Lumentum Holdings Inc. Q4 FY2025 earnings call

• Lumentum is at the forefront of the cloud and AI revolution, with innovation in optical hardware for AI infrastructure, including technologies like 200-gig EMLs, 1.6T transceivers, etc.
• Q4 revenue and EPS were above revised guidance ranges. Cloud revenue growing over 20% annually, gross margins set to surpass 40%, operating margins targeting above 20%.
• Cloud & Networking segment performance driven by strong demand from hyperscale customers, with components, cloud modules, OCS, and CPO all contributing. Industrial Tech segment saw revenue decline but improved profitability due to cost initiatives.
• Wafer fab expansion for EMLs and other indium phosphide-based devices is on schedule, and investments in U.S. facilities for CPO are ongoing.

Cloud & Networking Segment: Fourth quarter revenue was $424.1 million, up 16% sequentially and 67% year-over-year. Components saw all-time high EML shipments, nearly doubling revenue compared to June 2024 baseline, with a substantial order for 200-gig lane speed EML chips. Cloud modules grew 50% quarter-over-quarter, shipping to three major hyperscale customers. Optical circuit switches (OCS) had first revenue in the quarter with shipments to 2 hyperscale customers, and a third committed for 2026. Co-packaged optics (CPO) received the largest single purchase commitment in company history. Industrial Tech Segment: Revenue decreased 6% sequentially but was up 6% year-over-year. Industrial laser and 3D sensing declined seasonally, but ultrafast laser shipments were steady. Profit improved due to cost reduction initiatives.

• Anticipates first quarter fiscal '26 net revenue in the range of $510 million to $540 million, with the midpoint representing a new all-time quarterly revenue record.
• Projects first quarter non-GAAP operating margin to be in the range of 16% to 17.5% and diluted net income per share to be in the range of $0.95 to $1.10.
• Expect to surpass $600 million in quarterly revenue by the June 2026 quarter or earlier.

• Tariff fluidity and uncertainties, as discussed in relation to potential impacts on business operations.
• Supply chain constraints, particularly in certain segments like telecom where capacity improvements are needed.
• Competitive landscape, including competition in EMLs and other optical components.

Q: Talked about the OCS award, including customer count and ramp trajectory.

A: Michael Hurlston said they have more customers than expected, with a ramp starting in current and next quarters, limited by supply, and expecting meaningful revenue in back half of 2026.

Q: Thoughts on CPO opportunity and competitive landscape.

A: Michael Hurlston stated they feel good about maintaining a competitive moat due to unique power level and reliability, with early shipments and expecting meaningful revenue in second half of 2026.

Q: Contributions to $600 million quarterly revenue target.

A: Michael Hurlston mentioned continued strength in components, growth in cloud modules, acceleration in cloud modules in future quarters, and contribution from OCS.

Q: Thoughts on semiconductor tariffs and exemptions.

A: Wajid Ali said Lumentum's products are exempted from applicable tariffs as per new regulations, with minimal impact seen in Q4 and Q1 so far.

Q: Timing and visibility of EML and 200G ramp.

A: Michael Hurlston and Wupen Yuen discussed that 100-gig EMLs are baseline with ongoing growth, 200-gig is additive with early shipments, and visibility is good with 6-9 months or longer, and supply-constrained demand.