Lumentum Holdings Inc Q1 2026 Earnings Call Transcript

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

Question: Samik Chatterjee - JPMorgan Chase & Co - Analyst : Just making sure. Can you hear me?

Question: Samik Chatterjee - JPMorgan Chase & Co - Analyst : Getting used to the new system. So thank you, strong results. Congrats on the outlook as well. Maybe on the transceiver side, high confidence in relation to sustaining that growth going forward, and you're calling for a pretty sizable growth into the next quarter as well. Maybe just talk a bit about what's driving that confidence, maybe more in addition to the capacity ramp that you talked about? Is there more diversification on the customer front as well. That's giving you visibility into that consistent growth? And what's in particular driving the strong increase of about $60 million or so, I think that's what you're guiding to for the quarter-over-quarter sort of into the next December quarter? And I have a follow-up.

Question: Samik Chatterjee - JPMorgan Chase & Co - Analyst : Got it. Got it. And for my follow-up, Michael, you talked about the 40% increase in capacity for datacom chips. Wondering if you can just help me think through what that means on a revenue basis? I would assume the mix would tilt more towards 200-gig EMLs, but what is generally the plan in terms of usage of that capacity? And how should we translate that maybe into terms of what it means for revenue increases? Thank you.

Question: Samik Chatterjee - JPMorgan Chase & Co - Analyst : Okay, great. Thank you. Thanks for taking my questions.

Question: Ryan Koontz - Needham & Company LLC - Analyst : Great, thanks. I wanted to ask about the continuous laser output, how -- that's a new product for you, how you think about that market opportunity. Is that something you're targeting for your own optical transceivers and what sort of customers lined up for that? Thank you.

Question: Ryan Koontz - Needham & Company LLC - Analyst : That's great. Exactly what I was hoping to hear. So -- and then shifting gears maybe to narrow line width lasers for the DCI element. Is that a different set of competitors? Obviously, a different set of customers, but can you kind of educate us a little bit on the competitive environment for the narrow linewidth lasers for Coherent? Thank you.

Question: Ryan Koontz - Needham & Company LLC - Analyst : I appreciate that very much.

Question: Christopher Rolland - Susquehanna Financial Group LLLP - Analyst : So congratulations, particularly on the guide, that was -- that's pretty incredible. And congratulations to Wupen couldn't have happened to a smarter guy. But in terms of the transceivers and that market, it's my understanding that 102 switches are not really ramping until next year. In fact, they won't have like qualified ASICs in a box until early next year. That's the precursor to qualifying 1.6T transceivers. So perhaps for Michael, as you see this playing out, I guess my first question is, are you going to strategically use your -- what seems like market-limited EML supply to drive new customers and new qualifications on the transceiver side. It sounds like maybe yes. And secondly, on the EML side, as in REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 04, 2025 / 10:00PM, LITE.OQ - Q1 2026 Lumentum Holdings Inc Earnings Call the first half of the year, would you expect customers to stockpile these ahead of these qualifications? Is this something that you see in the first half even before 1.6 starts ramping?

Question: Christopher Rolland - Susquehanna Financial Group LLLP - Analyst : Very helpful, Wupen. And back to you, Michael, at OFC, I remember you were somewhat reticent to put on more indium phosphide capacity. And so as I think about the industry more largely, competitors are ramping 6-inch indium phosphide kind of as we speak. And it does seem like the early market is going to be for EMLs here, which are a large die because you put the modulators on there. But as we move to CW, it's a smaller die. And I'm just wondering do you think we might end up in an overcapacity situation, particularly when we -- competitors ramp and eventually we move to SiPho and CW. And what do you think the timing might be around that? And just putting all of this together into your decision to put more capacity on, what made you change your mind? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 04, 2025 / 10:00PM, LITE.OQ - Q1 2026 Lumentum Holdings Inc Earnings Call

Question: Christopher Rolland - Susquehanna Financial Group LLLP - Analyst : Yeah. understood. Thank you guys, good strategy and congrats.

Question: Simon Leopold - Raymond James & Associates - Analyst : Great, thank you. I wanted to first ask about the OCS opportunity. I know you said that it's currently a fairly small market. But coming out of the ECOC show, it certainly sounded like the industry as a community was more upbeat. And I've heard second or third hand that you've suggested that this could be $100 million by your December '26 quarter. Now I don't know that, that's true. So I wanted to hear directly from you how you see this market evolving? And then I've got a quick follow-up. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 04, 2025 / 10:00PM, LITE.OQ - Q1 2026 Lumentum Holdings Inc Earnings Call

Question: Simon Leopold - Raymond James & Associates - Analyst : Thanks. And then just as a follow-up, in the prepared remarks, you described the outlook for the December quarter as broad-based improvement. I would like to see if you could rank order, what does the biggest dollar increase come from sequentially in December versus September relative -- thinking about the datacom transceivers, the telecom devices, the datacom chipsets, where is the biggest dollar contribution coming from in your forecast?

Question: Simon Leopold - Raymond James & Associates - Analyst : Great. I'm surprised too. Thank you.

Question: Papa Sylla - Citibank Cameroon SA - Analyst : Thank you for taking my question and Congrats on the very strong results. I just wanted to kind of -- it was asked differently, but I just wanted to double check on the supply-demand imbalance for EML specifically. I think it's very clear kind of demand is running ahead of supply. But I guess, how would you characterize the supply-demand this quarter versus last quarter, for instance? I understand you kind of increased investment and yield improve. But on the other side as well, it seems like CapEx is going up across the board. Just if you could help us understand kind of how has that balance changed from last quarter to now?

Question: Papa Sylla - Citibank Cameroon SA - Analyst : Got it. No, that's very clear. And just for my follow-up on margins. obviously, this quarter kind of very strong improvement. But I guess going into the December quarter, and if my math is right, given the sales guidance you provided and the operating margin you provided, you could be very close to what you gave out previously in terms of your longer-term target. I guess, is that kind of the right way to think about it going into the December quarter? And just for kind of a quick follow-up to the supply-demand imbalance, we've now kind of demand further outstripping supply, kind of what's your approach in terms of pricing at this point? Do you have now more levered to even increase further pricing on EML and further expense margin as well?

Question: Papa Sylla - Citibank Cameroon SA - Analyst : Got it very clear. And congrats again on the from you.

Question: George Notter - Wolfe Research LLC - Analyst : Hey guys, this is [Tron] on for George. I just wanted to double click on CPO. What do you guys see in terms of the demand outlook there? I mean, compared to the last few quarters? And then how is -- how or if -- how is that customer and market expanding, if at all?

Question: Meta Marshall - Morgan Stanley - Analyst : Great, thanks. Maybe following up on Simon's question. Just as you guys ramp the OCS business to kind of that $100 million. Just trying to get a sense of kind of what are some of the milestones you're looking for. Or the -- is it kind of getting through their labs? Is it testing the hardware? Is it the software? Just kind of what are some of the key milestones we should be looking at over the next year?

Question: Meta Marshall - Morgan Stanley - Analyst : Got it. And then -- just in terms of the transceiver business, understanding kind of the ramp of that is primarily going to the first and major customer. But just is the expectation that kind of the vast majority of this ramp going forward will only include that kind of primary customer? Or just how should we think about any of the ramps of the additional customers of Cloud line at this point?

Question: Meta Marshall - Morgan Stanley - Analyst : Great. Thank you so much.

Question: Simon Leopold - Raymond James & Associates - Analyst : Thank you.