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CPO is Moving From Hype to Backlog for LITE: More Upside Ahead?
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Key Takeaways
LITE sees CPO move from prospect to contracted backlog, extending multi-year AI upgrade visibility.
LITE outlined ultra-high-power chip inflection in 2H26 and first CPO scale-up by late 2027.
LITE guides Q3 FY26 revenues up to $830M, with midpoint marking a record quarterly high.
Co-packaged optics (CPO) is shifting from concept to contracted demand, giving Lumentum Holdings (LITE - Free Report) a clearer multi-year runway as AI networks upgrade. AI-driven optics upgrades are accelerating, and Lumentum is now seeing CPO move from prospect to contracted pipeline and backlog, extending visibility and boosting potential content per system. That shift matters because next-generation AI fabrics increasingly favor optics over copper for short-reach connections. Management outlined a path to first meaningful CPO scale-up by late 2027, setting expectations for how the opportunity can build over multiple deployment cycles.
CPO’s Gaining Importance: Here’s How LITE Benefits
The core architectural logic is straightforward: as bandwidth and power constraints tighten, optics increasingly displaces copper for short-reach links inside AI systems. Lumentum’s report frames CPO as a practical next step in that evolution, with milestones that stretch beyond the current transceiver cycle. CPO is translating into contracted pipeline and backlog, which supports multi-year planning for capacity, product qualification and customer diversification in next-gen architectures.
Lumentum’s management reiterated a material shipment inflection for ultra-high-power chips in the second half of calendar 2026 and outlined a path to first scale-up CPO shipments by late calendar 2027, implying a staged build rather than a single cliff event. LITE disclosed an incremental, multi-hundred-million-dollar order tied to CPO on Feb. 3, with deliveries scheduled for the first half of calendar 2027. This order stacks on top of the company’s broader timing framework.
Another upside lever is how much content Lumentum can capture per system. The company is evaluating external light source modules to broaden participation and lift per-system revenue content by roughly 2.0x to 2.5x versus lasers alone, expanding the value pool as co-packaged architectures move into deployment.
LITE Offers Positive Guidance
For the third quarter of fiscal 2026, Lumentum expects revenues between $780 million and $830 million, with the mid-point of $805 million representing a new all-time quarterly revenue record. LITE expects earnings to be in the range of $2.15 to $2.35 per share.
The Zacks Consensus Estimate for third-quarter 2026 revenues is pegged at $805.4 million, suggesting 89.4% growth from the figure reported in the year-ago quarter. The consensus mark for earnings is pegged at $2.24 per share compared with 57 cents reported in the year-ago quarter.
Long term earnings growth rate for Seagate, Western Digital and Lattice Semiconductor is currently pegged at 38%, 51.1% and 30.6%, respectively. Shares of Seagate, Western Digital and Lattice Semiconductor have surged 310.8%, 482.4% and 47.6%, respectively, in a year.
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CPO is Moving From Hype to Backlog for LITE: More Upside Ahead?
Key Takeaways
Co-packaged optics (CPO) is shifting from concept to contracted demand, giving Lumentum Holdings (LITE - Free Report) a clearer multi-year runway as AI networks upgrade. AI-driven optics upgrades are accelerating, and Lumentum is now seeing CPO move from prospect to contracted pipeline and backlog, extending visibility and boosting potential content per system. That shift matters because next-generation AI fabrics increasingly favor optics over copper for short-reach connections. Management outlined a path to first meaningful CPO scale-up by late 2027, setting expectations for how the opportunity can build over multiple deployment cycles.
CPO’s Gaining Importance: Here’s How LITE Benefits
The core architectural logic is straightforward: as bandwidth and power constraints tighten, optics increasingly displaces copper for short-reach links inside AI systems. Lumentum’s report frames CPO as a practical next step in that evolution, with milestones that stretch beyond the current transceiver cycle. CPO is translating into contracted pipeline and backlog, which supports multi-year planning for capacity, product qualification and customer diversification in next-gen architectures.
Lumentum’s management reiterated a material shipment inflection for ultra-high-power chips in the second half of calendar 2026 and outlined a path to first scale-up CPO shipments by late calendar 2027, implying a staged build rather than a single cliff event. LITE disclosed an incremental, multi-hundred-million-dollar order tied to CPO on Feb. 3, with deliveries scheduled for the first half of calendar 2027. This order stacks on top of the company’s broader timing framework.
Another upside lever is how much content Lumentum can capture per system. The company is evaluating external light source modules to broaden participation and lift per-system revenue content by roughly 2.0x to 2.5x versus lasers alone, expanding the value pool as co-packaged architectures move into deployment.
LITE Offers Positive Guidance
For the third quarter of fiscal 2026, Lumentum expects revenues between $780 million and $830 million, with the mid-point of $805 million representing a new all-time quarterly revenue record. LITE expects earnings to be in the range of $2.15 to $2.35 per share.
The Zacks Consensus Estimate for third-quarter 2026 revenues is pegged at $805.4 million, suggesting 89.4% growth from the figure reported in the year-ago quarter. The consensus mark for earnings is pegged at $2.24 per share compared with 57 cents reported in the year-ago quarter.
Lumentum Holdings Inc. Revenue (TTM)
Lumentum Holdings Inc. revenue-ttm | Lumentum Holdings Inc. Quote
Zacks Rank & Stocks to Consider
Currently, Lumentum sports a Zacks Rank #1 (Strong Buy). Shares have surged 821.4% in the trailing 12-month period.
Seagate Technology (STX - Free Report) , Western Digital (WDC - Free Report) and Lattice Semiconductor (LSCC - Free Report) are stocks worth considering in the broader Zacks Computer and Technology sector. Each of the three stocks sports a Zacks Rank #1 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Long term earnings growth rate for Seagate, Western Digital and Lattice Semiconductor is currently pegged at 38%, 51.1% and 30.6%, respectively. Shares of Seagate, Western Digital and Lattice Semiconductor have surged 310.8%, 482.4% and 47.6%, respectively, in a year.