Lumentum Holdings Inc Q2 2025 Earnings Call Summary

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

Question: Samik Chatterjee - JPMorgan - Analyst : Hi, thank you for taking my question. Maybe for the first one, and was it you did mention this in your prepared box, but maybe I need to sort of, a clarification on this in terms of the sequential revenue increase from December to March, cloud and networking

Question: Samik Chatterjee - JPMorgan - Analyst : Got it. Yes, please. For my follow-up, you mentioned the 200-gig EML, you can see sort of demand being ahead of capacity or supply by -- even by end of calendar '26. Just wondering if you can -- I know you're doing capacity expansion on that front. Can you give us a reference point of where you expect your capacity to be by the end of calendar '26, maybe in reference to either end of 2024 calendar year or like the June '24, fiscal '24 end? Like how should we think about the pace of capacity increase that you're planning and demand sort of still outstripping that? And what do you expect to sort of see in 100-gig EML and demand for 100 gig as you ramp to 200-gig at that point? Thank you.

Question: Samik Chatterjee - JPMorgan - Analyst : Got it. Alan, congrats on the return.

Question: Thomas O'Malley - Barclays - Analyst : Hey guys, thanks for taking my question. I wanted to echo the congrats to Alan. Go Rader, hopefully, you have a little more time and retirement to watch, hopefully, it's a better football than you did for the last 10 years. . So with that, I'll keep come on the business side. I wanted to I wanted to start with your comments on Q2. So you talked about shipping to a proprietary interconnect customer and an exciting opportunity. I think you've hinted at this a little bit in the past, but maybe could you just explore that a bit more? Is that on the laser side? Is that on the module side? Any additional color there would be helpful.

Question: Thomas O'Malley - Barclays - Analyst : Helpful. And then you talked about so you have one customer that's ramping already in December. You have another customer that's coming online and closer to the end of the fiscal year. This opportunity sounds like there's some goodness in '25, but really more of a '26 story. You guys kept the commentary around the $500 million at some point in the calendar year '25, was that just you regurgitating that statement? Does it mean Q4? Or could you possibly get there earlier? I was just surprised you kind of kept the same language as you did before. Thank you.

Question: Simon Leopold - Raymond James - Analyst : Great, thank you very much for taking the question. I've got two. First one is, I wanted to -- if you could speak a little bit to your thoughts and comments on the prospects for co-packaged optics or CPO, thinking about really an intermediate and long term because obviously, it's not going to affect Lumentum in the near term. And then I've got a follow-up.

Question: Simon Leopold - Raymond James - Analyst : Great thanks. And then just just as a follow up, we've had a number of data points recently that the telco demand is recovering and you mentioned inventory drawdowns. It it sounds to us like that business was probably over $200 million for you in the December quarter and I guess I'm just looking for maybe a little bit more of a drill down in that. I interpreted your comment on your outlook to be more about inventory normalizing, whereas some of the others in the supply chain have sounded a little bit more upbeat and maybe that's that's nuanced, but how are you thinking about that and maybe any quantification you can offer on telco. Thank you.

Question: Simon Leopold - Raymond James - Analyst : Thank you. and congratulations. We will miss you.

Question: George Notter - Jefferies LLC - Analyst : Hi, thanks a lot guys. Alan, congratulations, well deserved, looking forward to working with Michael here also. All right. So on the question I have is just on the transceiver business. your largest transceiver customer, are you now fully through that product transition? And was that fully in the quarter?

Question: George Notter - Jefferies LLC - Analyst : Got it. And then could you just give us a sense on the milestones for the additional cloud provider customers you guys have won? I heard what you said certainly about shipping to one of those new customers. But is there -- what's gating your ability to ship to that customer? And then the third customer win, again, what do the milestones look like in terms of going from here to more significant volumes? Thanks.

Question: Meta Marshall - Morgan Stanley - Analyst : Great thanks. Maybe just a question on gross margins, you watch, you gave some detail, but just, should we consider kind of the sequential down takech more mixed or just, kind of working through yields. As you expand capacity, and then just maybe as a second question, building on what George just asked, just how should we think about kind of the relative size of customer in two and three as they ramp, maybe in comparison to one. Thank you.

Question: Meta Marshall - Morgan Stanley - Analyst : And just on the thinking about. Maybe have more visibility of a customer, yeah. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 06, 2025 / 10:00PM, LITE.OQ - Q2 2025 Lumentum Holdings Inc Earnings Call

Question: Ruben Roy - Stifel - Analyst : Thank you. Congrats, Congrats, Alan. First question for Alan or Wajid on the supply chain commentary. What's your line of sight on that? Can you give us any more details on what it is the short? Is it related to transceiver specifically, the ingredients at short? Or is it more widespread? And you see that kind of constraint extending further into the year beyond the March quarter?

Question: Ruben Roy - Stifel - Analyst : Yeah, absolutely. Just a quick follow-up. Just thinking through the ramp of 200 gig per lane EML lasers for this year and maybe beyond this year. I would assume there's demand for those lasers in 800 gig transceivers as well as obviously 1.6. Is that the right way to think about it? Or is that going to be sort of more of a production ramp for you as we get to 1.6T transceivers?

Question: Ruben Roy - Stifel - Analyst : Perfect. Great. Thank you, Alan. I guess if you added that, and maybe I'll sneak in. What's your expectations for mix as we progress through this year on EML versus Sipho?

Question: Ruben Roy - Stifel - Analyst : Thank you.

Question: David Vogt - UBS Investment Bank - Analyst : Great, thanks guys for taking my question and Alan, we wish you well in your next endeavor. Wajid, can I go back to gross margin for a second. So it sounds like, obviously, Industrial is much stronger, which carries a stronger gross margin. I guess I'm trying to understand the mix comment on why gross margins were down sequentially. Does that mean are you firing that the transceiver business grew significantly faster than Datacom in the quarter? Just trying to figure out kind of the stack ranking of how that played out. And I'll give you my second question, because it's more thematic . We haven't heard anything about tariffs recently from a lot of companies. I know things are paused. I'd just love to kind of get your perspective, maybe not so much from the China Thailand dynamic other markets that may be affected like Mexico. So just kind of what your thoughts are there and how you guys are thinking about that as we move through the early part of '25. Thanks. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 06, 2025 / 10:00PM, LITE.OQ - Q2 2025 Lumentum Holdings Inc Earnings Call

Question: David Vogt - UBS Investment Bank - Analyst : Thanks.

Question: Ryan Koontz - Needham & Company Inc - Analyst : Great, thanks for the question. I wanted to follow back up on your comments around DCI. We heard some pretty frothy numbers from others reporting over the last couple of months about volumes picking up there, and it seems like we're well on our way to kind of see some substitution from traditional systems over to pluggables. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 06, 2025 / 10:00PM, LITE.OQ - Q2 2025 Lumentum Holdings Inc Earnings Call I wonder if you can comment on your CapEx exposure, your BOM exposure as it relates to systems versus pluggables. And do you feel like that can provide a tailwind to revenue growth even if CapEx numbers aren't going up as fast?

Question: Ryan Koontz - Needham & Company Inc - Analyst : Sure. Congrats on the retirement.

Question: Karl Ackerman - BNP Paribas - Analyst : Yeah. And Alan, congrats on the next opportunity in front of you. I was hoping you kind of remind us whether the Sure. I was hoping you could remind us where the new Datacom transceiver wins you have from 2 additional hyperscalers are only 800G? Or could they be early samples of 1.6T? And I was hoping, as you addressed that question, whether your datacom opportunity is inhibited just in the March quarter from AML bottlenecks, like you noted, Wajid, or if it's a an issue that could persist through the first half of the year. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 06, 2025 / 10:00PM, LITE.OQ - Q2 2025 Lumentum Holdings Inc Earnings Call

Question: Karl Ackerman - BNP Paribas - Analyst : It did. If I may sneak it in, then that's tangential to that. Just I guess, how to think about CapEx. On 1 hand, the first half of this year, you've spent the same amount of CapEx you spent all of last year. And so as you contemplate building out the remaining area of Thailand, how should we think about the CapEx trajectory from here?

Question: Ananda Baruah - Loop Capital - Analyst : Alan, we'll miss working with you. Congrats on retirement. Two, I guess real quick, and I can ask them both at the same time. Yes, you're welcome, Alan. I'll ask those at the same time. On the new ramping customer, can you give us some sense of time frame when you think that it hits run rate and -- or any context around what run rate -- I know this is probably kind of somewhat project-based, but when you think it hits run rate, what time frame? And then the second one is sounds like this year, calendar year '25, you're not going to run into sort of congestion between your AML chips add your own transceivers since they're largely Sipho-based right now. But how do you think maybe in 26 calendar about REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 06, 2025 / 10:00PM, LITE.OQ - Q2 2025 Lumentum Holdings Inc Earnings Call balancing out EML -- sort of like third-party EML selling and your own transceiver like Lumentum Cloud Light branded transceiver shipments? Some context there would be great.

Question: Ananda Baruah - Loop Capital - Analyst : That's super helpful context on both. Really appreciate it.