The Zhitong Finance App learned that, driven by strong growth in demand for artificial intelligence (AI) optical communication, Lumentum (LITE.US) handed over better-than-expected results for the fourth fiscal quarter of fiscal year 2026 and guidance for the first fiscal quarter of fiscal year 2027.
According to financial reports, Lumentum's revenue for the fourth fiscal quarter increased 109.3% year over year to US$1,006 million, better than analysts' average expectations of US$990 million. Although it did not exceed expectations much, since the optical communication circuit where the company is located has received great attention from the market, it is still a signal in itself that it can continue to exceed expectations.
By business, component business revenue was US$649 million, up 102.7% year on year; system business revenue was US$357 million, up 122.6% year on year. Both businesses have doubled their revenue, indicating that demand expansion is not concentrated on a single product line. AI data center construction brings not only a single device requirement, but an overall drive from lasers and optical devices to system-level solutions.
In terms of profit, adjusted net profit was US$326 million, up 415% year on year; adjusted earnings per share was $3.23, better than analysts' average expectation of $2.97; adjusted gross margin was 50.4%, up 1,260 basis points year over year, better than analysts' average expectation of 48.8%; adjusted operating margin was 36.6%, up 2,160 basis points year over year. The rapid improvement in Lumentum's profit model shows that demand for high-end optical communications products, scale effects, and product portfolio improvements are jointly unlocking profit leverage.
It is worth mentioning that Lumentum generated a one-time non-cash debt settlement loss of US$7.8 billion due to the conversion of some convertible notes into equity, and its GAAP net loss for the fourth fiscal quarter was US$7.162 billion.
Lumentum CEO Michael Hurlston said that the fourth fiscal quarter results showed extensive market progress, and key growth drivers — such as OCS solutions and cloud module businesses — have also begun to contribute incrementally. He said, “Lumentum is at the heart of industry transformation. As AI computing workloads continue to increase in speed and bandwidth, data center architects are turning to optical links as the primary method of connectivity. Although our results for the fourth fiscal quarter indicate overall business growth, key growth drivers, such as OCS solutions and the cloud module business (we are promoting the adoption of 1.6T optical modules), are gradually emerging. The growing demand for ultra-high power CPO lasers, the first orders for ELS modules, and our extensive participation in the NPO field all indicate that optical technology is beginning to penetrate the field of in-rack connections, significantly increasing the potential market size of our optical technology.”
Lumentum's guidance for the first fiscal quarter of FY2027 also exceeded expectations. The company expects revenue for the first fiscal quarter to be US$1,225 million to US$1,275 million, with a median forecast range of US$1,250 million higher than the analysts' average expectation of US$1.50 billion; the adjusted earnings per share are expected to be US$4.05 to US$4.35, and the median forecast range of US$4.20 is higher than the analysts' average expectation of US$3.58.
Michael Hurlston said, “Looking ahead, our growth momentum will continue to accelerate as demand for artificial intelligence drives. The median revenue forecast for the first fiscal quarter will reach US$1.25 billion, reaching our target more than a quarter ahead of schedule.”
According to reports, after the AI cluster was expanded, bandwidth, power consumption, and latency pressure within the data center increased rapidly. Traditional electrical connections face bottlenecks in higher speed and higher density scenarios, and optical interconnection has begun to further penetrate from inter-rack and inter-switch connections to the inside of the rack and near the chip. This is also the most imaginative part of Lumentum's earnings report — the company's potential market space will be re-evaluated if optical requirements are no longer limited to traditional data center interconnections, but move into in-rack connectivity and near-package architectures. However, Lumentum also used the expression “early signs” to indicate that these directions are still in the early stages of verification and order conversion. In the future, the market will focus on whether these CPO, ELS, and NPO opportunities can be converted from initial orders and project contacts to sustainable large-scale revenue.
As of press release, Lumentum's US stock rose more than 3% after the market on Tuesday, and previously fell more than 4%. This stock price performance shows that on the one hand, the market acknowledges the strong demand and performance guidelines of Optical Communications shown in its financial report, and on the other hand, it is also absorbing its huge GAAP losses, high previous expectations, and valuation pressure.