Lumentum (LITE) Q4 FY26 earnings call: guidance and Q&A

Given hitting revenue and margin targets early, how should investors think about new financial targets, especially with incremental opportunities like ELS, NPO, and OCS?

Management will release new financial targets at the next OFC, noting they are running well ahead on almost every metric. New opportunities like NPO, CW lasers, and OCS were not fully factored into previous discussions and are expected to be additive.

“Look, I think there are some new things that we didn't factor into our discussion at OFS. NPO, we spent a bit of time on the -- in the prepared remarks on NPO. CW lasers, we think that that's an incremental opportunity for us that we would probably not spend a lot of time on before.”

asked by Joseph Cardoso · answered by Michael E. Hurlston

Can you provide more details on NPO timing, especially if opportunities are forming earlier, and which architectures (ELS vs. integrated mid-power) are favored by customers?

NPO timing is similar to CPO, with high-volume shipments for scale-up expected in H2 CY27 for CY28 deployments. The earliest NPO opportunities are primarily high-powered ELS types, followed by integrated mid-power lasers. Lumentum's mid-power lasers leverage ultra-high power technology for efficiency in small optical engines.

“The first couple of those are more -- is the same kind of ELS high-powered laser and then maybe followed by a couple that are integrated where the optical engine of a mid-power laser is integrated inside the optical engine, and it's all one unit.”

asked by Joseph Cardoso · answered by Michael E. Hurlston

To what extent was Lumentum able to reprice backlog, and how did that affect Q4 gross margin and the outlook?

Lumentum did some repricing, but most LTA price impacts are forward-looking. The primary driver for Q4 gross margin improvement was product mix, with more high-mix components. Management expects continued gross margin expansion.

“But I'd say the long pole this quarter was more on mix, right, where we were shipping a lot more of our high mix components and I think as we said, we'd expect that to continue to play through as well.”

asked by Simon Leopold · answered by Michael E. Hurlston

Can you confirm a triple-digit OCS revenue quarter in Q1 FY27 and when to expect a triple-digit quarter for ultra high-powered CW scale-out lasers?

Q1 FY27 guidance includes the first triple-digit OCS revenue quarter, expected to be meaningfully above $100 million. For ultra high-powered lasers, a triple-digit quarter is expected in Q3 FY27, building from approximately $50 million by the end of calendar year 2026.

“Yes, you've got it right. So in the guide, which is the first quarter, we expect our first triple-digit OCS revenue quarter, we'd expect to be meaningfully above the 3-digit mark. ... I think the third quarter is when you'd see the first triple digit quarter for ultra-high powered lasers.”

asked by Michael Genovese · answered by Michael E. Hurlston

What is the current supply/demand imbalance for EML and high-powered lasers, and how is it evolving?

For EMLs, the supply/demand imbalance remains unchanged, with Lumentum still shipping behind customer demand. For high-powered lasers, the imbalance has worsened significantly, with demand accelerating beyond Lumentum's ability to supply, despite their ramp execution being on track.

“So I would say on EML, probably no change, right? So I don't think that it's gone up, but it hasn't come down. We're still shipping behind customer demand on EML. ... We are way behind. Our shipments, unfortunately, on high-powered lasers. So we -- if one vector has really changed since the last time you and I talked, I'd say it's your high-powered lasers, and we are very much further behind.”

asked by Papa Sylla · answered by Michael E. Hurlston

Can you elaborate on the ELS module opportunity, its economics, and how it differs from just selling lasers?

Lumentum received its first ELS module order, which has a meaningfully higher ASP than standalone lasers. While margins are not as good as lasers (but still above corporate average), it provides a revenue bump. This is a first step to enable customers who prefer not to deal with individual laser chips, expanding the reach of their CPO and NPO systems.

“Yes, we've got our first ELS module order right? Which from an ASP standpoint is meaningfully higher than the set of lasers that we ship in. So we're very excited about the revenue opportunity, small to start, right? ... As I said a minute ago, the ELS module meaningfully higher from an ASP standpoint, but the margins are not quite as good. Above corporate average, but not quite as good as the lasers.”

asked by Christopher Rolland · answered by Michael E. Hurlston

What is driving the increased need for indium phosphide substrate, as evidenced by the AXT deal, and is Lumentum making progress in filling Greensboro's capacity?

The surge in demand for ultra-high-powered lasers, cutting across multiple customers, necessitated securing additional substrate supply from AXTI. While current supply is comfortable, the rapid change in demand may require more help. Lumentum is actively seeking LTAs for Greensboro's capacity, with discussions underway for new arrangements related to NPO/CPO demands.

“But I think we've seen a pretty big surge in demand, as we said. And in order to respond to that, we went out and we found additional substrate help from AXTI. ... I would expect that we have some things to talk about over the next couple of quarters relative to new arrangements in Greensboro that speak to more of this capacity we have there.”

asked by George Notter · answered by Michael E. Hurlston