Lumentum Holdings Inc (LITE) Q4 2025 Earnings Call Highlights: Surpassing Expectations with ...

Fourth Quarter Revenue: $480.7 million, above the high end of revised guidance. Non-GAAP EPS: $0.88, exceeding expectations. GAAP Gross Margin: 33.3% for the fourth quarter. Non-GAAP Gross Margin: 37.8%, up 260 basis points sequentially and 1,000 basis points year over year. Non-GAAP Operating Margin: 15%, up 420 basis points sequentially and over 2,000 basis points year over year. Cloud and Networking Segment Revenue: $424.1 million, increased 16% sequentially and 67% year over year. Industrial Tech Segment Revenue: $56.6 million, down 6% sequentially but up 6% year over year. Full Year Revenue: $1.65 billion, up 21% from fiscal '24. Full Year Non-GAAP Gross Margin: 34.7%, up 450 basis points from fiscal '24. Full Year Non-GAAP Operating Margin: 9.7%, up 10,030 basis points from fiscal '24. Cash and Short-term Investments: Increased by $10 million to $877 million in the fourth quarter. CapEx Investment: $59 million in Q4, primarily for manufacturing capacity for cloud customers. First Quarter Fiscal '26 Revenue Guidance: $510 million to $540 million. First Quarter Fiscal '26 Non-GAAP Operating Margin Guidance: 16% to 17.5%. First Quarter Fiscal '26 Non-GAAP EPS Guidance: $0.95 to $1.10.

Warning! GuruFocus has detected 7 Warning Signs with LITE.

Release Date: August 12, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Lumentum Holdings Inc (NASDAQ:LITE) reported fourth quarter revenue of $480.7 million, exceeding the high end of their revised guidance. The company's cloud and networking segment revenue increased 16% sequentially and 67% year over year, driven by strong demand from hyperscale cloud customers. Lumentum is positioned to capture significant value from the AI infrastructure market with technologies like 200GB EMLs and 1.6T transceivers. The company expects to surpass $600 million in quarterly revenue by June 2026, driven by growth in cloud modules and optical circuit switches. Non-GAAP gross margin improved to 37.8%, up 260 basis points sequentially, due to better manufacturing utilization and favorable product mix.

Negative Points

Lumentum's industrial tech segment revenue decreased 6% sequentially, with declines in industrial lasers and 3D sensing. The company is facing supply constraints in its narrow linewidth lasers, impacting its ability to meet demand. Lumentum's cloud module business, while growing, is still constrained by manufacturing capacity and engineering resources. The company is experiencing a significant amount of non-productive inventory (NPI) costs, impacting margins. Lumentum's ZR and ZR+ module sales have not performed as well as expected, affecting overall profitability.

Story Continues

Q & A Highlights

Q: Can you provide an update on the Optical Circuit Switch (OCS) award, including the trajectory and potential of this new product category? A: Michael E. Hurlston, President and CEO, explained that the OCS is progressing better than expected, with three customers now involved. The current and next quarters are ramping as they build capacity in Thailand. Significant revenue is expected in early 2026, with more meaningful contributions in the latter half of 2026. The demand is high, but they are currently limited by production capacity.

Q: How is the Co-Packaged Optics (CPO) opportunity progressing, and what is your competitive position in this market? A: Michael E. Hurlston stated that they feel confident in maintaining a competitive edge due to the unique power level and reliability of their lasers. They are leveraging developments from other product lines and expect significant revenue from CPO in the second half of 2026. They believe they are currently the sole source supplier and have a strong competitive moat.

Q: What are the contributions to reaching the $600 million revenue target, and how do you see the upside in different segments? A: Michael E. Hurlston noted that continued strength in components, a step-up in cloud modules, and contributions from OCS are key. Components business is expected to remain strong, cloud modules will see dramatic acceleration, and OCS will start contributing significantly in the second half of the fiscal year.

Q: How are you positioned in the EML competitive landscape, and what are your advantages? A: Michael E. Hurlston highlighted that their EMLs offer superior performance, leading to higher module yields for customers, allowing for pricing latitude. They lead in technology innovations and have the largest capacity, which gives them a competitive advantage.

Q: Can you discuss the impact of semiconductor tariffs and your strategy to mitigate potential impacts? A: Wajid Ali, CFO, mentioned that they have reviewed new regulations and determined their products are exempt from tariffs. They are comfortable with their current position but acknowledge the situation is fluid. They have accounted for minimal tariff impact in their guidance.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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