News: Optoelectronics
19 August 2026
Lumentum’s quarterly revenue more than doubles year-on-year to over $1bn
For its fiscal full-year 2026 (ended 27 June), Lumentum Holdings Inc of San Jose, CA, USA (which designs and makes optical and photonic products for optical networks and lasers for industrial and consumer markets) has reported revenue of $3014m, up 83.2% on fiscal 2025’s $1645m.
Specifically, Components segment revenue grew by 79.7% from $1116.3m to $2005.6m. Systems segment revenue grew by 90.7% from $528.7m to $1008.4m.
“Lumentum is positioned at the heart of a secular industry shift,” says president & CEO Michael Hurlston. “As AI compute workloads increase in both speed and bandwidth, data-center architects are turning to optical links as a primary means of connectivity. Our fourth quarter results reflect the early stages of this transition.”
Fiscal fourth-quarter 2026 revenue was $1006.3m (at the high end of the revised guidance range of $960–1010m), up 24.5% on $808.4m last quarter and up 109.3% as it more than doubled from $480.7m a year ago, driven by strong cloud and AI applications. This is the eighth consecutive quarter of growth, and the third consecutive quarter of sequential growth of over 20%, despite supply chain constraints.
Components revenue doubles
Specifically, Components segment revenue has grown further, by 102.7% from $320.4m a year ago and by 21.8% from $533.3m last quarter to $649.4m (64.5% of total revenue), driven by exceptional, broad-based strength in scale-out and scale-across component product lines. Highlights include:
- setting new company records for 100G and 200G electro-absorption modulated laser (EML) shipments, driven primarily by strong demand for 100G devices, although momentum for 200G EMLs is also accelerating rapidly (exceeding 25% of total EML revenue);
- expanding 200G lane-speed continuous wave (CW) laser sales across multiple transceiver customers;
- growing ultra-high-power laser shipments for co-packaged optics (CPO) solutions (on track to deliver meaningful revenue exiting calendar year 2026);
- achieving the 10th consecutive quarter of sequential growth in narrow-linewidth lasers for data-center interconnect (DCI)/scale-across installations (up >130% year-on-year);
- growing pump lasers by 80% year-on-year for a second consecutive quarter (effectively selling out), supported by multiple long-term supply agreements now in place for scale-across deployments (offsetting planned capital expenditures).
Systems revenue up 122.6% year-on-year
Systems segment revenue has grown by 122.6% from $160.3m a year ago and by 29.7% from $275.1m last quarter to $356.9m (35.5% of total revenue), driven by record shipments of 800G cloud transceiver modules (comprising the bulk of shipments). Initial shipments of next-generation 1.6T transceiver modules began as planned, with a portion utilizing internal CW lasers. Also, the optical circuit switches (OCS) ramp remains on track (shipments doubled quarter-over-quarter), backed by strengthening demand across the firm’s multi-year, multi-billion-dollar purchase agreement.
Both cloud transceivers and OCS were major drivers of the revenue growth quarter over quarter. “While pockets of supply chain tightness for certain components cap shipments below total market demand, our factories executed to our aggressive plan for both product lines,” says Hurlston.
“Profitability across our transceiver lines continues to improve, driven by gains in both yield and capacity utilization, as well as the initial rollout of higher-ASP 1.6T transceivers,” he notes.
Due to better manufacturing utilization, favorable mix, and increased pricing on select products, quarterly gross margin (on a non-GAAP basis) has risen further, from 37.8% a year ago and 47.9% last quarter to 50.4% (ahead of schedule on a 50% target that had been expected for a $2bn-per-quarter revenue run-rate). This boosted full-year gross margin from 34.7% in fiscal 2025 to 46% for fiscal 2026.
R&D spending increased from $67.6m a year ago and $78.4m last quarter to $87.5m, boosting full-year R&D spending from $256m in fiscal 2025 to $304.8m for fiscal 2026.
Overall operating expenses have hence risen from $109.3m a year ago and $126.2m last quarter to $138.1m. However, as a proportion of revenue they have fallen from 22.7% then 15.6% to 13.7%, respectively. “We continue to invest in critical R&D programs serving cloud and AI customers while maintaining the rigorous cost controls necessary to optimize our business model,” notes executive VP & chief financial officer Wajid Ali.
Fuelled by product momentum and strong operating leverage, operating income has risen further, from $72.3m (operating margin of 15%) a year ago and $260.7m (32.2% margin) to $368.8m (36.6% margin, exceeding the guidance range of 35–36%). Full-year operating income has hence risen from $160.1m (9.7% margin) in fiscal 2025 to $897m (29.8% margin) for fiscal 2026.
“Our differentiated technology commands premium value, and our operating model delivers outsized leverage,” notes Hurlston.
Likewise, quarterly net income has risen further, from $63.3m ($0.88 per diluted share) and $225.7m ($2.37 per diluted share) last quarter to $326.3m ($3.23 per diluted share, well above the guidance range of $2.85–3.05). Full-year net income has hence risen from $146.4m ($2.06 per diluted share) in fiscal 2025 to $782.3m ($8.67 per diluted share) for fiscal 2026.
Capital expenditure has increased from $125m last quarter to $167m in Q4/2026, focused on manufacturing capacity for cloud and AI customers.
Driven primarily by convertible debt conversions (to cut debt by $1.1bn), during fourth-quarter 2026 total cash, cash equivalents, and short-term investments fell by $433.9m from $3172.3m to $2738.4m. However, this is still up on $1.9bn at the end of fiscal 2025.
To support the expected growth in cloud and AI-related revenue, inventories have been increased further, from $470.1m a year ago and $632.8m last quarter to $691.6m.
“While our Q4 results demonstrate broad-based traction, key growth drivers such as OCS solutions and our cloud module business, where we are advancing 1.6T adoption, are beginning to layer in,” notes Hurlston. “Increasing demand for ultra-high-power CPO lasers, an initial order for ELS modules, as well as our breadth of NPO [near-packaged optics] engagements are the first signs that optics are starting to penetrate in-rack connectivity, significantly upping our optical TAM [total addressable market],” he adds.
September-quarter revenue to grow to record $1.225–1.275bn
For fiscal first-quarter 2027 (to end-September 2026), Lumentum expects revenue to grow to another record of $1.225–1.275bn, up by more than 130% year-on-year at the mid-point. “Our trajectory continues to accelerate as AI demand drives our Q1 revenue guidance midpoint to $1.25bn [$250m ahead of the guidance given at March’s Optical Fiber Communication 2026 conference], reaching our target model more than a quarter ahead of schedule,” notes Hurlston.
About half of this sequential growth is expected to stem from the Components portfolio, driven by continued expansion of scale-out and scale-across applications.
The other half of the sequential growth should be powered by the ongoing ramp of the Systems portfolio of 1.6T transceivers and accelerating OCS deliveries. “We expect our first triple-digit OCS revenue quarter, and we expect to be meaningfully above the three-digit mark,” says Hurlston.
Driven by product mix and tight operational execution, gross margin is expected to continue to grow.
Operating margin should rise to 39.5–40.5% (up by more than 2100 basis points year-on-year at the mid-point, which exceeds the high end of the target model associated with the expected revenue level, and already matches the midpoint of the 38–42% target model at a $2bn revenue run-rate). “Think of the 42% outlier more as a midpoint, with the range probably moving up 100–200 basis points versus what we showed at OFC,” says Ali.
Diluted net income per share is expected to increase further to $4.05–4.35.
Pump lasers will remain effectively sold out for the foreseeable future, despite the rapid capacity expansion. To support the growth in scale-across deployments, Lumentum has secured multiple long-term agreements (LTAs) with customers that help to offset planned capital expenditures. “We continue to expect a four-fold increase in our pump laser shipments over the next several quarters to meet this escalating demand,” says Hurlston.
Demand for both EML and CW lasers is expected to grow significantly through second-half calendar 2026 and into 2027. “To capture the coming 200G and 300G lane-speed opportunities, we are expanding capacity across our two indium phosphide wafer fabs in Japan, qualifying both CW and EML process flows on our newest tools as they come online,” says Hurlston. “Even as we allocate additional capacity to CW lasers, we remain on track to deliver over 50% EML unit growth by the December 2026 quarter compared to the year-ago quarter,” he adds. 200G should grow to at least 50% of EML shipment volume by mid-2027.
“For ultra-high-powered lasers, we expect to be in the $50m range by the end of the calendar year, with the first triple-digit quarter in fiscal Q3,” says Hurlston. “We remain confident in a demand ramp for ultra-high-power laser chips in the second half of calendar 2027, ahead of [CPO] customer scale-up deployments in calendar 2028,” he adds.
“Adding to our confidence, we were recently given our first external light source (ELS) module purchase, for delivery by the second half of calendar 2027, which - from an ASP standpoint - is meaningfully higher than the set of [ELS] lasers we ship in,” Hurlston says. “The margins are above the corporate average, but not quite as good as the lasers,” he adds. “We’re trading a little bit of margin to get some revenue bump.”
Regarding Systems: “Our visibility into future cloud transceiver demand is clearer than ever. In fact, we expect the 1.6T transceiver uptake to intensify starting in fiscal Q1 and sustain through calendar 2027,” says Hurlston.
“OCS internal manufacturing expansion is progressing smoothly,” notes Hurlston. “The demand signal for 2027 continues to be incredibly strong, and we have started the initial work to add capacity with contract manufacturers as well as continuing to increase output in our internal factories,” he adds. “We are now planning higher- and lower-port-count products, including specialized in-tray offerings.”
However, despite being on track to increase EML output year-on-year, Lumentum expects to be still shipping significantly behind customer demand at the end of 2026. There is also still a significant supply–demand imbalance for CW lasers. Regarding high-powered lasers: “We are very much further behind relative to our ability to supply,” says Hurlston. “Our execution of the ramp is on track. We’re further behind because the demand has accelerated, with the demand signal increasing faster than the ability to supply.”
Greensboro fab and AXT substrate supply to boost capacity
To provide the capacity needed for future growth, in mid-March Lumentum acquired from RF & power device maker Qorvo Inc a fab in Greensboro, North Carolina, which is now being converted from gallium arsenide (GaAs) to become Lumentum’s fifth indium phosphide fab. “We continue to expect first revenue out of Greensboro in early 2028, ramping through calendar 2028 into full production by the end of 2028 and into 2029,” says Hurlston.
Regarding the possibility of more long-term agreements (LTAs) with customers to fill the new capacity in Greensboro, Hurlston says: “I would expect that we’d have some things to talk about over the next couple of quarters”.
In response to the surge in demand for EMLs and CW lasers as well as ultra-high-power lasers as “everybody starts to look to adopt near-packaged or co-packaged solutions”, in late July Lumentum announced a long-term agreement (running through 31 December 2031) with AXT Inc of Fremont, CA, USA for the supply and capacity reservation of InP substrates. Lumentum is paying an initial deposit of $43.5m, to be followed by a second deposit of $43.5m (with the timing and terms surrounding payment to be subsequently determined during calendar year 2028).
“We’re probably pretty comfortable just given our lead arrangement with a Japanese supplier and now the announced deal with AXT,” says Hurlston. “Given the rate of change in the demand vector that we're seeing, that may not be true a quarter or two from now,” he adds. “If this vector continues, we’re probably going to need to look for more help on substrates.”
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