Lumentum Holdings Inc. (LITE) is having a moment. The optical technology company reported fiscal fourth-quarter results after Tuesday's close that blew past expectations, and investors responded by sending shares up 7.63% to $883.24 in premarket trading Wednesday.
But the headline numbers only tell part of the story. During the earnings call, management said demand for its optical circuit switching products remains "incredibly strong" for 2027. The company is expanding capacity both with contract manufacturers and at its own factories to keep up with what looks like an AI-fueled supercycle.
Earnings Snapshot
Here's the scorecard: adjusted earnings came in at $3.23 per share, beating the $2.97 consensus estimate. Revenue jumped 109% year over year to $1.01 billion, topping the $987.89 million Street estimate. Adjusted gross margin expanded 1,260 basis points to 50.4%, helped by better manufacturing utilization, product mix, and pricing. Adjusted operating margin increased 2,160 basis points to 36.6%, reflecting strong operating leverage from AI-related demand.
Lumentum ended the quarter with $2.74 billion in cash and short-term investments.
CEO Michael Hurlston said AI workloads are driving a long-term shift toward optical connectivity as data centers require greater speed and bandwidth. That's not just a talking point; the numbers back it up.
AI Demand Drives Optical Growth
Components revenue surged 103% year over year to $649.4 million, while Systems revenue jumped 123% to $356.9 million. Lumentum posted record shipments of 800G cloud transceivers and began production and shipments of 1.6T transceivers. Management expects 1.6T adoption to accelerate through 2027 as Tier-1 hyperscalers build custom AI clusters and transition from 800G technology.
Narrow-linewidth laser assembly shipments rose more than 130% year over year, marking the 10th straight quarter of sequential growth. Pump laser shipments increased more than 80% and remain effectively sold out for the foreseeable future. The company expects pump laser shipments to quadruple over the next several quarters as AI data center demand grows.
EML laser chips also reached record levels. Products using 200G EMLs now account for more than 25% of EML revenue. Lumentum expects strong EML and CW laser demand through late 2026 and 2027 as the industry shifts toward faster per-lane speeds.
Lumentum is also expanding capacity at its two indium phosphide fabs in Japan. Optical circuit switch shipments doubled sequentially, and the company expects its first quarter with triple-digit OCS revenue in the fiscal first quarter of 2027.
Lumentum Forecast Tops Estimates
For the fiscal first quarter, Lumentum expects adjusted earnings of $4.05 to $4.35 per share, well above the $3.61 analyst estimate. The company forecast revenue of $1.23 billion to $1.28 billion, compared with the $1.16 billion estimate. That would put Lumentum above a previously targeted revenue level more than one quarter ahead of schedule.
Adjusted operating margin is expected to reach 39.5% to 40.5%, expanding more than 2,100 basis points year over year.
Looking further out, Lumentum expects significant demand for co-packaged optics (CPO) and ultra-high-power laser chips to emerge in the second half of 2027, ahead of customer deployments in 2028. The company has received its first external light source module order for delivery in the second half of 2027. It also said demand from its lead CPO customer continues to rise.
In short, Lumentum is riding the AI wave hard, and the wave shows no signs of cresting. With 2027 demand described as "incredibly strong," the company is positioning itself as a key supplier for the next phase of data center buildout.
