

$774M

$1.3B

$859M

$437M

ST Investments

$1.3B

$1.2B

$1.3B

$1.2B

$450M

Cash & ST Inv.

$1.6B

$1.9B

$2.5B

$2B

$887M

Receivables

$234M

$213M

$262M

$246M

$195M

Inventory

$189M

$196M

$250M

$409M

$398M

Go Deeper

Financial information provided by Financial Modeling Prep. Options data provided by Unusual Whales. Live transcripts provided by Quartr. Reported revenue and EPS data from Earnings powered by FinChat.io. All data is provided for informational purposes only, and is not intended for trading purposes or financial, investment, tax, legal, accounting or other advice.

Market Cap: $6.1B
IPO Date: 7/23/15
CEO: Mr. Michael E. Hurlston
Fulltime Employees: 7.3K
Sector: Technology
Industry: Communication Equipment
Country: US
Exchange: NASDAQ Global Select

Peers

TESSCO Technologies Incorporated

Juniper Networks, Inc.

Extreme Networks, Inc.

ADTRAN Holdings, Inc.

$7.79

ADTN

3.87%

Gilat Satellite Networks Ltd.

$6.42

GILT

5.51%

Hewlett Packard Enterprise Company

$18.17

HPE

2.89%

Motorola Solutions, Inc.

Watchlist

Earnings

Report Date

May 6, 2025

Reported Revenue

425.2M

Miss -6.87%

Avg 1d Change

9.69%

Report Period

Q3 2025

Reported EPS

0.57

Beat +14%

Implied Move 1d

12.01%

Transcript

10m 38s

12m 15s

12m 49s

Thank you, Kathy, and good afternoon, everyone.

12m 52s

14m 25s

16m 14s

17m 56s

19m 38s

21m 25s

23m 3s

24m 55s

27m

28m 47s

30m 14s

Thank you, Wajid. To allow everyone an opportunity to ask questions, please keep to one question and one follow-up. Jasung, let's begin the Q and A session.

30m 31s

31m 43s

Did you have a follow-up, Joe?

31m 45s

33m 1s

34m 11s

34m 39s

Thanks, Joe.

34m 41s

35m 23s

36m 59s

37m 23s

38m 20s

Thank you.

38m 21s

Thank you so much, Simon.

38m 25s

Our next question is from Blayne Curtis with Jefferies. Your line is now open. Hi, Ezra Wiener on for Blayne. Thanks for taking my question.

38m 34s

38m 57s

39m 41s

40m 2s

41m 17s

Our next question is from Meta Marshall with Mortgage Stanley. Your line is now open.

41m 23s

Great.

41m 24s

41m 46s

43m 3s

So I'd say kind of across the board, we're seeing a nudge of improvement across multiple product lines, and that's helping us.

43m 11s

43m 36s

44m 18s

45m 27s

Great.

45m 28s

Thanks. Thank you, Meta.

45m 32s

Our next question is from Christopher Rolland with SIG. Your line is now open. Hi. This is Dylan Olivier on for Chris. Thanks for taking my question.

45m 44s

46m 10s

47m 6s

Yes.

47m 6s

47m 27s

Did you have any follow ups? Got it.

47m 28s

47m 51s

Yeah.

47m 51s

48m 26s

Thank you.

48m 27s

Great. Thank you.

48m 32s

Our next question is from Ryan Koontz with Needham and Co. Your line is now open. Thanks for the question. Maybe stepping back a little bit on the datacom transceiver market here.

48m 45s

49m 3s

50m 2s

50m 38s

51m 33s

52m 15s

53m 12s

Thank you, Ryan. Super, really appreciate Our next question is from Carl Ackerman with BNP Paribas. Your line is now open.

53m 26s

54m 3s

Yeah. Hey, Carl.

54m 4s

55m 32s

Kyle, did you have a follow-up?

55m 35s

I I did one, if I may. Rajeed, you spoke of moving production away from, contract manufacturers to in house solutions.

55m 43s

55m 56s

Yes. So it's revolved around our data center in interconnect products.

56m 1s

56m 49s

Thanks, Karl.

56m 55s

57m 20s

58m 21s

58m 50s

59m 24s

1h 45s

Thanks, Mike.

1h 48s

Our next question is from David Bach with UBS. Your line is now Thanks guys for taking my question. I just want go back to the telecom business for a second.

1h 59s

1h 1m 27s

1h 2m 20s

1h 3m 28s

Great. Thanks, guys. And Dave, did you have a follow-up?

1h 3m 32s

Nope. Those are my two.

1h 3m 33s

Thank you. Oh, okay. Excellent. Thank you. Just on I think we have time for just one more question.

1h 3m 43s

Okay. Our last question is from Alec Valero with Capital. Your line is now open.

1h 3m 50s

1h 4m 8s

1h 5m 3s

And the benefit of CPO is clear. But the adoption will take time for people to figure out how to use it very effectively. Got it.

1h 5m 13s

That's very helpful. And just as a quick follow-up, can you remind us the economic difference between transceivers and co package optics?

1h 5m 26s

1h 6m 30s

Got it. And and Thank you, Alex. With with the [indiscernible] Okay. Thank you.

1h 6m 36s

Go ahead.

1h 6m 39s

Yeah. No. I was gonna ask, does does co package optics come with a ASP increase compared to transceivers?

1h 6m 52s

1h 7m 37s

Thanks, Alec.

1h 7m 38s

Got it.

1h 7m 39s

Thank you again.

1h 7m 40s

1h 7m 57s

That concludes the conference call. Thank you for your participation. Enjoy the rest of your day.

Key Insights

Lumentum exceeded Q3 guidance with revenue of $425.2M and non-GAAP EPS of $0.57, driven by strong cloud customer demand and a recovering networking market; Cloud and Networking segment revenue grew 8% sequentially and 16% year-over-year.
The company remains on track to achieve a $500M quarterly run rate by the end of the calendar year, with Q4 revenue guidance of $440M–$470M, non-GAAP operating margin of 13–14%, and non-GAAP EPS of $0.70–$0.80.
Cloud transceiver revenue is expected to grow over 50% sequentially in Q4, with continued strong demand for EML chipsets and ramping of 200G and 400G lasers; capacity expansions in Thailand are underway to support growth.
Gross margin improvement is attributed to better manufacturing utilization, favorable product mix (notably increased datacom laser shipments), improved yields, and insourcing of production; Q3 non-GAAP gross margin was 35.2%, up 290 bps sequentially.
Tariffs and supply chain shifts remain a headwind (estimated 100 bps impact on gross margin in Q4), but Lumentum is mitigating risk by moving production from China to Thailand and expects further margin improvement as more capacity comes online and internal manufacturing increases.

Earnings

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Reported Revenue

Avg 1d Change

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Reported EPS

Implied Move 1d

Transcript

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Income Statement

Cash Flow

Balance Sheet

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