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Lumentum Rises 99% in a Month: Are the Shares Still a Buy?
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Key Takeaways
Lumentum shares surged 98.5% in a month, beating the sector and peers.
LITE faces tight laser supply but has backlog over $400M and new CPO orders into 2027.
Lumentum guides Q3 FY26 revenues of $780-$830M and 30-31% operating margin.
Lumentum Holdings (LITE - Free Report) shares have surged 98.5% over the past month, outperforming the Zacks Computer and Technology sector’s drop of 2.9% and the Zacks Communications Components industry’s surge of 52.3%. The stock has outperformed competitors including Coherent (COHR - Free Report) , Marvell Technology (MRVL - Free Report) and Ciena (CIEN - Free Report) over the same timeframe. Shares of Coherent and Ciena jumped 27.6% and 46.1%, respectively. However, Marvell shares dropped 3.9%.
LITE’s prospects ride on accelerating AI-driven optics upgrades, momentum in optical circuit switches (OCS), and co-packaged optics (CPO), moving from roadmap to contracted pipeline. However, the question that arises in investors' minds is: Can Lumentum turn demand into on-time shipments while protecting pricing and expanding margins as product mix shifts to higher-value lanes, systems and next-generation architectures? Let’s find out.
LITE Stock Performance
Image Source: Zacks Investment Research
Supply Lags Demand: Will LITE Pick Up the Pace?
Supply is structurally tight in indium phosphide electro-absorption modulated lasers, with Lumentum under shipping demand by roughly 25-30% and capacity fully spoken for under long-term laser agreements through calendar 2027. Those agreements prioritize allocation and stabilize pricing, while incremental volumes above contracted levels are negotiated at a premium.
The capacity plan is ambitious. Lumentum front-loaded more than half of its planned 40% expansion in the December 2025 quarter and expects to slightly exceed that plan, with additional capacity extending into the second half of calendar 2026 and early 2027 across Sagamihara, Caswell and Takao.
Execution is the watch item. Front-end and back-end footprints remained tight in the second quarter of fiscal 2026, prompting accelerated contract manufacturing, factory reconfiguration and added external leadership to speed outsourcing. Management also highlighted that optical circuit switching deliveries depend on avoiding unforeseen manufacturing or supply chain disruptions, which makes timing and logistics central to the revenue story.
Higher-Value Lanes and Systems to Lift LITE’s Margins
The margin thesis hinges on mix and economics. Module-level margins at 1.6T are described as significantly better than 800G, with profitability improving on yields and scrap. In parallel, vertical integration of continuous-wave lasers for Lumentum’s own 1.6T modules is expected to further lift module margins as it comes online around late fiscal second quarter to early fiscal third quarter.
Systems are becoming more meaningful as optical circuit switching moves beyond initial shipments. Optical circuit switch shipments began in the first quarter of fiscal 2026 and exceeded $10 million in the second quarter of fiscal 2026, three months ahead of plan, supporting the view that execution has de-risked and customer uptake is broadening.
The proof point is already visible in the guidance. Lumentum guided third-quarter fiscal 2026 revenue of $780-$830 million and an operating margin of 30-31%.
Consensus Estimate Trend
Image Source: Zacks Investment Research
Improving Visibility Bodes Well for LITE’s 2027 Prospect
OCS provides a multi-quarter backlog signal. The order backlog has surged well past $400 million, with the majority scheduled for shipment in the second half of calendar 2026. That timing matters because it aligns with the period when systems mix is expected to contribute more meaningfully.
CPO adds a second layer of visibility. In the second quarter of fiscal 2026, Lumentum disclosed a new multi-hundred-million-dollar purchase order tied to CPO lasers, with deliveries scheduled for the first half of calendar 2027, while also reiterating a material shipment inflection for ultra-high-power chips in the second half of calendar 2026.
Content per system is another lever. Management is evaluating external light source modules that could increase revenue content per system to roughly 2.0x to 2.5x versus lasers alone, expanding the addressable content as architectures evolve.
Here’s Why LITE is a Buy Right Now
Lumentum’s bright prospects are reflected in positive estimate revisions. The Zacks Consensus Estimate for fiscal 2026 earnings is currently pegged at $7.63 per share, up 32.5% over the past 30 days. The company reported year-ago quarter earnings of $2.06 per share.
LITE is currently trading at a premium, as suggested by the Value Score of F. In terms of price/sales (P/S), Lumentum is trading at 11.71X higher than the broader sector’s 6.48X, Coherent’s 5.83X, Marvell’s 6.8X, and Ciena’s 7.69X.
LITE Shares are Trading at a Premium
Image Source: Zacks Investment Research
The premium valuation is justified, given Lumentum’s improving prospects driven by OCS and CPO adoption and expanding margin profile. These factors make the stock attractive for investors.
View the Zacks #1 Rank List
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Lumentum Rises 99% in a Month: Are the Shares Still a Buy?
Key Takeaways
Lumentum Holdings (LITE - Free Report) shares have surged 98.5% over the past month, outperforming the Zacks Computer and Technology sector’s drop of 2.9% and the Zacks Communications Components industry’s surge of 52.3%. The stock has outperformed competitors including Coherent (COHR - Free Report) , Marvell Technology (MRVL - Free Report) and Ciena (CIEN - Free Report) over the same timeframe. Shares of Coherent and Ciena jumped 27.6% and 46.1%, respectively. However, Marvell shares dropped 3.9%.
LITE’s prospects ride on accelerating AI-driven optics upgrades, momentum in optical circuit switches (OCS), and co-packaged optics (CPO), moving from roadmap to contracted pipeline. However, the question that arises in investors' minds is: Can Lumentum turn demand into on-time shipments while protecting pricing and expanding margins as product mix shifts to higher-value lanes, systems and next-generation architectures? Let’s find out.
LITE Stock Performance
Image Source: Zacks Investment Research
Supply Lags Demand: Will LITE Pick Up the Pace?
Supply is structurally tight in indium phosphide electro-absorption modulated lasers, with Lumentum under shipping demand by roughly 25-30% and capacity fully spoken for under long-term laser agreements through calendar 2027. Those agreements prioritize allocation and stabilize pricing, while incremental volumes above contracted levels are negotiated at a premium.
The capacity plan is ambitious. Lumentum front-loaded more than half of its planned 40% expansion in the December 2025 quarter and expects to slightly exceed that plan, with additional capacity extending into the second half of calendar 2026 and early 2027 across Sagamihara, Caswell and Takao.
Execution is the watch item. Front-end and back-end footprints remained tight in the second quarter of fiscal 2026, prompting accelerated contract manufacturing, factory reconfiguration and added external leadership to speed outsourcing. Management also highlighted that optical circuit switching deliveries depend on avoiding unforeseen manufacturing or supply chain disruptions, which makes timing and logistics central to the revenue story.
Higher-Value Lanes and Systems to Lift LITE’s Margins
The margin thesis hinges on mix and economics. Module-level margins at 1.6T are described as significantly better than 800G, with profitability improving on yields and scrap. In parallel, vertical integration of continuous-wave lasers for Lumentum’s own 1.6T modules is expected to further lift module margins as it comes online around late fiscal second quarter to early fiscal third quarter.
Systems are becoming more meaningful as optical circuit switching moves beyond initial shipments. Optical circuit switch shipments began in the first quarter of fiscal 2026 and exceeded $10 million in the second quarter of fiscal 2026, three months ahead of plan, supporting the view that execution has de-risked and customer uptake is broadening.
The proof point is already visible in the guidance. Lumentum guided third-quarter fiscal 2026 revenue of $780-$830 million and an operating margin of 30-31%.
Consensus Estimate Trend
Image Source: Zacks Investment Research
Improving Visibility Bodes Well for LITE’s 2027 Prospect
OCS provides a multi-quarter backlog signal. The order backlog has surged well past $400 million, with the majority scheduled for shipment in the second half of calendar 2026. That timing matters because it aligns with the period when systems mix is expected to contribute more meaningfully.
CPO adds a second layer of visibility. In the second quarter of fiscal 2026, Lumentum disclosed a new multi-hundred-million-dollar purchase order tied to CPO lasers, with deliveries scheduled for the first half of calendar 2027, while also reiterating a material shipment inflection for ultra-high-power chips in the second half of calendar 2026.
Content per system is another lever. Management is evaluating external light source modules that could increase revenue content per system to roughly 2.0x to 2.5x versus lasers alone, expanding the addressable content as architectures evolve.
Here’s Why LITE is a Buy Right Now
Lumentum’s bright prospects are reflected in positive estimate revisions. The Zacks Consensus Estimate for fiscal 2026 earnings is currently pegged at $7.63 per share, up 32.5% over the past 30 days. The company reported year-ago quarter earnings of $2.06 per share.
LITE is currently trading at a premium, as suggested by the Value Score of F. In terms of price/sales (P/S), Lumentum is trading at 11.71X higher than the broader sector’s 6.48X, Coherent’s 5.83X, Marvell’s 6.8X, and Ciena’s 7.69X.
LITE Shares are Trading at a Premium
Image Source: Zacks Investment Research
The premium valuation is justified, given Lumentum’s improving prospects driven by OCS and CPO adoption and expanding margin profile. These factors make the stock attractive for investors.
Currently, Lumentum Sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.