$LITE (Lumentum) Pre-Earnings Thoughts

The two most important optical companies are reporting this week.

LITE on Tuesday.

COHR on Wednesday.

The bar has been raised the past few weeks.

Both of these stocks are up around 50% since the late July lows.

So let’s dig into LITE and discuss all the different bits that we expect to see.

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Headline Print

For revenue I would love to see over $1B. They guided $960-$1.01B. That $1B is such a psychological number and I think that would be really strong if they can exceed that.

They also guided for 35%-36% operating margins, which is so so strong for this basket.

And $2.85-$3.05 EPS. Also very strong here.

They have a longer term target of $2B quarterly rev + ~40% operating margins. I would like to hear that that is on track (would be very surprised if not) and hopefully that it might come sooner than they were even projecting.

EMLs + 1.6T

Given all the latest talks the CEO has given, we know that the supply demand gap is still massive.

But I want to hear more about that 30% number. If supply still falls short by 30%, thatd be great.

They were targeting >50% YoY EML unit growth by the December 2026 quarter, hopefully thats on track or pulled forward.

The 1.6T transition is really attractive because the 200G EML ASP should be roughly 2x 100G EML. So I want to hear that 1.6T is going great and that they have strong pricing for them and that EML based 1.6T are still strong.

They said some big things about transceivers.

1 - Q3 cloud transceiver rev grew > 40% sequentially and they said transceivers were the major driver of the June Q sequential increase

2 - They expect to double the transceiver biz over 4-5 Q’s.

3 - They believe that are front of line on the 1.6T.

Scale Across

This was one of the really big surprises last quarter. Pump lasers and narrow linewidht lasers especially.

Last quarter their narrow linewdith laser shipments were +120% YoY and pump lasers were +80% YoY.

Any continued strength and growth here would be very bullish.

The undersupply was even worse that EMLs, above 30%.

Their last projected market numbers had the scale across component market growing from roughly $1.5B to $4B by 2029. Lets keep pushing that number higher.

Let’s hear about any updates on their expansion targeting these markets. Will be a read through for NOK and CIEN as well.

OCS (Optical Circuit Switching)

We haven’t really heard too much about OCS in a while because transceivers + NPO/CPO have taken all the attention.

But they said they could ship around $400m of OCS in the back hald of CY 2026. Its going to be one of their toughest manufacturing ramps though.

The customer pipeline has expanded substantial and they last hard multiple large opportunities. Lets hear more about those.

The most recent number I heard their OCS TAM at was close to $10B. That’s a big number. Let’s reaffirm that or guide higher.

Scale-out CPO

Yes CPO rev is coming soon. No, it’s not the very exciting scale-up CPO that is still 18+ months away.

I know people will be posting about LITE having CPO rev and saying that all the FUD around CPO delays was wrong.

LITE has been saying that meaningful rev is going to expected in the December quarter, wth a multi-hundred million dollar purchase order due during H1 2027.

Any accleration here would be meaningful because their excisting $1B quarterly run rate still cntains relatively little CPO rev.

Scale-up CPO & NPO

This will be big for the long term thesis. I expect them to push back on the industry chatter around timing of scale up.

But I really want them to dig into the NPO opp because it’s front of mind and helps ease concerns over scale up CPO delays.

This is the major TAM step up vs. scale out. Scale up is entirely new market share. Whereas scale out replace plubbagles.

For scale up, Hurlston often uses the figure 10x the optical requirement of scale out. This is massive.

He said that NPO could involved more optical lanes than CPO opps because some customers may go extremely optical heavy in their backplanes.

Dig into this Hurlston!

InP Substrates

Let’s hear that they have great visibility and that this isn’t their bottleneck.

Ideally they have lots of alternate suppliers than are outside of China that can meet demand.

Also want lots of long term visibility here.

In addition to substrates lets hear about relevant equipment for capacity expansion like reactors, etch, etc.

Greensboro / 6-inch

Greensboro is going to be a major capacity unlock, but its a 2028 story.

Let’s hear that that’s on track or even ahead of schedule.

It should ultimately support >$5B rev opp.

They also talked about 6-inch beign somethign that want to experiment with but are ready to shift if it’s not working. I want to hear updates on that.

Pricing + Margins

Non-GAAP gross margin jumped 500 basis points last quarter which was massive.

I would love to see these hold up and continue to expand further with improved product mix and pricing power.

If they can continue to massively expand rev higher while also moving their operating margin closer to 40%, that is massive earnings power.

DSP / TIAs constraint

AAOI flagged that these two components limited their own transceiver shipments.

Curious if this will impact LITE as well because of their massive 1.6T demand. Might be blunted slightly by DSP/TIA shortages.

But this might already be in the forecast because last quarter they said that electrical components were one of the driving factors behind their inability to ship more transceivers.

This is a much smaller part of the LITE business model, but it’s still relevant.

China

Lastly, I want to hear about China.

What their thoughts are on the development.

Whether they thinks it’s probably or not.

What the implications would be.

How they are positioned for it.

If they already see customers moving in this direction.

etc.

Closing Thoughts