Lumentum Holdings Inc. Q1 FY2026 earnings call

• Revenue surged over 58% YoY in Q1 with operating margins expanding by over 1,500 basis points, reaching $533 million, the highest single quarter revenue in 10 years.
• Over 60% of total revenue comes from cloud and AI infrastructure. Q2 outlook projects surpassing $650 million in revenue, 2 quarters earlier than previous target.
• Components products had broad-based growth in laser chips, optical transceivers, etc., with improvements in indium phosphide wafer fab yields and throughput.
• Systems revenue was impacted by production ramp in Thailand but expects sustained growth going forward.

In Q1, components revenue was $379 million, up over 18% sequentially and 64% year-over-year. Systems revenue was $155 million, down 4% sequentially but up 47% year-over-year. Components contribute almost entirely to the growth driven by cloud infrastructure, while Systems saw growth but with some sequential decline.

• Q2 net revenue expected to be in range of $630 million to $670 million, midpoint a new all-time quarterly record.
• Non-GAAP operating margin projected to be 20% to 22% in Q2.
• Diluted net income per share expected to be in range of $1.30 to $1.50.

• Supply-demand imbalance for EMLs with demand outstripping supply significantly.
• Challenges in supply chain and managing allocation of capacity due to high demand.
• Competition in the market, including from competitors ramping indium phosphide capacity.

Q: On the transceiver side, what's driving confidence in sustained growth?

A: Improvements in execution, participating in early customer ramps, and layering effect of new products like 1.6T transceivers.

Q: How does the 40% increase in indium phosphide capacity translate to revenue?

A: Raw output increase and shift to 200-gig EMLs, with 200-gig lasers expected to be a meaningful part of mix in 2026.

Q: Thoughts on the OCS market and its evolution?

A: Confidence in ramping to $100 million by Dec 2026 quarter, high customer engagement and growing use cases.

Q: Supply-demand imbalance for EMLs compared to last quarter?

A: Demand-supply mismatch increased to 25%-30% from previous levels, with long-term agreements to manage customer base.

Q: Outlook for CPO demand?

A: Demand stronger than initial forecast, customer conversations magnified, and heightened interest in the area.