Lumentum Holdings Inc at UBS Global Technology and AI Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: David Vogt - UBS AG - Analyst : So when we think about the forecast that you talked about being really bullish and now obviously, magnitude stronger, let's talk about underpinning some of that. Let's start with sort of, I think, not to deemphasize this business, but let's talk about the transceiver business first. So obviously, that business has seen tremendous growth -- the market has grown leaps and bounds better than I think anyone had expected. Back in -- you're in this business because of an acquisition made back in 2023. So can we talk about kind of how you're thinking about that business long term? I know you've been pretty vocal about how you see that from a customer perspective, a volume perspective, an IP perspective. So as we sit here today, given just the demand trends that you're seeing, like maybe just refresh us on like how do you think that plays out? I mean is there really a cap on that business in terms of how you're thinking about the revenue opportunity, self-imposed cap, I should say, not a demand cap.

Question: David Vogt - UBS AG - Analyst : And that, I think you said publicly that's really targeted with three large existing customers that you've had a long-standing relationship with since you've gotten back into this business. And to get to that margin target, I know it's probably below that 35% today, what needs to happen? Is it vertical integration? Is it outsourcing? Like how are you thinking about driving that margin? I know it's the least exciting piece of your business today in your view, but just maybe let's get this one out of the way.

Question: David Vogt - UBS AG - Analyst : Okay. Got it. So as an extension of transceivers, maybe let's touch on EMLs, right? So EMLs have been an incredibly strong business for you, supply is incredibly tight. Indium phosphide is an incredibly short supply. I think you've added 40% capacity year-over-year this year. So how are we thinking about -- how are you thinking about as we go into '26? I'm pretty sure I know the answer to this, but it kind of feels like you're sold out for 26 on EMLs, if I'm not mistaken. And you have long-term agreements with customers. Is that how investors should think about the EML business in '26? Or is there room for incremental sort of capacity additions from your existing footprint at this point? LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies. DECEMBER 03, 2025 / 10:35PM, LITE.OQ - Lumentum Holdings Inc at UBS Global Technology and AI Conference

Question: David Vogt - UBS AG - Analyst : So along those lines over the next 6 quarters, it sounds like there's obviously additional capacity. One of your relative competitors, partners in the industry is adding 6-inch capacity in indium phosphide. So how do you think about -- on a couple of lines, how do you think about the industry supply-demand balance longer term? I mean is this a let's get through '26 into '27 and then we'll kind of revisit? Or is the demand essentially strong for multiple years where you still have to consistently look at ways to drive more capacity to meet the underlying demand that we're seeing, which seems to be --

Question: David Vogt - UBS AG - Analyst : Well, you mentioned earlier, given your background from a semiconductor perspective and Jim's background, and you used the word cycle, doesn't feel much like a cycle right now, right? It feels like an elongated demand backdrop. I mean how would you characterize where we are in this particular part of said cycle versus like your historical perspective? I mean I don't think there's an analog that I've seen in 20, 25 years. Just kind of love to get your perspective because we get questions from investors all the time, do you have visibility into '27, visibility into '28? Jim made reference to '28 orders -- or not orders, basically comments and potential commitments from customers into '28. So how are you thinking about that maybe at a higher level?

Question: David Vogt - UBS AG - Analyst : Got it. All right. So let's just move to CPO since you mentioned CPO. Obviously, that's, I think, a unique -- you have a unique position in CPO from a laser perspective. The market, I think, is still kind of debating in terms of scale and scope of how big CPO from an industry perspective can be as we move through '26, more realistically '27 in terms of more volume. I think you said you expect your CPO-related business to start ramping in late calendar '26 or the second half of '26. Maybe kind of give us a sense for how you see that sort of demand curve playing out or that cadence playing out as we move through '26 into '27 where volume should ramp more materially?

Question: David Vogt - UBS AG - Analyst : And just maybe straight on this, what you're seeing, this is an opportunity largely in scale-up right near term. So does the Ethernet consortium or ESN, is that a longer-term opportunity by the time they set standards, by the time protocols are determined? Like how do you think about that as an opportunity outside of that large very vocal customer that you're working with today, particularly on Ethernet switching?

Question: David Vogt - UBS AG - Analyst : Maybe just touching on competition and CPO. You mentioned CBO's been talked about for a while. I think if we went back to like OFC in '22, '23, players like Marvell are making a big stink about it, Cisco is maybe a little bit less optimistic. They don't -- Cisco doesn't sound as optimistic on CPO being sort of a mainstream solution that they're going to participate in -- how do you see the competitive landscape today and how that's evolving and the relationship between some of the other optics players in the space right now?

Question: David Vogt - UBS AG - Analyst : Got it. So since you mentioned your large customers switch portfolio, maybe it makes sense to touch on OCS, right? Obviously, this is a new TAM for you, relatively new TAM for you, talked aggressively about it six, nine months ago. How do you think about your technological roadmap in OCS versus the incumbent roadmap? You have -- like Google has their own technology, your MEMS-based competitors, liquid crystal. Maybe talk through like why you think MEMS -- your MEMS solution is technically the right solution. And it's one new, two or three customers that are ramping as we speak, and we'll probably ramp aggressively as we move through '26?

Question: David Vogt - UBS AG - Analyst : Got it. And so when you -- I know you haven't given a TAM, but I think it's my understanding, and I think you might have said this publicly. Your initial foray with three large customers sort of mimics or overlaps with your three transceiver customers, is that fair?

Question: David Vogt - UBS AG - Analyst : Okay. So I'll throw that out. I'll state that with maybe different rank orders in terms of maybe the revenue opportunity within that portfolio versus transceivers. How do you think about -- so I mean, is the volume ramp dependent upon the speed at which sort of AI data is driving training environments and then ultimately, inference environments, what bandwidth latency, to your point is critical? And so as we see more customers, these three customers that we think are your customers ramp 800G and then faster speeds, 1.6, that is sort of the tailwind to think about how quickly OCS gets deployed in those environments?

Question: David Vogt - UBS AG - Analyst : So maybe I'm not as familiar with what the bottleneck is from the supply chain. Is it manufacturing capacity? Is it substrate? Like is there a golden screw, if you will? Like what is sort of the gating factor that's limiting how quickly you can produce, your partners can produce for you?

Question: David Vogt - UBS AG - Analyst : Final question on OCS, so obviously, it comes up in questions, and so I'll run this by you. When you think about men's versus liquid crystal, that voltage dynamic that you mentioned, obviously, since you're actually mechanically moving mirrors, how are your customers thinking about that sort of voltage dynamic difference between liquid crystal? I know it's lossless versus not with loss issues, but how is that sort of reconciled by your customers? And how do you think about that dynamic?

Question: David Vogt - UBS AG - Analyst : Got it. All right. Just in the few minutes we have left, talk about your telecom business, components. Obviously, that's a bit different than sort of what it looked like three, four, five years ago. I think the outlook is considerably stronger. So when we look at the portfolio today, within your component business, what are you most excited about that is not only supportive to the gross margin targets that you're aiming for, but sort of growth rates, maybe not on par with what you're seeing in some of the other parts of the business but really, where you're seeing sort of a step-up in demand from a component perspective in that vertical?

Question: David Vogt - UBS AG - Analyst : And I know you're the component provider, so this isn't directly kind of in your purview. But like there's a subtle difference between scale across and traditional DCI, right? So in scale across we're connecting effectively your products or your components are going into products to connect sort of dedicated links between AI clusters. Is that how you're seeing your -- I mean, you're removed from it, I guess, one step. LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies. DECEMBER 03, 2025 / 10:35PM, LITE.OQ - Lumentum Holdings Inc at UBS Global Technology and AI Conference

Question: David Vogt - UBS AG - Analyst : And as an outsider looking in, should we view the opportunity set driven largely by kind of the regional distribution of data centers because of power considerations and other sort of nimbyism? And so the more we have more distributed data center infrastructure that's just a fairly meaningful tailwind for your component business, particularly in scale across?

Question: David Vogt - UBS AG - Analyst : Great. So I think we're out of time. Okay. I want to thank you, Michael, for joining us. Thank you, everyone, for joining, and enjoy the rest of your stay.