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.
LITE's Transceivers Gain From AI Infrastructure Demand: What's Ahead?
Read MoreHide Full Article
Key Takeaways
Lumentum's Systems revenues surged 122.6% year over year to $356.9 million in fiscal Q4 2026.
LITE is shipping 1.6T transceivers for higher manufacturing yields and capacity utilization.
LITE's earnings estimates imply 147% growth in fiscal 2027.
Lumentum Holdings Inc. (LITE - Free Report) is benefiting from rising demand for high-speed optical transceivers as artificial intelligence (AI) and cloud infrastructure deployments expand. The company’s transition toward next-generation 1.6T transceivers, improving manufacturing yields and record cloud shipments position its Systems business for further growth.
Lumentum’s Systems revenues reached $356.9 million in the fourth quarter of fiscal 2026, up 29.7% sequentially and 122.6% year over year. Cloud transceivers and optical circuit switching were the primary drivers of sequential growth, supported by record cloud transceiver shipments.
Most cloud transceiver shipments remained at 800G speeds, while Lumentum began shipping 1.6T products as planned. Management expects 1.6T adoption to intensify in the first quarter of fiscal 2027 and continue throughout 2027. The company is shipping several 1.6T stock-keeping units ahead of major competitors following improvements in product quality and time to market.
Transceiver profitability also improved as manufacturing yields and capacity utilization increased, while the initial rollout of higher-priced 1.6T products supported product mix. Additionally, some initial 1.6T offerings incorporate internally produced continuous-wave (CW) lasers, strengthening vertical integration.
Despite the positive momentum, Lumentum’s transceiver business continues to face a profitability gap against leading competitors. Cloud Light, LITE’s transceiver business, is generating more than $200 million in quarterly revenues, but gross margins remain below those of top peers.
How Competitors Fare Against Lumentum
Lumentum faces stiff competition from the likes of Applied Optoelectronics (AAOI - Free Report) and Coherent (COHR - Free Report) in the optical networking market.
Applied Optoelectronics is benefiting from the growing demand for its 400G and 800G products as global organizations are shifting from legacy data centers to AI-driven infrastructures. Applied Optoelectronics has also reduced its reliance on China, sourcing less than 10% of the value of its 800G and 1.6T components from China in the most recent quarter.
Coherent and NVIDIA recently announced a multi-year strategic agreement to develop advanced optical technologies used in AI data centers. As part of the deal, NVIDIA has made a multibillion-dollar purchase commitment for Coherent’s laser and optical networking products. In addition, NVIDIA will invest $2 billion in Coherent to support research and development, expand manufacturing capacity and strengthen operations as Coherent increases its U.S.-based production capabilities.
LITE’s Price Performance, Valuation and Estimates
Shares of Lumentum have rallied 148% year to date compared with the Communication - Components industry’s growth of 67.3%.
LITE YTD Performance Chart
Image Source: Zacks Investment Research
From a valuation standpoint, Lumentum trades at a forward price-to-sales ratio of 11.04X, higher than the industry’s average of 5.85X.
LITE Forward 12-Month (P/S) Valuation Chart
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Lumentum's fiscal 2027 and 2028 earnings implies year-over-year growth of 147% and 64%, respectively. The estimates for fiscal 2026 have been revised downward in the past 30 days.
View the Zacks #1 Rank List
Image: Bigstock
LITE's Transceivers Gain From AI Infrastructure Demand: What's Ahead?
Key Takeaways
Lumentum Holdings Inc. (LITE - Free Report) is benefiting from rising demand for high-speed optical transceivers as artificial intelligence (AI) and cloud infrastructure deployments expand. The company’s transition toward next-generation 1.6T transceivers, improving manufacturing yields and record cloud shipments position its Systems business for further growth.
Lumentum’s Systems revenues reached $356.9 million in the fourth quarter of fiscal 2026, up 29.7% sequentially and 122.6% year over year. Cloud transceivers and optical circuit switching were the primary drivers of sequential growth, supported by record cloud transceiver shipments.
Most cloud transceiver shipments remained at 800G speeds, while Lumentum began shipping 1.6T products as planned. Management expects 1.6T adoption to intensify in the first quarter of fiscal 2027 and continue throughout 2027. The company is shipping several 1.6T stock-keeping units ahead of major competitors following improvements in product quality and time to market.
Transceiver profitability also improved as manufacturing yields and capacity utilization increased, while the initial rollout of higher-priced 1.6T products supported product mix. Additionally, some initial 1.6T offerings incorporate internally produced continuous-wave (CW) lasers, strengthening vertical integration.
Despite the positive momentum, Lumentum’s transceiver business continues to face a profitability gap against leading competitors. Cloud Light, LITE’s transceiver business, is generating more than $200 million in quarterly revenues, but gross margins remain below those of top peers.
How Competitors Fare Against Lumentum
Lumentum faces stiff competition from the likes of Applied Optoelectronics (AAOI - Free Report) and Coherent (COHR - Free Report) in the optical networking market.
Applied Optoelectronics is benefiting from the growing demand for its 400G and 800G products as global organizations are shifting from legacy data centers to AI-driven infrastructures. Applied Optoelectronics has also reduced its reliance on China, sourcing less than 10% of the value of its 800G and 1.6T components from China in the most recent quarter.
Coherent and NVIDIA recently announced a multi-year strategic agreement to develop advanced optical technologies used in AI data centers. As part of the deal, NVIDIA has made a multibillion-dollar purchase commitment for Coherent’s laser and optical networking products. In addition, NVIDIA will invest $2 billion in Coherent to support research and development, expand manufacturing capacity and strengthen operations as Coherent increases its U.S.-based production capabilities.
LITE’s Price Performance, Valuation and Estimates
Shares of Lumentum have rallied 148% year to date compared with the Communication - Components industry’s growth of 67.3%.
LITE YTD Performance Chart
Image Source: Zacks Investment Research
From a valuation standpoint, Lumentum trades at a forward price-to-sales ratio of 11.04X, higher than the industry’s average of 5.85X.
LITE Forward 12-Month (P/S) Valuation Chart
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Lumentum's fiscal 2027 and 2028 earnings implies year-over-year growth of 147% and 64%, respectively. The estimates for fiscal 2026 have been revised downward in the past 30 days.
Image Source: Zacks Investment Research
Lumentum currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.