We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Lumentum Shares Rise 12% in a Month: Is There More Upside Ahead?
Read MoreHide Full Article
Key Takeaways
LITE shares rose 12.1% in a month as fiscal Q4 revenues surged 109.3% and margins expanded.
OCS shipments doubled sequentially, with LITE expecting more than $100 million in fiscal Q1 revenues.
LITE sees growth from 1.6T transceivers, CPO, NPO and lasers as AI data-center demand expands.
Lumentum (LITE - Free Report) shares have risen about 12.1% in the past month, with the rally appearing to be supported by strong AI-driven revenue growth, improving profitability and rising visibility into future optical demand. In the fourth quarter of fiscal 2026, revenues surged 109.3% year over year to $1.01 billion, while non-GAAP gross margin expanded to 50.4% from 37.8% and operating margin jumped to 36.6% from 15%. Lumentum expects first-quarter fiscal 2027 revenues of $1.225-$1.275 billion and non-GAAP earnings of $4.05-$4.35 per share.
The strong results and bright near-term forecast are expected to continue the momentum in LITE’s shares. Lumentum shares have outperformed the broader Zacks Computer and Technology sector, as well as Cisco Systems (CSCO - Free Report) and Broadcom (AVGO - Free Report) , but lag Coherent (COHR - Free Report) over the past month. The broader sector and Coherent have returned 4.8% and 15.2%, while Cisco and Broadcom have dropped 0.6% and 0.3%, respectively. So, what should investors do with the LITE stock? Let’s find out.
LITE Stock’s Price Performance
Image Source: Zacks Investment Research
LITE Rides on Strong OCS Demand, AI Opportunity
Growing demand for Optical Circuit Switch (OCS) is emerging as a major catalyst for Lumentum. OCS shipments doubled sequentially in the fiscal fourth quarter, while the company expects its first quarter to generate more than $100 million in OCS revenues. More importantly, orders from its largest customer have increased significantly since the earnings call, giving Lumentum enough visibility to introduce a fiscal 2028 earnings target of $40 per share. The company also believes its previously estimated $8-billion OCS addressable market may prove conservative as additional customers evaluate OCS for AI scale-up deployments.
Lumentum is also benefiting from the transition toward higher-speed optical connectivity. The company began shipping 1.6T transceivers in the fiscal fourth quarter and expects adoption to accelerate through calendar 2027 as hyperscalers upgrade custom AI clusters from 800G. Meanwhile, 200G EMLs already account for more than 25% of EML revenues. Lumentum noted that moving from 100G to 200G EMLs roughly doubles average selling prices, providing a favorable mix benefit as 1.6T deployments scale.
Moreover, the growing shift from copper toward optical connectivity inside AI clusters represents another important long-term opportunity. Lumentum expects ultra-high-power laser demand for co-packaged optics (CPO) to ramp in the second half of calendar 2027 ahead of scale-up deployments in 2028. Near-packaged optics (NPO) is viewed as additive rather than competitive with CPO, expanding the company's addressable market. Lumentum has also secured its first external light source win and expects initial shipments in the second half of 2027.
Increasing AI computing requirements are also driving greater connectivity between data centers. Lumentum's narrow-linewidth laser shipments increased more than 130% year over year in the fourth quarter of fiscal 2026, while pump laser shipments jumped more than 80%. The company expects pump laser shipments to increase fourfold over the next several quarters as hyperscalers deploy more interconnected AI data centers.
Lumentum is investing aggressively to address persistent supply constraints. For ultra-high-power lasers used in CPO and NPO, capacity is expanding through three waves: the existing San Jose facility through 2027, additional U.K. capacity beginning in the second quarter of 2027 and the Greensboro facility beginning around mid-2028. The company is adding capacity rather than displacing existing production, allowing it to pursue growth across EMLs, scale-across products and next-generation CPO/NPO lasers simultaneously.
The Zacks Consensus Estimate for fiscal 2027 earnings is pegged at $21.30 per share, up 17.3% over the past 60 days, suggesting 145.7% growth from the fiscal 2026 reported figure.
The consensus mark for first-quarter fiscal 2026 earnings is pegged at $4.22 per share, up 18.5% over the past 60 days and indicating 283.64% growth from the figure reported in the year-ago quarter.
Lumentum Shares Trade at a Premium
Lumentum shares are trading at a premium, as suggested by a Value Score of F.
In terms of the trailing 12-month price/sales, LITE is trading at 11.91X, higher than the broader sector’s 6.1X. Lumentum is trading at a higher multiple compared with peers, including Coherent’s 5.39X, Cisco’s 5.97X, and Broadcom’s 10.23X.
LITE Valuation
Image Source: Zacks Investment Research
Conclusion
Lumentum’s premium valuation appears well-supported by its accelerating exposure to AI-driven optical networking demand, expanding addressable market and improving profitability. Strong momentum in 1.6T transceivers, OCS, CPO, NPO and external light source modules should help the company capitalize on hyperscalers’ rising investments in next-generation data center infrastructure.
At the same time, improving product mix, higher manufacturing utilization and operating leverage are translating robust revenue growth into sharply higher margins and earnings. Investors willing to accept the premium valuation may find Lumentum worth considering as a play on the continued expansion of AI and cloud infrastructure.
View the Zacks #1 Rank List
Image: Bigstock
Lumentum Shares Rise 12% in a Month: Is There More Upside Ahead?
Key Takeaways
Lumentum (LITE - Free Report) shares have risen about 12.1% in the past month, with the rally appearing to be supported by strong AI-driven revenue growth, improving profitability and rising visibility into future optical demand. In the fourth quarter of fiscal 2026, revenues surged 109.3% year over year to $1.01 billion, while non-GAAP gross margin expanded to 50.4% from 37.8% and operating margin jumped to 36.6% from 15%. Lumentum expects first-quarter fiscal 2027 revenues of $1.225-$1.275 billion and non-GAAP earnings of $4.05-$4.35 per share.
The strong results and bright near-term forecast are expected to continue the momentum in LITE’s shares. Lumentum shares have outperformed the broader Zacks Computer and Technology sector, as well as Cisco Systems (CSCO - Free Report) and Broadcom (AVGO - Free Report) , but lag Coherent (COHR - Free Report) over the past month. The broader sector and Coherent have returned 4.8% and 15.2%, while Cisco and Broadcom have dropped 0.6% and 0.3%, respectively. So, what should investors do with the LITE stock? Let’s find out.
LITE Stock’s Price Performance
Image Source: Zacks Investment Research
LITE Rides on Strong OCS Demand, AI Opportunity
Growing demand for Optical Circuit Switch (OCS) is emerging as a major catalyst for Lumentum. OCS shipments doubled sequentially in the fiscal fourth quarter, while the company expects its first quarter to generate more than $100 million in OCS revenues. More importantly, orders from its largest customer have increased significantly since the earnings call, giving Lumentum enough visibility to introduce a fiscal 2028 earnings target of $40 per share. The company also believes its previously estimated $8-billion OCS addressable market may prove conservative as additional customers evaluate OCS for AI scale-up deployments.
Lumentum is also benefiting from the transition toward higher-speed optical connectivity. The company began shipping 1.6T transceivers in the fiscal fourth quarter and expects adoption to accelerate through calendar 2027 as hyperscalers upgrade custom AI clusters from 800G. Meanwhile, 200G EMLs already account for more than 25% of EML revenues. Lumentum noted that moving from 100G to 200G EMLs roughly doubles average selling prices, providing a favorable mix benefit as 1.6T deployments scale.
Moreover, the growing shift from copper toward optical connectivity inside AI clusters represents another important long-term opportunity. Lumentum expects ultra-high-power laser demand for co-packaged optics (CPO) to ramp in the second half of calendar 2027 ahead of scale-up deployments in 2028. Near-packaged optics (NPO) is viewed as additive rather than competitive with CPO, expanding the company's addressable market. Lumentum has also secured its first external light source win and expects initial shipments in the second half of 2027.
Increasing AI computing requirements are also driving greater connectivity between data centers. Lumentum's narrow-linewidth laser shipments increased more than 130% year over year in the fourth quarter of fiscal 2026, while pump laser shipments jumped more than 80%. The company expects pump laser shipments to increase fourfold over the next several quarters as hyperscalers deploy more interconnected AI data centers.
Lumentum is investing aggressively to address persistent supply constraints. For ultra-high-power lasers used in CPO and NPO, capacity is expanding through three waves: the existing San Jose facility through 2027, additional U.K. capacity beginning in the second quarter of 2027 and the Greensboro facility beginning around mid-2028. The company is adding capacity rather than displacing existing production, allowing it to pursue growth across EMLs, scale-across products and next-generation CPO/NPO lasers simultaneously.
LITE’s 2027 Earnings Estimate Revision Shows Rising Trend
The Zacks Consensus Estimate for fiscal 2027 earnings is pegged at $21.30 per share, up 17.3% over the past 60 days, suggesting 145.7% growth from the fiscal 2026 reported figure.
Lumentum Holdings Inc. Price and Consensus
Lumentum Holdings Inc. price-consensus-chart | Lumentum Holdings Inc. Quote
The consensus mark for first-quarter fiscal 2026 earnings is pegged at $4.22 per share, up 18.5% over the past 60 days and indicating 283.64% growth from the figure reported in the year-ago quarter.
Lumentum Shares Trade at a Premium
Lumentum shares are trading at a premium, as suggested by a Value Score of F.
In terms of the trailing 12-month price/sales, LITE is trading at 11.91X, higher than the broader sector’s 6.1X. Lumentum is trading at a higher multiple compared with peers, including Coherent’s 5.39X, Cisco’s 5.97X, and Broadcom’s 10.23X.
LITE Valuation
Image Source: Zacks Investment Research
Conclusion
Lumentum’s premium valuation appears well-supported by its accelerating exposure to AI-driven optical networking demand, expanding addressable market and improving profitability. Strong momentum in 1.6T transceivers, OCS, CPO, NPO and external light source modules should help the company capitalize on hyperscalers’ rising investments in next-generation data center infrastructure.
At the same time, improving product mix, higher manufacturing utilization and operating leverage are translating robust revenue growth into sharply higher margins and earnings. Investors willing to accept the premium valuation may find Lumentum worth considering as a play on the continued expansion of AI and cloud infrastructure.
Lumentum currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.