Lumentum Holdings
Lumentum makes the laser chips, light modules and optical switches that move data as light inside AI datacentres and across telecom networks.
Our viewUnattractive Medium conviction
The scores
The profile · 1-4
Growth4/4 ↑
Revenue grew 83.2% in fiscal 2026 and 109.3% in Q4, all without acquisitions, and the Q1 guide implies over 130%.
Business quality3/4 →
Owns scarce laser fabs and most pump supply, but Coherent and Chinese fabs add capacity and Google builds its own switch.
Financial position4/4 ↑
$2.74B of cash and investments against $1.65B of debt, $300.1M of free cash flow, and NVIDIA's $2.0B already paid in.
Execution record3/4 ↑
Eight straight beats and the revenue target hit a quarter early, but switch supply slipped early and fiscal 2024 revenue fell 23%.
Per share capture2/4 ↓
Common shares rose from 69.8M to 89.7M in a year, plus 2.9M preferred, and the 2032 notes keep adding shares above $268.
Potential3/4 ↑
NVIDIA's purchase commitment and pump take-or-pay deals are signed, but the co-packaged laser ramp is 2027 and unproven at volume.
Risk profile3/4 →
Two customers bought 41.6% of revenue, demand rides AI spending, and a Huawei export inquiry by BIS and DOJ is unresolved.
Valuation1/4 ↓
About 88 times annualised GAAP operating profit; a 6% yield needs revenue near $21B, beyond even analysts' fiscal 2029 path.
Evidence quality3/4 →
Statements, NVIDIA's deal and AXT's contract are filed; the shortage, pump share and co-packaged timing rest on management.
The bet · 2-3 years
Priced for success1.2×
If it works 1.2× · if it fails you keep up to 31%.
The Verdict
We rate Lumentum unattractive. It makes the laser chips that turn data into light inside AI data centres, and the world is short of them, so sales nearly doubled last year and the business is solid. The price is the problem: to earn a modest yearly return, operating profit would need to reach about four times the pace its latest outlook implies, and part of today's margin comes from factories running full. So the price is stretched, not cheap. As a bet it is fragile: even the best case barely beats today's value, and failure keeps under a third.
The long caseAI data centres need far more light-based links than copper can carry, and Lumentum makes scarce lasers for them; the case needs that shortage to last.
The evidence under this - 10 claims
C01facthigh confidence
Lumentum makes optical and photonic products and reports one segment. Components (laser chips, laser assemblies, pump lasers, line subsystems and wavelength management) were 66.5% of fiscal 2026 revenue; Systems (cloud transceiver modules, optical circuit switches and industrial lasers) were 33.5%. It also sells VCSEL lasers for 3D sensing in phones.
C12management claimmedium confidence
Management says it is still shipping EML lasers behind customer demand and expects to be significantly behind at the end of 2026, that it is 'very much further behind' on high-power lasers for co-packaged optics because demand rose, and that it repriced some products upward in the quarter.
against this
- A shortage is what lets a supplier raise prices without any lasting edge; the same management team saw revenue fall 23% in fiscal 2024 once customers had stocked up (C25).
- Cignal AI says capacity additions for lasers are underway across the industry (C20).
C40inferencemedium confidence
Lumentum's advantage is owning indium phosphide laser wafer capacity and the EML, CW and high-power laser designs at a time when lasers are short; it has no comparable edge in assembling transceiver modules, where Chinese makers are larger.
derivedManagement's shortage account (C12), buyers prepaying for substrate (C11), Cignal AI's statement that a few non-Chinese firms supply most high-speed EMLs and light sources (C20), and LightCounting ranking Lumentum's transceiver sales at the bottom of its top ten (C19).
against this
- Coherent is doubling its own indium phosphide output on larger wafers and supplies NVIDIA too (C17).
- Yuanjie and other Chinese fabs list competing CW lasers and a 200G EML (C18); management says it sees no effect yet but cannot say what their output will be.
- A margin earned in a shortage cannot be told apart from one earned by an edge until supply catches up (C41).
C02facthigh confidence
Fiscal 2026 (year to 27 June 2026) revenue was $3,014.0M, up 83.2%: Components $2,005.6M, up 79.7%, and Systems $1,008.4M, up 90.7%. GAAP gross margin rose to 41.7% from 28.0% and GAAP operating income was $524.8M against a loss of $180.1M.
C29estimatemedium confidence
Counting every share at the $971.26 close of 30 September 2026, Lumentum is worth about $99.9B and its enterprise value is about $98.8B, not the vendor's $75.6B market value, which uses about 77.8M shares.
derived89.7M common plus 2.876M preferred (C28), 3.0M shares under equity awards (10-K equity note), and about 7.3M net shares from the convertibles: each note's conversion shares less the shares its cash principal covers, at the conversion prices in C44, less about 0.56M offset by the 2032 capped call up to $268.24 - about 102.9M in all. Net cash is $2,738.4M less $1,554.3M of note principal and $92.8M of loans (C26).
against this
- Some note conversions requested by 14 August may already sit in the 89.7M common, which would slightly overstate the total; the company's own diluted count of about 102M agrees within 1%.
- Lumentum may settle conversion premiums in cash rather than shares, which lowers the share count and the cash by the same value.
C30estimatemedium confidence
At that enterprise value Lumentum trades at about 188 times fiscal 2026 GAAP operating income of $524.8M, about 88 times the Q4 run-rate of $1,117.2M (four times $279.3M), and about 49 times four quarters of the Q1 guide's roughly $500M of non-GAAP operating income.
derivedEnterprise value of about $98.8B (C29) over GAAP operating income (C02, C03) and over 40% of $1.25B, the guide's midpoints (C04).
against this
- Revenue grew 24.5% from Q3 to Q4, so any trailing multiple falls fast if growth holds: two more quarters like it would roughly halve the run-rate multiple.
- Non-GAAP excludes $191.3M a year of share pay and $135.7M of amortisation (C37), so the 49 times flatters the cost of running the business.
C31estimatemedium confidence
For a 6% after-tax earnings yield on the enterprise value, Lumentum's GAAP operating income would have to reach about $7.1B a year, about 4.3 times the roughly $1.64B a year implied by the Q1 guide; at the guide's GAAP margin near 33% that is revenue of about $21B, against $5.0B annualised today and analysts' $9.6B for fiscal 2028.
derived$98.8B (C29) times 6%, divided by one minus the company's 16.5% long-term tax rate (C04's release). Q1 GAAP run-rate: the guide's $500M of non-GAAP operating income less Q4's $89.5M of share pay, amortisation and other charges (C37), times four. Consensus from the pack (C32).
against this
- Cignal AI's datacom component market was $7.7B in a single quarter and doubled in a year (C20); if that pace held, $21B would be about a third of it by 2028.
- Analysts project $13.6B for fiscal 2029, so the bar is roughly the consensus path carried one more year at about 50% growth.
C33facthigh confidence
The shares closed at $971.26 on 30 September 2026, up 497% in 252 sessions; over that year revenue per share rose 77% and the price paid for each dollar of trailing revenue rose 238%. They peaked at $1,053.09 on 11 May 2026 and fell to $602.35 on 29 July before recovering.
C32factmedium confidence
18 analysts rate Lumentum a buy, 7 a hold and none a sell; the positive share has risen to 85.2% of 27 from 78.3% of 23 in February. Consensus is $9.6B of revenue and $34.08 of EPS for fiscal 2028 (11 analysts) and $13.6B for fiscal 2029 (3 analysts). Fiscal 2026 revenue was $3,014.0M.
C41inferencemedium confidence
Much of fiscal 2026's margin gain is cyclical: fuller factories and shortage pricing, the same levers that pushed gross margin down to 18.5% in fiscal 2024 when customers stopped ordering.
derivedThe 10-K's gross margin bridge, 54% utilisation and 29% mix (C23), against fiscal 2024's collapse (C25) and management's statement that it repriced products (C12).
against this
- The 29% from mix reflects a shift toward lasers, which may last if laser content per link rises (C05).
- Take-or-pay pump agreements and NVIDIA's purchase commitment put a floor under part of the volume (C13, C08).
The company
Data inside a datacentre travels between chips as light in glass fibre, because copper wires cannot carry today's speeds far enough. Every fibre link starts with a laser. Lumentum makes those lasers on wafers of indium phosphide, a crystal that can emit light, in two factories in Japan.
It sells the chips to companies that build light modules, sells finished modules itself, and sells switches that steer light between fibres with tiny mirrors. Lasers drove 78% of its chip growth last year. NVIDIA is a buyer and an investor.
The evidence under this - 5 claims
C01facthigh confidence
Lumentum makes optical and photonic products and reports one segment. Components (laser chips, laser assemblies, pump lasers, line subsystems and wavelength management) were 66.5% of fiscal 2026 revenue; Systems (cloud transceiver modules, optical circuit switches and industrial lasers) were 33.5%. It also sells VCSEL lasers for 3D sensing in phones.
C05facthigh confidence
In fiscal 2026 laser chips and laser assemblies made up 78% of the growth in Components revenue, helped by a slight rise in laser-chip prices as buyers moved to 200G per lane. Cloud transceiver revenue rose more than 173% on volume at lower prices, and optical circuit switches added more than $90.0M of revenue.
C39facthigh confidence
Lumentum makes its indium phosphide laser chips in two wafer fabs in Japan and has other plants in the US, Thailand, China, the UK and Slovenia; 79.2% of fiscal 2026 revenue was shipped outside the US, led by Thailand (20.8%), Hong Kong (17.2%) and Mexico (14.7%).
C08facthigh confidence
On 2 March 2026 NVIDIA paid $2.0B for 2,876,415 Lumentum preferred shares at $695.31, convertible one-for-one into common stock after the antitrust waiting period. NVIDIA's release describes non-exclusive multi-year agreements including a multi-billion purchase commitment and capacity access rights for advanced laser components, and says the money supports a new US fab.
C20factmedium confidence
Cignal AI puts the datacom optical component market at $7.7B in 1Q26, double a year earlier, with Innolight at 34% and Chinese-headquartered suppliers at about 60%. It says non-Chinese firms including Broadcom, Coherent and Lumentum supply most of the high-speed EMLs and high-performance light sources, that most high-end lasers are made outside China, and that module assembly rather than lasers is the binding constraint.
How it makes money
Lumentum is paid per part shipped. Two thirds of revenue comes from components, mostly laser chips, and one third from finished products: light modules, optical switches and industrial lasers. Two customers it does not name bought 41.6% of everything last year. Most buyers sign no long-term commitment and order quarter by quarter. In fiscal 2026 the business turned $751.4M of operating cash into $300.1M of free cash after spending $451.3M on factories.
The evidence under this - 4 claims
C01facthigh confidence
Lumentum makes optical and photonic products and reports one segment. Components (laser chips, laser assemblies, pump lasers, line subsystems and wavelength management) were 66.5% of fiscal 2026 revenue; Systems (cloud transceiver modules, optical circuit switches and industrial lasers) were 33.5%. It also sells VCSEL lasers for 3D sensing in phones.
C02facthigh confidence
Fiscal 2026 (year to 27 June 2026) revenue was $3,014.0M, up 83.2%: Components $2,005.6M, up 79.7%, and Systems $1,008.4M, up 90.7%. GAAP gross margin rose to 41.7% from 28.0% and GAAP operating income was $524.8M against a loss of $180.1M.
C06facthigh confidence
One unnamed end customer was 26.6% of fiscal 2026 revenue (15.4% a year earlier) and a second was 15.0% (16.0%). The 10-K says most customers buy on purchase orders with no volume or long-term commitment and can cut or cancel orders at short notice.
C27facthigh confidence
Fiscal 2026 operating cash flow was $751.4M and capital spending $451.3M, leaving $300.1M of free cash flow; capex was $167M in Q4 alone, and purchase obligations stood at $2,354.4M.
Where the money comes from, stream by stream
| Stream | Share of sales (fiscal 2026) | How it earns it |
|---|---|---|
| Components | 66.5% | Laser chips, laser assemblies, pump lasers, line subsystems and wavelength management sold to module, network-equipment and cloud buyers who build them into systems. |
| Systems | 33.5% | Finished products: cloud transceiver modules, optical circuit switches and industrial lasers sold to cloud operators and equipment makers. |
Who runs it
Michael Hurlston has run Lumentum since February 2025, after running Synaptics and, before that, Finisar, a rival he sold. Wajid Ali has run finance since 2019. Insiders own well under 1% of the company, so they are hired managers rather than owners. Their bonus pays on operating profit and sales, and their long-term shares on earnings per share and on beating other stocks. None of it pays on cash, on returns, or on holding down the share count, which rose by more than a quarter last year.
The evidence under this - 4 claims
C48facthigh confidence
Michael Hurlston has been president and chief executive since February 2025, after running Synaptics from 2019 to 2025 and Finisar from 2018 to 2019, which he agreed to sell to II-VI, now Coherent. Wajid Ali has been chief financial officer since February 2019, after the same role at Teledyne; both signed the fiscal 2026 10-K.
C49facthigh confidence
At August 29, 2025 the 14 directors and executive officers as a group owned 307,933 shares, under 1% of the 70,843,924 outstanding; the largest insider holding was former chief executive Alan Lowe's 95,571, and Michael Hurlston held none. There is one class of common stock; Vanguard (10.2%), FMR (9.8%), BlackRock (8.8%), Capital World (8.1%) and Invesco (5.6%) held more than 5%.
against this
Since then insiders sold 211,422 shares and bought none (C35), and the common count rose to 89.7M (C28), so the group's share is likely lower than the table shows.
C50facthigh confidence
The fiscal 2025 bonus paid 60% on adjusted organic operating income and 40% on revenue, and was paid at 132.2% after the board cut a 181.5% result. For fiscal 2026 the bonus is wholly financial and paid in cash, and the performance shares pay half on fiscal 2026 EPS with three-year cliff vesting and half on three-year relative shareholder return; the CEO's one-time $14M performance award vests only if four-year shareholder return beats the S&P 500 Information Technology index.
sourceLumentum Holdings Inc. proxy statement (DEF 14A), filed…primaryForm 10-K for the fiscal year ended June 27, 2026primary
against this
- No measure pays on cash flow, return on capital or the share count, so the 28% rise in common shares in a year (C28) costs the plan nothing.
- The board did cut the fiscal 2025 payout by 27.2 points when the beat came from mix rather than execution, which is discipline the formula alone would not have shown.
C28facthigh confidence
Lumentum had 89.7M common shares on 14 August 2026 against 69.8M on 28 June 2025, plus 2.9M NVIDIA preferred shares that convert one-for-one. It issued about 5.7M shares in April and 5.0M in May 2026 to retire convertible notes; non-GAAP diluted shares were 101.1M in Q4 and are guided at about 102M.
Why it wins, and who could beat it
Why customers come back
The edge is owning the scarce step. Growing laser wafers at high yield is hard, few companies do it at volume, and the industry analyst Cignal AI says a handful of non-Chinese firms, Lumentum among them, supply most of the fastest lasers.
The proof is what buyers pay to secure supply. NVIDIA put $2.0B into the company and committed to multi-billion purchases. Lumentum itself is prepaying its crystal supplier to reserve six years of material. This is a supply edge, not lock-in: buyers can and do qualify other laser makers.
The evidence under this - 6 claims
C39facthigh confidence
Lumentum makes its indium phosphide laser chips in two wafer fabs in Japan and has other plants in the US, Thailand, China, the UK and Slovenia; 79.2% of fiscal 2026 revenue was shipped outside the US, led by Thailand (20.8%), Hong Kong (17.2%) and Mexico (14.7%).
C12management claimmedium confidence
Management says it is still shipping EML lasers behind customer demand and expects to be significantly behind at the end of 2026, that it is 'very much further behind' on high-power lasers for co-packaged optics because demand rose, and that it repriced some products upward in the quarter.
against this
- A shortage is what lets a supplier raise prices without any lasting edge; the same management team saw revenue fall 23% in fiscal 2024 once customers had stocked up (C25).
- Cignal AI says capacity additions for lasers are underway across the industry (C20).
C11facthigh confidence
AXT's own 10-Q says that on 26 July 2026 Lumentum signed a six-year capacity reservation agreement for indium phosphide wafer substrates, paying an initial deposit of $43.5M and a second $43.5M in 2028. Coherent (June 2026, with a $22.3M prepayment) and a Chinese buyer signed similar reservations with AXT.
C08facthigh confidence
On 2 March 2026 NVIDIA paid $2.0B for 2,876,415 Lumentum preferred shares at $695.31, convertible one-for-one into common stock after the antitrust waiting period. NVIDIA's release describes non-exclusive multi-year agreements including a multi-billion purchase commitment and capacity access rights for advanced laser components, and says the money supports a new US fab.
C20factmedium confidence
Cignal AI puts the datacom optical component market at $7.7B in 1Q26, double a year earlier, with Innolight at 34% and Chinese-headquartered suppliers at about 60%. It says non-Chinese firms including Broadcom, Coherent and Lumentum supply most of the high-speed EMLs and high-performance light sources, that most high-end lasers are made outside China, and that module assembly rather than lasers is the binding constraint.
C40inferencemedium confidence
Lumentum's advantage is owning indium phosphide laser wafer capacity and the EML, CW and high-power laser designs at a time when lasers are short; it has no comparable edge in assembling transceiver modules, where Chinese makers are larger.
derivedManagement's shortage account (C12), buyers prepaying for substrate (C11), Cignal AI's statement that a few non-Chinese firms supply most high-speed EMLs and light sources (C20), and LightCounting ranking Lumentum's transceiver sales at the bottom of its top ten (C19).
against this
- Coherent is doubling its own indium phosphide output on larger wafers and supplies NVIDIA too (C17).
- Yuanjie and other Chinese fabs list competing CW lasers and a 200G EML (C18); management says it sees no effect yet but cannot say what their output will be.
- A margin earned in a shortage cannot be told apart from one earned by an edge until supply catches up (C41).
The threat
Coherent, its closest American rival, is expanding its own laser factories and has its own NVIDIA supply deal. Yuanjie, a Chinese laser maker, lists competing chips. In finished modules, Chinese makers such as Innolight are far larger. Google designs its own optical switches, and NVIDIA's newest switches build the optics in, removing the separate module altogether.
The evidence under this - 5 claims
C17facthigh confidence
Coherent's 2026 10-K says it is expanding 6-inch indium phosphide laser capacity in the US and Europe, signed a multi-year supply agreement with NVIDIA for advanced lasers, develops EMLs and 400G-per-lane parts, and is developing an optical circuit switch family on liquid-crystal technology.
C18factmedium confidence
Yuanjie Semiconductor, a Chinese indium phosphide laser maker listed in Shanghai, lists datacom CW lasers up to 100mW and a 200G EML on its own product page.
C19factmedium confidence
LightCounting estimates the optical transceiver market grew about 58% in 2025, with Ethernet 75% of it; Innolight sold $5.3B and Eoptolink $3.5B of transceivers in 2025. On transceiver sales alone it ranks Lumentum at the bottom of its top ten, and says optical circuit switches are gaining adoption beyond Google.
C16facthigh confidence
Google, the largest user of optical circuit switches, describes its Apollo network as the first large-scale production deployment of such switches and says the switch is its own 'internally developed 3D MEMS-based OCS'.
C47facthigh confidence
NVIDIA's own product page says its co-packaged optics switches replace pluggable transceivers by putting silicon photonics in the same package as the switch chip, and that its Ethernet version has ramped to full production.
The rivals: COHR, COHR, NVDA, GOOGL, and 2 more that are private, in-house or listed abroad.
Who else does this, rival by rival
| Ticker | Rival | Where it competes | How far along | Priced against it |
|---|---|---|---|---|
| COHR | Coherent Corp. (6-inch indium phosphide EMLs, CW and high-power lasers, including under its own NVIDIA supply agreement)Priced against it: Same product | Components: laser chips, laser assemblies, pump lasers and line subsystems | On sale | Same product |
| Coherent's optical circuit switch family on liquid-crystal technology | Systems: optical circuit switches | Announced | ||
| Yuanjie Semiconductor (688498.SS), 100mW CW lasers and a 200G EMLPriced against it: Listed abroad | Components: laser chips, laser assemblies, pump lasers and line subsystems | On sale | Listed abroad | |
| Innolight Technology (300308.SZ)Priced against it: Listed abroad | Systems: cloud transceiver modules | On sale | Listed abroad | |
| NVDA | NVIDIA Spectrum-X and Quantum-X Photonics co-packaged switchesPriced against it: One segment only | Systems: cloud transceiver modules | On sale | One segment only |
| GOOGL | Google's internally developed Apollo 3D-MEMS optical circuit switchPriced against it: Different product | Systems: optical circuit switches | On sale | Different product |
How big it could get
How big this could get
The market is large and growing fast. Cignal AI measured $7.7B of datacentre optical parts sold in just the first quarter of 2026, double a year earlier, with Chinese suppliers holding about 60%. LightCounting estimates the module market grew about 58% in 2025. Buyers keep spending: Alphabet's own filing shows its spending on equipment and buildings up 103% in the first half of 2026. Nobody publishes how many lasers ship or at what price.
The evidence under this - 3 claims
C20factmedium confidence
Cignal AI puts the datacom optical component market at $7.7B in 1Q26, double a year earlier, with Innolight at 34% and Chinese-headquartered suppliers at about 60%. It says non-Chinese firms including Broadcom, Coherent and Lumentum supply most of the high-speed EMLs and high-performance light sources, that most high-end lasers are made outside China, and that module assembly rather than lasers is the binding constraint.
C19factmedium confidence
LightCounting estimates the optical transceiver market grew about 58% in 2025, with Ethernet 75% of it; Innolight sold $5.3B and Eoptolink $3.5B of transceivers in 2025. On transceiver sales alone it ranks Lumentum at the bottom of its top ten, and says optical circuit switches are gaining adoption beyond Google.
C43facthigh confidence
Alphabet's own 10-Q shows capital spending of $80,598M in the six months to 30 June 2026 against $39,643M a year earlier, up 103%.
Who has signed
NVIDIA's deal includes a multi-billion purchase commitment, but neither the size nor the length is disclosed. Management says most new deals for pump lasers, which power amplifiers on long fibre links, run three years with minimum purchases; none is filed. The lead customer for the next laser product has ordered for delivery in late 2027.
The evidence under this - 3 claims
C08facthigh confidence
On 2 March 2026 NVIDIA paid $2.0B for 2,876,415 Lumentum preferred shares at $695.31, convertible one-for-one into common stock after the antitrust waiting period. NVIDIA's release describes non-exclusive multi-year agreements including a multi-billion purchase commitment and capacity access rights for advanced laser components, and says the money supports a new US fab.
C13management claimlow confidence
Management says Lumentum holds roughly 70% to 80% of the pump-laser market, that pump shipments rose more than 80% on the year and should rise about fourfold over the next several quarters, and that most new pump agreements with equipment makers run three years and are largely take-or-pay with pricing levers.
against this
- No pump agreement is filed and the 10-K says most customers have no long-term purchase commitments (C06).
- Coherent's 10-K describes its own pump-laser and Raman pump portfolio for the same subsea and terrestrial markets (C17).
C15management claimlow confidence
Management says its lead co-packaged-optics customer will start buying ultra-high-power lasers in volume in the second half of calendar 2027 for 2028 deployments, that it has a first order for its external light source module, that such laser revenue should reach about $50M a quarter by the end of 2026 and pass $100M in fiscal Q3 2027.
sourceQ4 fiscal 2026 earnings call transcript (FMP), held 2026-08-11primaryFourth quarter and fiscal 2026 results release (8-K Exhibit…primary
against this
- Management says no current processor has a fast enough link to fit these optics, so the ramp waits on new chips due mid-2027 to early 2028.
- Coherent's 10-K describes its own NVIDIA laser supply agreement for the same platform (C17).
The results
The numbers
Is it growing?Fast
Sales grew 83% in the year to Jun 2026, faster than the 21% in the year before.
Is it profitable?Healthy
Operating margin is 17%, up from −6.5% in the year to Jul 2023.
Does growth pay off?Pays off
Running costs take 24¢ of each sales dollar, down from 28¢ in the year to Jul 2022.
Does it earn good returns?Poor
Shareholders' money lost 240% a year, down from 10% in the year to Jul 2022.
Is it making cash?Solid
It turned 10.0% of sales into free cash, $300M over the year.
Is the balance sheet safe?Light debt
It owes $496M more than the cash it holds, about 0.7 years of the cash its operations bring in.
Are shares being diluted?Stable
The share count rose 0.5% in 4.0 years, and pay in shares costs 5.5% of sales.
All the numbers
Filed figures from the company's 10-K and 10-Q, read 2026-10-04. Fiscal years end in June.
| Jul 2022 | Jul 2023 | Jun 2024 | Jun 2025 | Jun 2026 | |
|---|---|---|---|---|---|
| Size and growth | |||||
| Sales | $1.71B | $1.77B | $1.36B | $1.65B | $3.01B |
| Sales growth | −1.7% | +3.2% | −23% | +21% | +83% |
| Profit | |||||
| Gross margin | 46% | 32% | 19% | 28% | 42% |
| Operating margin | 18% | −6.5% | −32% | −11% | 17% |
| Net margin | 12% | −7.4% | −40% | 1.6% | −230% |
| What growth costs, per sales dollar | |||||
| Research and development | 13% | 17% | 22% | 18% | 12% |
| Selling, general and admin | 16% | 20% | 23% | 21% | 12% |
| Pay in shares | 6.0% | 8.8% | 9.5% | 11% | 5.5% |
| Capital spending | 5.3% | 7.3% | 9.8% | 14% | 15% |
| Cash | |||||
| Cash from operations | $459M | $180M | $24.7M | $126M | $751M |
| Free cash flow | $368M | $51.3M | −$108M | −$105M | $300M |
| Balance sheet | |||||
| Cash and short-term investments | $2.55B | $2.01B | $887M | $877M | $2.74B |
| Debt | $1.88B | - | $2.50B | $2.58B | $3.23B |
| Net cash | $673M | - | −$1.62B | −$1.71B | −$496M |
| Returns and shares | |||||
| Shares (diluted) | 74.2M | 68.3M | 67.3M | 69.6M | 74.6M |
What growth costs
Growth has made Lumentum more profitable: research and office costs barely rose while sales more than doubled, so each new sale costs less to win. What grows with sales now is factory building, which takes a far bigger share of each sales dollar than five years ago. A downturn reverses the gain, as fiscal 2024 showed when sales fell and losses widened.
The evidence under this - 3 claims
C52facthigh confidence
Per sales dollar, R&D fell from 22.2 cents in fiscal 2024 to 11.8 in fiscal 2026 and selling, general and administrative from 22.9 to 12.1, close to fiscal 2021's 12.3 and 13.9, while R&D dollars rose 18.0% and revenue 2.2 times. Capital spending went the other way, from 4.9 cents in fiscal 2021 and 9.8 in fiscal 2024 to 15.0. Share pay on the filer's AllocatedShareBasedCompensationExpense tag was 5.5 cents in fiscal 2026 ($165.2M); C37's $191.3M (6.3%) adds payroll taxes on the awards.
sourceLumentum XBRL company facts, fiscal 2021 to fiscal 2026,…primaryForm 10-K for the fiscal year ended June 27, 2026primary
against this
In fiscal 2024, when revenue fell 23.1%, R&D rose to 22.2 cents per sales dollar and the operating loss reached $434.0M (C25), so the leverage runs both ways.
C27facthigh confidence
Fiscal 2026 operating cash flow was $751.4M and capital spending $451.3M, leaving $300.1M of free cash flow; capex was $167M in Q4 alone, and purchase obligations stood at $2,354.4M.
C25facthigh confidence
In fiscal 2024 revenue fell 23.1% to $1,359.2M and gross margin fell to 18.5%; the 10-K says customers had built inventory during shortages and then ran it down, leaving factories underused.
The last report (11 Aug)
Quarter ended June 2026, filed figures.
109%
Sales growth
against the same quarter a year earlier
24.5%
Growth from the quarter before
against 21.5% the quarter before that
28¢
Operating profit
per dollar of sales
Q4 fiscal 2026 was another record: revenue doubled from a year earlier to $1.01B and grew 24.5% in three months. Profit grew faster, because factories ran full and the company raised some prices. The 10-K says fuller factories explain about half of the year's jump in margin.
Management guided the next quarter to $1.225B to $1.275B, more than double a year earlier, and said it still cannot make enough lasers. Its optical switch line expects its first quarter above $100M.
What it did to the thesisIt confirmed the laser shortage and the pricing power it brings. It also showed that much of the margin gain came from full factories and higher prices, which can fade when supply catches up. The price needs far more, so the view stays Unattractive.
The quarter in detail
Sales growth from the previous quarter, filed figures.
Earnings per share $3.23 against $2.97 expected.
The evidence under this - 5 claims
C03facthigh confidence
Q4 fiscal 2026 (quarter to 27 June 2026) revenue was $1,006.3M, up 109.3% on the year and 24.5% on the quarter. GAAP gross margin was 47.4% and GAAP operating income $279.3M, a 27.8% margin; the non-GAAP operating margin was 36.6%.
C23facthigh confidence
Of the rise in GAAP gross margin from 28.0% to 41.7% in fiscal 2026, the 10-K attributes about 54% to lower manufacturing cost as a share of revenue from fuller factories, 29% to a mix shift to higher-margin products and 17% to lower amortisation. The CFO adds that Q4's 50.4% non-GAAP gross margin also reflected higher prices on some products.
C04management claimmedium confidence
Management guides Q1 fiscal 2027 (quarter to late September 2026) revenue of $1.225B to $1.275B, a non-GAAP operating margin of 39.5% to 40.5% and non-GAAP diluted EPS of $4.05 to $4.35 on about 102M shares; the CFO says the midpoint is more than 130% growth.
sourceFourth quarter and fiscal 2026 results release (8-K Exhibit…primaryQ4 fiscal 2026 earnings call transcript (FMP), held 2026-08-11primary
against this
- Q3 fiscal 2026 revenue of $808.4M came in just below the $810.2M vendor estimate, so the beats have been on earnings more than on revenue (C34).
- Fiscal 2024 revenue fell 23.1% when customers worked down inventory; a guide is not a contract and most customers sign no purchase commitment (C25, C06).
C12management claimmedium confidence
Management says it is still shipping EML lasers behind customer demand and expects to be significantly behind at the end of 2026, that it is 'very much further behind' on high-power lasers for co-packaged optics because demand rose, and that it repriced some products upward in the quarter.
against this
- A shortage is what lets a supplier raise prices without any lasting edge; the same management team saw revenue fall 23% in fiscal 2024 once customers had stocked up (C25).
- Cignal AI says capacity additions for lasers are underway across the industry (C20).
C14management claimmedium confidence
Management says optical circuit switch revenue doubled from Q3 to Q4 and will pass $100M in Q1 fiscal 2027, that it is tracking to $400M or more for the second half of calendar 2026 after early supply problems, that it is the only merchant supplier, and that it expects to become the main supplier at a customer that also builds its own switch in early 2027.
against this
- Google, the largest user, built its own switch and runs it in production (C16).
- Coherent is developing a switch family of its own on liquid-crystal technology (C17).
What management did with the money
Management used its rising share price to cut debt: it swapped convertible notes for about 10.7M new shares this spring, sold a $2.0B stake to NVIDIA and bought a factory in North Carolina for $38.0M. The result is $2.74B of cash, but 28% more shares than a year ago.
Insiders in 2026Q3: 20 purchases and 86 sales, from their Form 4 filings.
The evidence under this - 4 claims
C28facthigh confidence
Lumentum had 89.7M common shares on 14 August 2026 against 69.8M on 28 June 2025, plus 2.9M NVIDIA preferred shares that convert one-for-one. It issued about 5.7M shares in April and 5.0M in May 2026 to retire convertible notes; non-GAAP diluted shares were 101.1M in Q4 and are guided at about 102M.
C26facthigh confidence
At 27 June 2026 Lumentum held $2,738.4M of cash and short-term investments against $1,554.3M of convertible note principal (2026 notes $54.8M, 2028 $179.6M, 2029 $54.9M, 2032 $1,265.0M) and $92.8M of term loans; its $400M revolver was undrawn. Note principal must be settled in cash.
C09facthigh confidence
Lumentum bought an operating wafer fab in Greensboro, North Carolina for $38.0M in cash on 17 March 2026, and agreed to make wafers for the seller for about 15 months.
C44facthigh confidence
The convertible notes convert at about $99.29 (2026 notes), $131.03 (2028), $69.54 (2029) and $187.77 (2032); a capped call offsets 2032 dilution only up to $268.24. By 14 August holders had asked to convert $757.8M of notes, $519.4M of it settled in fiscal 2026; principal is paid in cash and the excess in cash or shares at Lumentum's choice.
The price, and where we disagree
In short. Priced for perfection. The price pays for growth well beyond what analysts themselves expect, so even a business that keeps beating forecasts can disappoint the share price.
Share price
$971.26
close,
Price for each $1 of sales
25.1
its 6-year normal 3.4
Price for each $1 of net worth
15.6
its 6-year normal 3.3
The shares are up about six-fold in a year, and most of that came from buyers paying more for each dollar of sales, not from the sales themselves. They fell 43% between May and July on fears about new laser technologies and Chinese competition, then recovered after the August results.
The next test is close. Results for Q1 fiscal 2027 are due around 3 November, and analysts already expect revenue to triple from fiscal 2026 by fiscal 2028.
The evidence under this - 4 claims
C33facthigh confidence
The shares closed at $971.26 on 30 September 2026, up 497% in 252 sessions; over that year revenue per share rose 77% and the price paid for each dollar of trailing revenue rose 238%. They peaked at $1,053.09 on 11 May 2026 and fell to $602.35 on 29 July before recovering.
C34factmedium confidence
After Q3 results on 5 May 2026, with revenue of $808.4M just below the $810.2M estimate, the shares fell 5.1% the next day and, after a May peak, fell 43% to $602.35 by 29 July; on the Q4 call management addressed 'recent market noise around co-packaged and near-packaged optics' and was asked about new Chinese indium phosphide fabs. After Q4 results the shares rose 13.6%.
C32factmedium confidence
18 analysts rate Lumentum a buy, 7 a hold and none a sell; the positive share has risen to 85.2% of 27 from 78.3% of 23 in February. Consensus is $9.6B of revenue and $34.08 of EPS for fiscal 2028 (11 analysts) and $13.6B for fiscal 2029 (3 analysts). Fiscal 2026 revenue was $3,014.0M.
C04management claimmedium confidence
Management guides Q1 fiscal 2027 (quarter to late September 2026) revenue of $1.225B to $1.275B, a non-GAAP operating margin of 39.5% to 40.5% and non-GAAP diluted EPS of $4.05 to $4.35 on about 102M shares; the CFO says the midpoint is more than 130% growth.
sourceFourth quarter and fiscal 2026 results release (8-K Exhibit…primaryQ4 fiscal 2026 earnings call transcript (FMP), held 2026-08-11primary
against this
- Q3 fiscal 2026 revenue of $808.4M came in just below the $810.2M vendor estimate, so the beats have been on earnings more than on revenue (C34).
- Fiscal 2024 revenue fell 23.1% when customers worked down inventory; a guide is not a contract and most customers sign no purchase commitment (C25, C06).
The betPriced for success
If it works
1.2×
from today's value, at the stated multiple
If it fails
keep up to 31%
of today's market value: at most, with what is left counted at book value
How we read the multiple
Counting every share, including NVIDIA's stake and shares owed to bondholders, buyers pay about 88 times last quarter's operating profit, taken over a full year.
To earn 6% a year after tax on that price, a common yardstick, Lumentum must:
- Earn about $7.1B of operating profit a year, about 4.3 times the pace its latest outlook implies.
- At today's 33 cents of profit per sales dollar, that takes about $21B of sales.
- Sales run near $5B a year today; analysts expect $13.6B even by fiscal 2029.
Against its own history. Far dearer than its own normal on every measure: buyers are paying for years of growth in advance, in a business whose sales fell sharply only two years ago.
The evidence under this - 4 claims
C29estimatemedium confidence
Counting every share at the $971.26 close of 30 September 2026, Lumentum is worth about $99.9B and its enterprise value is about $98.8B, not the vendor's $75.6B market value, which uses about 77.8M shares.
derived89.7M common plus 2.876M preferred (C28), 3.0M shares under equity awards (10-K equity note), and about 7.3M net shares from the convertibles: each note's conversion shares less the shares its cash principal covers, at the conversion prices in C44, less about 0.56M offset by the 2032 capped call up to $268.24 - about 102.9M in all. Net cash is $2,738.4M less $1,554.3M of note principal and $92.8M of loans (C26).
against this
- Some note conversions requested by 14 August may already sit in the 89.7M common, which would slightly overstate the total; the company's own diluted count of about 102M agrees within 1%.
- Lumentum may settle conversion premiums in cash rather than shares, which lowers the share count and the cash by the same value.
C30estimatemedium confidence
At that enterprise value Lumentum trades at about 188 times fiscal 2026 GAAP operating income of $524.8M, about 88 times the Q4 run-rate of $1,117.2M (four times $279.3M), and about 49 times four quarters of the Q1 guide's roughly $500M of non-GAAP operating income.
derivedEnterprise value of about $98.8B (C29) over GAAP operating income (C02, C03) and over 40% of $1.25B, the guide's midpoints (C04).
against this
- Revenue grew 24.5% from Q3 to Q4, so any trailing multiple falls fast if growth holds: two more quarters like it would roughly halve the run-rate multiple.
- Non-GAAP excludes $191.3M a year of share pay and $135.7M of amortisation (C37), so the 49 times flatters the cost of running the business.
C31estimatemedium confidence
For a 6% after-tax earnings yield on the enterprise value, Lumentum's GAAP operating income would have to reach about $7.1B a year, about 4.3 times the roughly $1.64B a year implied by the Q1 guide; at the guide's GAAP margin near 33% that is revenue of about $21B, against $5.0B annualised today and analysts' $9.6B for fiscal 2028.
derived$98.8B (C29) times 6%, divided by one minus the company's 16.5% long-term tax rate (C04's release). Q1 GAAP run-rate: the guide's $500M of non-GAAP operating income less Q4's $89.5M of share pay, amortisation and other charges (C37), times four. Consensus from the pack (C32).
against this
- Cignal AI's datacom component market was $7.7B in a single quarter and doubled in a year (C20); if that pace held, $21B would be about a third of it by 2028.
- Analysts project $13.6B for fiscal 2029, so the bar is roughly the consensus path carried one more year at about 50% growth.
C32factmedium confidence
18 analysts rate Lumentum a buy, 7 a hold and none a sell; the positive share has risen to 85.2% of 27 from 78.3% of 23 in February. Consensus is $9.6B of revenue and $34.08 of EPS for fiscal 2028 (11 analysts) and $13.6B for fiscal 2029 (3 analysts). Fiscal 2026 revenue was $3,014.0M.
Priced against its rivals
Only Coherent sells the same thing to the same buyers as a large part of what it does. A price comparison needs at least two, so the price is judged against its own history instead.
The bet: what it pays if it works
Even if it works, the shares look expensive. The best case we can defend is the sales analysts expect in three years, at the margin the company now guides to. Valued as a laser maker at the top of its cycle, that is only a little above today's value.
If it fails, supply catches up, margins fall as they did when buyers stopped ordering in 2024, and shareholders keep a business earning around today's pace plus spare cash: under a third of today's value.
| Operating profit in two to three years | Dollars of yearly revenue needed | At the stated multiple |
|---|---|---|
| $3.17B | about 9.6B at 100% kept | 0.8× |
| $4.49B (the big win) | about 13.6B at 100% kept | 1.2× |
| $7.10B | about 21.5B at 100% kept | 1.9× |
To pay 2× (a Fair bet) it would need about $7.52B of operating profit (about 22.8B dollars of yearly revenue); to pay 5× (a Cheap bet), about $18.80B of operating profit (about 57.0B dollars of yearly revenue), at the same multiple.
The steps it has to take
- Done NVIDIA's $2.0B preferred purchase and multi-year purchase commitment
- Done Six-year indium phosphide substrate reservation signed with AXT
- In progress Q1 fiscal 2027 revenue of $1.25B or more at a non-GAAP operating margin of 39.5% or more due 2026-11-03
- In progress Optical circuit switch revenue of $400M or more in the second half of calendar 2026 due 2027-02
- Not started High-power laser revenue for co-packaged optics past $100M a quarter due 2027-05
- Not started Quarterly GAAP operating income of $700M due 2027-08
- Not started The largest customer below 25% of annual revenue due 2027-08
- Not started First revenue from the Greensboro indium phosphide fab due 2028-03
The detail behind the label
Rating
Expensive
the big win's payoff against the 2× and 5× lines
Cheap bet at about
≈ $235.63
76% below the price (close, )
The evidence under this - 6 claims
C32factmedium confidence
18 analysts rate Lumentum a buy, 7 a hold and none a sell; the positive share has risen to 85.2% of 27 from 78.3% of 23 in February. Consensus is $9.6B of revenue and $34.08 of EPS for fiscal 2028 (11 analysts) and $13.6B for fiscal 2029 (3 analysts). Fiscal 2026 revenue was $3,014.0M.
C31estimatemedium confidence
For a 6% after-tax earnings yield on the enterprise value, Lumentum's GAAP operating income would have to reach about $7.1B a year, about 4.3 times the roughly $1.64B a year implied by the Q1 guide; at the guide's GAAP margin near 33% that is revenue of about $21B, against $5.0B annualised today and analysts' $9.6B for fiscal 2028.
derived$98.8B (C29) times 6%, divided by one minus the company's 16.5% long-term tax rate (C04's release). Q1 GAAP run-rate: the guide's $500M of non-GAAP operating income less Q4's $89.5M of share pay, amortisation and other charges (C37), times four. Consensus from the pack (C32).
against this
- Cignal AI's datacom component market was $7.7B in a single quarter and doubled in a year (C20); if that pace held, $21B would be about a third of it by 2028.
- Analysts project $13.6B for fiscal 2029, so the bar is roughly the consensus path carried one more year at about 50% growth.
C30estimatemedium confidence
At that enterprise value Lumentum trades at about 188 times fiscal 2026 GAAP operating income of $524.8M, about 88 times the Q4 run-rate of $1,117.2M (four times $279.3M), and about 49 times four quarters of the Q1 guide's roughly $500M of non-GAAP operating income.
derivedEnterprise value of about $98.8B (C29) over GAAP operating income (C02, C03) and over 40% of $1.25B, the guide's midpoints (C04).
against this
- Revenue grew 24.5% from Q3 to Q4, so any trailing multiple falls fast if growth holds: two more quarters like it would roughly halve the run-rate multiple.
- Non-GAAP excludes $191.3M a year of share pay and $135.7M of amortisation (C37), so the 49 times flatters the cost of running the business.
C41inferencemedium confidence
Much of fiscal 2026's margin gain is cyclical: fuller factories and shortage pricing, the same levers that pushed gross margin down to 18.5% in fiscal 2024 when customers stopped ordering.
derivedThe 10-K's gross margin bridge, 54% utilisation and 29% mix (C23), against fiscal 2024's collapse (C25) and management's statement that it repriced products (C12).
against this
- The 29% from mix reflects a shift toward lasers, which may last if laser content per link rises (C05).
- Take-or-pay pump agreements and NVIDIA's purchase commitment put a floor under part of the volume (C13, C08).
C25facthigh confidence
In fiscal 2024 revenue fell 23.1% to $1,359.2M and gross margin fell to 18.5%; the 10-K says customers had built inventory during shortages and then ran it down, leaving factories underused.
C26facthigh confidence
At 27 June 2026 Lumentum held $2,738.4M of cash and short-term investments against $1,554.3M of convertible note principal (2026 notes $54.8M, 2028 $179.6M, 2029 $54.9M, 2032 $1,265.0M) and $92.8M of term loans; its $400M revolver was undrawn. Note principal must be settled in cash.
Where we disagree with the market
The market believes
Scarce lasers make Lumentum an AI winner whose sales triple by fiscal 2028, justifying today's price.
We believe
The shortage is real, but the price needs more than tripling, and part of today's margin will fade when supply catches up.
Over half of last year's margin jump came from running factories full, the same lever that pushed margins down to 18.5% in fiscal 2024 when buyers stopped ordering.
We would be wrong if quarterly operating profit passes $700M by mid-2027 with sales still growing; at today's growth rate, a few more quarters like Q4 would shrink the price per dollar of profit quickly.
What analysts say, and the evidence
Analysts positive
85%
of 27, 1 Oct
Four months earlier
80%
of 25, 1 Jun
The evidence under this - 6 claims
C32factmedium confidence
18 analysts rate Lumentum a buy, 7 a hold and none a sell; the positive share has risen to 85.2% of 27 from 78.3% of 23 in February. Consensus is $9.6B of revenue and $34.08 of EPS for fiscal 2028 (11 analysts) and $13.6B for fiscal 2029 (3 analysts). Fiscal 2026 revenue was $3,014.0M.
C33facthigh confidence
The shares closed at $971.26 on 30 September 2026, up 497% in 252 sessions; over that year revenue per share rose 77% and the price paid for each dollar of trailing revenue rose 238%. They peaked at $1,053.09 on 11 May 2026 and fell to $602.35 on 29 July before recovering.
C31estimatemedium confidence
For a 6% after-tax earnings yield on the enterprise value, Lumentum's GAAP operating income would have to reach about $7.1B a year, about 4.3 times the roughly $1.64B a year implied by the Q1 guide; at the guide's GAAP margin near 33% that is revenue of about $21B, against $5.0B annualised today and analysts' $9.6B for fiscal 2028.
derived$98.8B (C29) times 6%, divided by one minus the company's 16.5% long-term tax rate (C04's release). Q1 GAAP run-rate: the guide's $500M of non-GAAP operating income less Q4's $89.5M of share pay, amortisation and other charges (C37), times four. Consensus from the pack (C32).
against this
- Cignal AI's datacom component market was $7.7B in a single quarter and doubled in a year (C20); if that pace held, $21B would be about a third of it by 2028.
- Analysts project $13.6B for fiscal 2029, so the bar is roughly the consensus path carried one more year at about 50% growth.
C41inferencemedium confidence
Much of fiscal 2026's margin gain is cyclical: fuller factories and shortage pricing, the same levers that pushed gross margin down to 18.5% in fiscal 2024 when customers stopped ordering.
derivedThe 10-K's gross margin bridge, 54% utilisation and 29% mix (C23), against fiscal 2024's collapse (C25) and management's statement that it repriced products (C12).
against this
- The 29% from mix reflects a shift toward lasers, which may last if laser content per link rises (C05).
- Take-or-pay pump agreements and NVIDIA's purchase commitment put a floor under part of the volume (C13, C08).
C25facthigh confidence
In fiscal 2024 revenue fell 23.1% to $1,359.2M and gross margin fell to 18.5%; the 10-K says customers had built inventory during shortages and then ran it down, leaving factories underused.
C30estimatemedium confidence
At that enterprise value Lumentum trades at about 188 times fiscal 2026 GAAP operating income of $524.8M, about 88 times the Q4 run-rate of $1,117.2M (four times $279.3M), and about 49 times four quarters of the Q1 guide's roughly $500M of non-GAAP operating income.
derivedEnterprise value of about $98.8B (C29) over GAAP operating income (C02, C03) and over 40% of $1.25B, the guide's midpoints (C04).
against this
- Revenue grew 24.5% from Q3 to Q4, so any trailing multiple falls fast if growth holds: two more quarters like it would roughly halve the run-rate multiple.
- Non-GAAP excludes $191.3M a year of share pay and $135.7M of amortisation (C37), so the 49 times flatters the cost of running the business.
What could go wrong, and how we would know
The risks
- Two customers, unnamed. Two buyers took 41.6% of revenue and can cut orders at short notice; neither has signed a volume commitment.
- The cycle turns. In fiscal 2024 sales fell 23.1% and margins collapsed when buyers worked through stock. Today's margins lean on full factories.
- Rivals add laser capacity. Coherent is expanding its own laser factories and Chinese makers list competing chips, which could end the shortage and the price increases.
- An open export inquiry. US regulators subpoenaed Lumentum in 2024 over past sales to Huawei; no outcome has been disclosed.
- More shares as it rises. Above about $268 a share, every rise adds new shares owed to bondholders, so shareholders keep less of the gain.
The evidence under this - 6 claims
C06facthigh confidence
One unnamed end customer was 26.6% of fiscal 2026 revenue (15.4% a year earlier) and a second was 15.0% (16.0%). The 10-K says most customers buy on purchase orders with no volume or long-term commitment and can cut or cancel orders at short notice.
C41inferencemedium confidence
Much of fiscal 2026's margin gain is cyclical: fuller factories and shortage pricing, the same levers that pushed gross margin down to 18.5% in fiscal 2024 when customers stopped ordering.
derivedThe 10-K's gross margin bridge, 54% utilisation and 29% mix (C23), against fiscal 2024's collapse (C25) and management's statement that it repriced products (C12).
against this
- The 29% from mix reflects a shift toward lasers, which may last if laser content per link rises (C05).
- Take-or-pay pump agreements and NVIDIA's purchase commitment put a floor under part of the volume (C13, C08).
C17facthigh confidence
Coherent's 2026 10-K says it is expanding 6-inch indium phosphide laser capacity in the US and Europe, signed a multi-year supply agreement with NVIDIA for advanced lasers, develops EMLs and 400G-per-lane parts, and is developing an optical circuit switch family on liquid-crystal technology.
C18factmedium confidence
Yuanjie Semiconductor, a Chinese indium phosphide laser maker listed in Shanghai, lists datacom CW lasers up to 100mW and a 200G EML on its own product page.
C22facthigh confidence
Lumentum stopped all shipments to Huawei, once its largest networking customer in China, in early 2024, and in August 2024 received subpoenas from the Commerce Department's BIS and from the Justice Department about that business; it says it is cooperating.
C45estimatemedium confidence
Above $268.24 every dollar the share price rises adds 2032-note shares that the capped call no longer offsets; at $971.26 the notes add about 7.3M shares, about 8% on top of common and preferred stock.
derivedConversion shares per note series at the prices in C44, less the shares bought with cash principal, less the capped call's value up to its cap (C29).
against this
Lumentum can settle the excess in cash, which avoids the shares but spends the cash; either way the gain goes to noteholders.
What we still do not know
- Who the two largest customers are; Lumentum names neither.
- How big NVIDIA's purchase commitment is, how long it runs and whether it can be cancelled.
- How many competing lasers Chinese makers such as Yuanjie actually ship.
- Whether management's estimate that it holds 70% to 80% of pump lasers holds up from outside.
The evidence under this - 4 claims
C06facthigh confidence
One unnamed end customer was 26.6% of fiscal 2026 revenue (15.4% a year earlier) and a second was 15.0% (16.0%). The 10-K says most customers buy on purchase orders with no volume or long-term commitment and can cut or cancel orders at short notice.
C08facthigh confidence
On 2 March 2026 NVIDIA paid $2.0B for 2,876,415 Lumentum preferred shares at $695.31, convertible one-for-one into common stock after the antitrust waiting period. NVIDIA's release describes non-exclusive multi-year agreements including a multi-billion purchase commitment and capacity access rights for advanced laser components, and says the money supports a new US fab.
C18factmedium confidence
Yuanjie Semiconductor, a Chinese indium phosphide laser maker listed in Shanghai, lists datacom CW lasers up to 100mW and a 200G EML on its own product page.
C13management claimlow confidence
Management says Lumentum holds roughly 70% to 80% of the pump-laser market, that pump shipments rose more than 80% on the year and should rise about fourfold over the next several quarters, and that most new pump agreements with equipment makers run three years and are largely take-or-pay with pricing levers.
against this
- No pump agreement is filed and the 10-K says most customers have no long-term purchase commitments (C06).
- Coherent's 10-K describes its own pump-laser and Raman pump portfolio for the same subsea and terrestrial markets (C17).
What would change our view
- Unattractive→NeutralA price the run-rate profit can carry
It needs:
- ○The whole business, counting debt and every share, costs 40 times a full year of last quarter's operating profit, down from about 88.about ≈$438.99 today, 55% below the last close
- Unattractive→NeutralThe business grows into the price
It needs all of:
- ○Operating profit reaches $700M in a single quarter, from $279.3M in Q4 fiscal 2026.checked at the next results, due by 3 Nov
- ○The largest customer falls below 25% of yearly revenue, from 26.6%.checked at the next results, due by 3 Nov
We would also be wrong if
- Sales fall from one quarter to the next.
- Gross margin before one-off items drops below 45% while sales still grow.
- The next big laser customer's ramp slips past 2027.
What is coming
- 3 November 2026 Q1 fiscal 2027 results: Revenue against the $1.25B midpoint, non-GAAP operating margin against 39.5%, switch revenue past $100M, and whether the Q2 guide reaches $1.40B.
Every dated event ahead
- 3 November 2026 Q1 fiscal 2027 results: Revenue against the $1.25B midpoint, non-GAAP operating margin against 39.5%, switch revenue past $100M, and whether the Q2 guide reaches $1.40B.
- 15 December 2026 2026 convertible notes mature: How the last 2026 notes settle and how many new shares conversions add, the dilution per-share capture already scores.
- February 2027 Q2 fiscal 2027 results: Whether switch revenue reached the promised $400M-plus for the second half of 2026 and co-packaged laser sales about $50M a quarter.
- December 2027 Lead co-packaged-optics customer starts volume laser buying: Whether high-power laser orders arrive in the second half of 2027 as management says; a slip leaves growth resting on today's shortage.
Since we wrote this
Written
1 Oct
Price the thesis read
$971.26
30 Sep
- 5 OctThesis reviewThe bet now names what it ridesThe owner asked that every bet name the macro trend behind it, after BWXT's bet was missing its chief executive's case for nuclear over gas.
- 4 OctThesis reviewOwner's checklist: revenue streams, cost of growth, management, catalystsThe owner's checklist found the method silent on who runs the company, what growth costs, where the money comes from and what is dated ahead; this pass fills those four blocks from the proxy and filings.
- 1 OctThesis writtenUnattractive, medium convictionA real laser shortage and a strong business, at a price that needs operating profit over four times the guided pace.
Also checked 4 times with nothing new to act on.
Sources 18
Where this came from
Sources - 18
Every claim above cites one of these, or states the reasoning that derived it. The quote is frozen at the date it was read: a link can rot, and an agent fetch returns a reading of a page rather than the page. Backs counts the whole claim ledger, so it can name a claim this page does not surface.
- S01primarycompany filing2026-08-17Item 1 products, customers table, competition section, manufacturing sites and headcount; risk factors on Huawei, customers, competition and manufacturing; MD&A growth drivers, gross margin bridge, geography, cash flows, contractual obligations; debt note with each convertible's terms, conversions and exchanges; NVIDIA preferred stock terms; Greensboro acquisition note; cover share countbacksC01C02C05C06C07C08C09C22C23C25C26C27C28C38C39C44C48C50C51C52C53
- S02primarycompany filing2026-08-11Q4 and full-year income statement and balance sheet, Components and Systems revenue, GAAP to non-GAAP reconciliation, share counts, Q1 fiscal 2027 guidancebacksC02C03C04C15C26C28C32C33C37
- S03primarytranscript2026-08-11Q4 fiscal 2026 earnings call transcript (FMP), held 2026-08-11data/cache/transcripts/LITE-2026Q4.jsonmanagement on supply against demand, pricing, pump-laser share and long-term agreements, OCS, CPO and NPO timing, Greensboro, the AXT deal and Chinese laser fabs; 18 analyst turns from 9 analysts, a separate origin from the answers
We're still shipping behind customer demand on EML. I think what surprised us is high-powered lasers, right?
backsC04C10C12C13C14C15C23C34C39C46 - S04primarycompany filing2026-03-022,876,415 preferred shares at $695.31 for $2.0B, one-for-one conversion after the antitrust waiting period, voting and dividend termsbacksC08
- S05primarycompany filing2026-08-13the supplier's own description of the Lumentum capacity reservation agreement (six years, two $43.5M deposits) and of the similar agreements Coherent and Casela signed for indium phosphide substratesbacksC11
- S06primaryother2022-08-22the largest optical-circuit-switch user describing its own internally developed switch in production
we describe Apollo, to the best of our knowledge, the world's first large-scale production deployment of optical circuit switches (OCSes) for datacenter networking ... implementation details of our internally developed 3D MEMS-based OCS
backsC16 - S07primarycompany filing2026-08-14a rival's own account of its 6-inch indium phosphide expansion in the US and Europe, its NVIDIA laser supply agreement, its EML and 400G-per-lane work and its optical circuit switch programmebacksC17
- S08primaryother2026-10-01Yuanjie Semiconductor Technology (688498.SS) product list and company profile Yuanjie Semiconductor Technology Co., Ltd.a Chinese indium phosphide laser maker listing datacom CW lasers up to 100mW and a 200G EML
Datacom CW 100mW 1310nm CW DFB --> --> --> Datacom 200G 1270～1330 CWDM4 PAM4 Single &Differential Drive EML
backsC18 - S09primaryindustry data2026-05-31the independent supplier ranking, the two Chinese leaders' revenue, the estimated growth of the transceiver market, the Ethernet share, and that optical circuit switches are spreading beyond Google
The company reported $5.3 billion in revenue for 2025 - up 61% and just above of our estimates of 58% growth in the total transceiver market last year. ... Optical circuit switches are gaining adoption beyond Google. ... Neither CIG nor Lumentum plan to stay at the bottom of the list for much longer.
backsC19 - S10primaryindustry data2026-08-04the size of the datacom optical component market in 1Q26, Chinese suppliers' share, where the high-end lasers are made, and the analyst's view that the reported ban will not stick
Innolight, to which Cignal AI attributes $2.6B of datacom optical component revenue in 1Q26, or 34% of the $7.7B worldwide market. ... Together, these companies supply most of the high-speed EMLs and assemblies as well as high-performance light sources, but they don't have the manufacturing throughput to fill the void. ... Most of the lasers at the high end are made outside of China
backsC20C21 - S11secondaryvendor data2026-10-01Research pack frozen beside this thesis, 2026-10-01content/LITE/research-pack.jsonclose of $971.26 on 2026-09-30, the 252-day return and its decomposition, daily closes, analyst split and its history, consensus estimates, short interest, measured news reactionsbacksC21C25C32C33C34C36C38
- S12primarycompany filing2026-10-01every open-market sale in the year to 2026-10-01 and whether each was made under a pre-arranged planbacksC35
- S13primarycompany filing2026-03-02Joint NVIDIA and Lumentum press release of 2 March 2026 (8-K Exhibit 99.1) NVIDIA CorporationNVIDIA's own words on the agreement: non-exclusive, multi-year, a multi-billion purchase commitment and capacity access rights for advanced laser components, and the $2B investment for a new US fabbacksC08
- S14primarycompany filing2026-07-23one buyer's own capital spending for the six months to 30 JunebacksC43
- S15primaryother2026-10-01NVIDIA Silicon Photonics product page - co-packaged optics switches NVIDIA CorporationNVIDIA's own statement of what its co-packaged switches replace, and its first adopters
Replacing pluggable transceivers with silicon photonics on the same package as the ASIC, NVIDIA CPO innovations provide 5x better power efficiency
backsC47 - S16primarycompany filing2025-10-07beneficial ownership as of August 29, 2025, director and officer biographies, the fiscal 2025 bonus goals and payout, the CEO's hiring package and the fiscal 2026 pay designbacksC48C49C50
- S17primarycompany filing2026-10-04Lumentum XBRL company facts, fiscal 2021 to fiscal 2026, frozen as content/LITE/financials.jsoncontent/LITE/financials.jsonrevenue, research and development (ResearchAndDevelopmentExpense, the same line the income statement labels Research and development), selling, general and administrative, share pay (AllocatedShareBasedCompensationExpense), capital spending and operating income per fiscal yearbacksC52
- S18secondaryvendor data2026-10-04Earnings calendar saved by the daily routine, content/calendar/2026-10-04.json (FMP earnings, per symbol)content/calendar/2026-10-04.jsonthe next results date, 3 November 2026
"LITE": {"archived": false, "next": {"date": "2026-11-03"
backsC53