News: Optoelectronics
9 February 2026
Lumentum’s quarterly revenue grows 65% year-on-year to $665.5m
For its fiscal second-quarter 2026 (ended 27 December 2025), Lumentum Holdings Inc of San Jose, CA, USA (which designs and makes photonics products for optical networks and lasers for industrial and consumer markets) has reported record revenue (for the second consecutive quarter) of $665.5m (towards the top of the $630–670m guidance range). This is up 24.7% from $533.8m last quarter and up 65.5% on $402.2m a year ago, driven by cloud and AI business, yielding high double-digit gains in both core and new product lines.
Components revenue grows 68.3% year-on-year
Components segment revenue was $443.7m (66.7% of total revenue), up 17% on $379.2m last quarter and 68.3% on $263.7m a year ago. Growth is fueled by broad-based demand across laser chips, laser assemblies, and aligned subsystems going primarily into inter-data-center DCI (data-center interconnects) and long-haul applications.
Highlights included:
- Laser chip business (serving cloud transceiver customers) yielded another quarterly record in electro-absorption modulated laser (EML) shipments, led by 100G lane speeds. This was bolstered by a ramp-up for 200G-lane-speed devices, which now comprise about 5% of unit volume but 10% of Datacom laser chip revenue, indicating a meaningful uplift in average selling price (ASP). 200G is projected to rise to 25% of the product mix by end-2026, further boosting ASPs and gross margin.
- Components supporting optical links ranging from inter-campus DCI to longer-reach topologies saw sustained momentum. “Shipments of our narrow-linewidth laser assemblies grew for the eighth consecutive quarter, a clear proof point of robust market demand and our successful manufacturing expansion,” says president & CEO Michael Hurlston.
- The long-haul portfolio saw gains, with both coherent components and aligned subsystem products growing both sequentially and year-on-year.
- Pump lasers achieved another quarterly record, supporting not only long-haul terrestrial and subsea networks but also new scale-across architectures, with revenue in this product line surging over 90% year-on-year.
- 3D sensing grew modestly, following a new smartphone launch and some incremental share gains.
Systems revenue grows 60.1% year-on-year
Systems segment revenue was $221.8m (33.3% of total revenue), up 43.5% on $154.6m last quarter and 60.1% on $138.5m a year ago.
This was due mostly to record cloud transceiver shipments (growing by about $50m sequentially, outperforming the legacy cloud-like run-rate) as Lumentum leveraged its expanded manufacturing capacity at its facilty at the Nava Nakorn Industrial Estate in Pathum Thani, near Bangkok, Thailand. “We have moved past the production volatility seen in earlier calendar 2025 and are now on a sustainable growth trajectory,” notes Hurlston. “We have focused on time to market in the business and have greatly improved our execution through the design cycle. As a result, we are now in the lead pack of transceiver suppliers as customers transition their networks to 1.6T speeds,” he adds. “We are also improving the profitability of our transceiver business, with better yields and lower scrap rates.”
Also, the ramp-up of optical circuit switch (OCS) shipments exceeded the targeted $10m quarterly run-rate a quarter ahead of the scheduled fiscal Q3/2026, as manufacturing readiness proceeds ahead of plan, indicating faster-than-expected market ramp and execution. “This outperformance is a direct result of the seamless collaboration between our engineering and operations teams, proving our ability to scale complex technology at pace,” says Hurlston. Customer demand for OCS is intensifying, he adds.
“As our cloud-related business continues to accelerate, we see a different dynamic in the industrial end-market,” notes Hurlston. “Shipments remained roughly flat sequentially. This performance reflects the persistent cyclical softness we continue to see in the broader industrial market. With that said, we have an increasing design-win funnel for our newly introduced PicoBlade Compact line of products.”
Profitability and EPS exceed guidance
On a non-GAAP basis, gross margin has risen further, from 32.3% a year ago and 39.4% last quarter to 42.5%. This was driven by improved manufacturing utilization across most product lines, increased pricing on select products, and a shift in product mix to higher-speed devices (driven mainly by the ramp-up in data-center laser chips).
There have been rises in selling & general administrative expenses from $35.9m a year ago and $41.5m last quarter to $45m, and in R&D spending from $62.4m a year ago and $69m last quarter to $69.9m, in order to support expanding cloud opportunities.
Overall operating expenses have hence risen from $98.3m a year ago and $110.5m last quarter to $114.9m. However, as a proportion of revenue they have fallen from 24.4% and 20.7% to 17.3%, respectively.
“While continuing to invest in critical R&D programs serving cloud and AI customers, we have maintained the rigorous cost controls necessary to optimize our business model,” says executive VP & chief financial officer Wajid Ali.
Operating income has risen from $31.7m a year ago (operating margin of just 7.9%) and $99.8m (18.7% margin) last quarter to $167.7m (25.2% margin, well above the forecasted 20–22%), driven mainly by revenue growth in components products.
Likewise, net income has risen from $30m ($0.42 per diluted share) a year ago and $86.4m ($1.10 per diluted share) last quarter to $143.9m ($1.67 per diluted share, well above the forecasted $1.30–1.50).
“Profitability and EPS expanded well beyond prior guidance, demonstrating the leverage of our business model,” says Hurlston.
Capital expenditure was $84m, primarily for expanding manufacturing capacity to support cloud and AI segment growth.
During the quarter, cash, cash equivalents, and short-term investments rose by $33.5m, from $1121.8m to $1155.3m, while working capital rose from $516.6m to $600.5m. The firm held $1155.3m in debt.
“Our results continue to highlight the strength of our roadmaps for both optical components and systems, which make us mission-critical to the world’s AI leaders,” says Hurlston. “Virtually every AI network is powered by Lumentum technology, either through our direct hyperscaler partnerships or as the critical component supplier that enables our network equipment manufacturer customers.” Inventory has hence been increased by $39m sequentially to support the expected growth in cloud and AI revenue.
March-quarter outlook
“While we previously projected crossing $750m in quarterly revenue by mid-2026, we now expect to comfortably surpass that milestone next quarter,” notes Hurlston.
For fiscal third-quarter 2026 (ending 27 March), Lumentum forecasts revenue growth of 65% year-on-year to another record of $780–830m. About two-thirds of the sequential increase in revenue will be driven by the Components portfolio, such as 200G EMLs supported by further expansion of high-margin, high-speed transceivers (as 1.6T network transitions accelerate) and advanced laser products, reflecting broad-based strength across cloud applications. The remaining third of the sequential increase will stem from Systems, driven by the continued ramp of high-speed transceivers and additional contributions from OCS.
Fueled by greater-than-expected orders for 1.6T transceivers (for which margins are significantly better than 800G transceivers), operating margin should rise to 30–31%. Diluted earnings per share is expected to increase to $2.15–2.35.
Cloud transceivers, OCS and CPO to drive future growth
“We previously identified three primary catalysts for Lumentum’s future growth: cloud transceivers, optical circuit switches (OCS), and co-packaged optics (CPO),” says Hurlston. “The vast majority of this growth is still ahead of us, and we have increased confidence as to the timing and magnitude of the ramps. While our Q2 results and Q3 guidance reflect meaningful contributions from cloud transceivers, we are only just beginning to unlock the massive potential of OCS and CPO.”
Fueled by intensifying customer demand extending now across three primary customers, OCS order backlog has surged well above $400m, accelerating shipments into late calendar 2026, with the majority expected to ship in second-half 2026 (compared with the previously expected $100m). “We are scaling rapidly to meet extraordinary customer demand,” says Hurlston.
“Turning to CPO, we have secured an additional multi-$100m purchase order for ultra-high-power [UHP] lasers that support optical scale-out applications… deliverable in first-half calendar 2027 [compared with expected CPO revenue of just $50m in calendar Q4/2026],” says Hurlston. “Meanwhile, we continue to execute on the initial orders we have discussed previously and remain firmly on track for material shipment inflection of UHP chips in the second half of this calendar year,” he adds.
“Furthermore, we have established a clear line of sight into the broader external light source (ELS) market, which would enable us to participate more holistically than as a standalone laser chip supplier. By expanding into pluggable external light source modules, we would dramatically increase our serviceable market [and offer 2-2.5 times the revenue content compared to individual laser sales]. In addition, the ELS allows us to diversify our customer base, as several new partners adopting next-generation scale-out architectures are looking for more turnkey solutions,” continues Hurlston.
“We have built significant momentum through our leadership in cloud transceiver, OCS, and scale-out CPO. Now, a fourth growth driver is taking shape, one poised to be a generational game-changer for the industry: optical scale-up. Today, data-center architectures have a clear divide. Optical links handle scale-out networking, connecting relatively longer links within the data center. Conversely, copper links dominate scale-up connectivity, referring to the ultra-short-reach high-speed paths within a single rack or a cluster. While copper has long been the gold standard for scale-up for simplicity and cost, it is hitting a physical wall. An industry pivot is underway to bypass the scaling limits of copper. By late calendar 2027, we would expect our first scale-up CPO shipments replacing longer copper connections. We are already deeply embedded in design-in cycles for this, leveraging our ultra-high-power lasers and external light source modules. As we look into the not-so-distant future, it is only right to assume that optics begins to capture more and more of the connectivity, eventually subsuming copper. In response to these demand projections, we have initiated proactive capacity planning.”
“Given the sheer magnitude of the scale-up optics market, we are carefully assessing our projected wafer output plans,” says Hurlston.
Lumentum has confirmed a persistent supply/demand imbalance for EML devices, with demand outpacing supply by about 30%, despite increasing manufacturing capacity by 20% in the December quarter.
“We have front-loaded our 40% expansion target [which had been planned to take three quarters: December, March, and June], delivering on over half of that this past quarter,” says Hurlston. “We are scaling rapidly through precision tool optimization and yield gains. This execution will help to ensure that additional [indium phosphide wafer fab] capacity comes online as planned over the next two quarters and beyond [achieving better than the targeted 40% increase in Lumentum’s fab in Sagamihara, Japan]. We now have line of sight to a significant block of additional capacity through the next four quarters [calendar second-half 2026 into early 2027], both through current activities in Sagamihara and better utilization of our Caswell, UK, and Takao, Japan fabs.”
All incremental capacity for EMLs is covered under long-term agreements (LTAs) through to the end of calendar 2027, enabling pricing discipline and capacity allocation to committed customers. “We are in active negotiations with leading customers to offset our capital requirements in exchange for long-term supply assurances,” says Hurlston. Customer requests for more committed capacity have enabled Lumentum to pursue incremental pricing optimization, with LTAs protecting from frequent price renegotiations seen in prior years.
Alongside the scale-ups at its existing sites in Caswell in the UK and Sagamihara and Takao in Japan, to address ongoing shortages amid accelerating bookings, Lumentum’s capacity expansion efforts now include potential new fabs or acquisitions.
Lumentum reckons that its strategic focus on external light source modules and long-term agreements positions it to capture additional value in evolving AI and data-center markets.
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