Lumentum delivered a spectacular quarter with record revenue and massive margin expansion, fueled by insatiable demand for its laser components used in AI data centers. The company is supply-constrained across nearly every product line and is exercising significant pricing power. Management raised the bar again with record Q4 guidance and reiterated confidence in its long-term $2B quarterly revenue goal. FQ3 FY26 revenue hit a record $808M, up 90% YoY, with non-GAAP gross margin expanding a staggering 1,270 bps YoY to 47.9%.
Lumentum delivered a spectacular quarter with record revenue and massive margin expansion, fueled by insatiable demand for its laser components used in AI data centers. The company is supply-constrained across nearly every product line and is exercising significant pricing power. Management raised the bar again with record Q4 guidance and reiterated confidence in its long-term $2B quarterly revenue goal. FQ3 FY26 revenue hit a record $808M, up 90% YoY, with non-GAAP gross margin expanding a staggering 1,270 bps YoY to 47.9%.
Lumentum delivered a spectacular quarter with record revenue and massive margin expansion, fueled by insatiable demand for its laser components used in AI data centers. The company is supply-constrained across nearly every product line and is exercising significant pricing…
Management highlighted AI-driven demand across multiple product lines, including EMLs, CW lasers, CPO, OCS, and scale-across components, with supply constraints lagging demand and new customer engagements expanding. They are investing in capacity and vertical integration to…
Management is significantly increasing capex to expand manufacturing capacity, particularly for lasers and OCS, with a focus on bringing new fabs online (Greensboro, North Carolina) and ramping existing facilities to alleviate supply constraints.
The company is aggressively ramping capacity for pump lasers and narrow-linewidth lasers for scale-across networks, which are becoming a major margin driver.
Management highlighted AI-driven demand across multiple product lines, including EMLs, CW lasers, CPO, OCS, and scale-across components, with supply constraints lagging demand and new customer engagements expanding. They are investing in capacity and vertical integration to address this demand.
Management is highly bullish, guiding to another record quarter and reiterating its long-term $2B quarterly revenue target, driven by broad-based demand across all growth vectors.
Management is significantly increasing capex to expand manufacturing capacity, particularly for lasers and OCS, with a focus on bringing new fabs online (Greensboro, North Carolina) and ramping existing facilities to alleviate supply constraints.
Management's tone is confident and positive, highlighted by record revenue, strong margin expansion, and repeated references to demand outpacing supply, with a forward-looking emphasis on growth opportunities.
“The supply demand imbalance is probably even higher than we reported in our last call, somewhere greater than 30%.”
“As we have started to shift, and we're early in those innings, back to a contract manufacturing base, we would actually expect to see improvement in our margins.”
“The supply-demand imbalance on our own transceivers was somewhere in that zip code, but it was definitely appreciable, although I don't know that we've calculated that.”
| 지표 | 기간 | 범위 | 중간값 | 상태 |
|---|---|---|---|---|
| EPS | FY2026 Q4 | $2.85–$3.05 | $2.95 | GUIDED |
| Op margin | FY2026 Q4 | 35%–36% | 35.5% | GUIDED |
| Revenue | FY2026 Q4 | $960M–$1.01B | $985M | GUIDED |
| 제시 시점 | 지표 | 목표 기간 | 가이던스 | 실제 | 결과 |
|---|---|---|---|---|---|
| FY2026 Q2 | EPS | FY2026 Q3 | $2.15–$2.35 | $2.37 | Met / beat |
| FY2026 Q2 | Op margin | FY2026 Q3 | 30%–31% | 21.72% | Missed |
| FY2026 Q2 | Revenue | FY2026 Q3 | $0.78B–$0.83B | $0.8084B | Met / beat |
Nvidia made a direct equity investment in Lumentum, a strong endorsement of Lumentum's technology and a source of capital to fund expansion.
“During the third quarter, our cash and short-term investments increased by 2.02 billion to 3.17 billion dollars with the increase primarily driven by nvidia's direct investment in momentum”
… last year in support of expanding cloud opportunities. Q3 non-GAAP SG&A expense was $47.8 million, non-GAAP R&D expense was $78.4 million. Interest and other income was $9.6 million, on a non-GAAP basis. Third quarter non-GAAP net income was $225.7 million and non-GAAP net income per share was $2.37. Our diluted weighted shares for the third quarter was 95.2 million on a non-GAAP basis. Turning to the balance sheet, during the third quarter, our cash and short-term investments increased by 2.02 billion to 3.17 billion dollars with the increase primarily driven by nvidia's direct investment in momentum our inventory levels increased by 62 million dollars sequentially to support the expected growth in our cloud and ai related revenue in q3 we spent $125 million in CapEx, primarily focused on manufacturing capacity to support cloud and AI customers. Turning to revenue details, components revenue of $533.3 million increased 20% sequentially in Q3 and 77% year on year. Systems revenue of $275.1 million increased 24% sequentially in Q3 and 121% year-on-year. Now let me move to our guidance for the fourth quarter of fiscal 26, which is on a non-GAAP basis and is based on our …
Even with massive internal expansion, Lumentum is undershipping demand for pump lasers, narrow linewidth lasers, and EMLs by more than 30% and having to allocate supply to customers. — Persistent industry-wide laser and component shortages signal pricing power and potential revenue upside for Lumentum's laser competitors and indicate the AI supply chain remains heavily constrained.
We do. Great. Maybe let's start with your strength in EMLs and laser supply. Clearly, demand is not a concern here, and you guys have just done an incredible job of executing. What are the dynamics both on the supply side as well as your ability to ramp production? Maybe give some color on where you are in meeting demand, what the gap looks like, as well as What are some of the puts and takes that you're battling with on a quarter-to-quarter basis?
Hey, Ryan. Thanks for the question. Look, I think we're still chasing behind relative to demand. We are steadily increasing supply. I think we just gave the benchmark that we'd expect our supply line to increase 50% on year, meaning as measured from December quarter. to December quarter. So we're actually stepping up our supply in a pretty significant way. That being said, as we've said kind of over and over again, we continue to lag demand. The supply demand imbalance is probably even higher than we reported in our last call, somewhere greater than 30%. I think last time we gave a metric of 25 to 30. We still seem to be behind significantly. We had conversations today with customers, significant customers looking to really up their demand and get output from us, and we simply can't service that. So we are stepping up, we're doing everything we can to step that up. I think you know that story pretty well, but we continue to lag demand.
Lumentum is shifting to contract manufacturing to improve margins, a strategic change from its historical insourcing approach. — Outsourcing production to EMS providers like Flex could signal a new source of demand for those companies and a margin tailwind for Lumentum.
Thank you, Michael. Thank you. And for my follow up on OCS specifically, you said you're still constrained, maybe that's more due to your current output right now relative to demand. How do you think about engaging with more contract manufacturers? I know you mentioned that at OFC, but where are you in that process? Maybe not just for OCS, but for other product areas as well. And then within OCS specifically, how do you think, given the demand you're seeing from multiple customers, maybe multiple different applications and multiple types of products between, you know, medium rate X, high rate X products. How do you think about prioritizing all those different sources of demand, right, or…
Yeah, look, I'm going to answer the first part of it, right, just in the interest of time and to get some more questions. I think one of the, you know, levers we do have is contract manufacturing. We have historically insourced everything, and we found that working with good contract manufacturers, of which there are several, we could actually improve our margins. So as we have started to shift, and we're early in those innings, back to a contract manufacturing base, we would actually expect to see improvement in our margins. The margins that we pay to those contract manufacturers are more than offset by the efficiency and cost benefit that they can drive on common components. So that ends up being a lever for us.
Lumentum is experiencing a supply-demand imbalance in its own transceiver business that is 'appreciable' and likely over 30%, limiting its ability to meet customer demand despite a strong ramp in 1.6T shipments. — The significant shortage of transceivers, a critical AI infrastructure component, indicates the AI buildout demand is far outpacing supply, benefiting the broader ecosystem but keeping a lid on Lumentum's top-line growth.
Hi, this is Mike Lamani on for Vivek Arya. Thanks so much for taking our questions. My first question is on the transfer business. Number one, how large would it have been if you had been able to address all the demand that you saw in the quarter? Or if you could peg that number relative to the 30%. overall imbalance for the entire company. And then on 1.60 specifically, you talked about how the margin structure is still the challenge and is a work in progress. But as we move into 1.60, what we're hearing from many of the suppliers and ecosystem is that the margins are just significantly better, maybe it's led by pricing. So to what extent does that transition that's happening in the next…
Yeah, I mean, on the first one, I don't think that we've given a figure of merit around our own transceiver imbalance. It was significant. I mean, we had a lot of demand that was placed on us, and we simply weren't able to ship largely due to supply constraints. The 30% number that I gave is on our EMLs, right? So it's a supply imbalance. It's not relative to our whole business. It's on that particular line of business. I would say here, you know, the supply-demand imbalance on our own transceivers was somewhere in that zip code, but it was definitely appreciable, although I don't know that we've calculated that. I think the second part of your question, you know, we – What was it? The second part was on 1.6. Yeah, no doubt. Right. The margins are definitely better. I would say that, too. When I said the margins are challenging, our transceiver business, as we've outlined over and over again, is definitely a challenge for us on the margin line. I think we are underperforming peers. We have room to grow. We're getting better. I think we are. We've certainly gotten the lead in terms of design. And now in terms of margin, I think we're improving significantly. We still trail. That being said, to your point, 1.60 definitely better structurally from a margin standpoint is definitely better than 800 gigs. So there's definitely, we will see step up in our margin line. We have room as a unique Lumentum entity to do better and we will do better.