Lumentum Holdings Inc Q3 2025 Earnings Call Transcript

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

Question: Joseph Cardoso - JPMorgan - Analyst : Hi, good evening. Thanks for the question. This is Joe Cardoso on for Samik. I guess first question and maybe just a big picture question. I noticed you guys didn't necessarily talk about the $500 million-revenue target that you initially laid out on seeing by the end of the calendar year. I guess recent performance in the June quarter guidance, how are you thinking about achieving that target by the December quarter, is there the possibility that you can achieve that a bit earlier? And what are the puts and takes to your expectations there? And then I have a follow-up.

Question: Joseph Cardoso - JPMorgan - Analyst : Yes. Yes. Definitely have a follow-up. So maybe just talked -- maybe just touching on the datacom chip business. I think you were initially targeting a 40% increase in volumes by the June quarter. I guess I just wanted to get an update there in terms of how it's tracking relative to your initial outlook. And whether you're outperforming your initial expectations, both on the volume and ASP front? And similar question, but obviously, more related to kind of the calendar '25 outlook, it does look like you're kind of outperforming your initial expectation in terms of where you were going to track towards the end of the calendar year. But any kind of color in terms of how you're thinking about ASPs trending there? And then sorry for the long question, but just curious like what's the contribution that you're expecting from CW lasers now that you're talking about ramping those up as well as EML. 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. MAY 06, 2025 / 9:00PM, LITE.OQ - Q3 2025 Lumentum Holdings Inc Earnings Call

Question: Joseph Cardoso - JPMorgan - Analyst : Thanks, guys. Appreciate it.

Question: Simon Leopold - Raymond James - Analyst : Thank you very much. I wanted to see if you could maybe unpack what in your assumptions around the tariff headwind, you quantified it around 100 basis points, which we appreciate. I guess what I'm trying to get at is trying to get a sense of how much business or manufacturing do you still have in China in that assumption? I understand you're moving more to Thailand. And what are the other underlying assumptions you've made? And then I've got a quick follow-up.

Question: Simon Leopold - Raymond James - Analyst : Thanks. And then just as my follow-up, longer-term question is I'd like to get your latest thinking on what contributions and what role you can play in CPO. It was nice to see that you were announced within the ecosystem back in March. I assume you're providing products like CW lasers, but we can get an idea of maybe some dollar content and forecasting of how you see this affecting your business over the intermediate or longer term? Thank you.

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

Question: Meta Marshall - Morgan Stanley - Analyst : Great. Thanks. Wupen, maybe just some clarity on the margin improvement that you saw on Cloud & Networking business. How much of that is from some of the yield improvements on cloud light versus just kind of pricing mix advantages on EMLs? And then I have a second question.

Question: Meta Marshall - Morgan Stanley - Analyst : Okay. Got it. And just as a second question, obviously, a very fluid situation with tariffs currently. But assuming kind of the 100-basis-point headwind that you guys are talking about is within that kind of 90-day exemption period kind of considering current tariffs as of that. I'm just kind of wondering what your thinking is, if there are kind of greater tariffs that come from Thailand, just our thoughts about eventually moving production out of Thailand. It sounds like you're moving more production there for now, but just kind of overall thinking if there ends up being tariffs on Thailand. Thanks.

Question: Meta Marshall - Morgan Stanley - Analyst : Great. Thanks.

Question: Dylan Ollivier - Susquehanna International Group - Analyst : Hi. This is Dylan Ollivier on for Chris. Thanks for taking my question. So for my first question, I wanted to follow up on the 50% sequential growth in the optical transceiver business. So which of your transceiver customer programs will be responsible for that growth. And how should we expect transceiver shipments to trend for the rest of the calendar year? Do you guys think that level is sustainable? And are you guys expecting to grow from there as you add customer programs?

Question: Dylan Ollivier - Susquehanna International Group - Analyst : Got it. That's great. Yes. So for my follow-up, I wanted to ask about 200 gig EMLs. So it sounds like you're getting solid traction there already. When should we expect that to ramp? And do you expect it to quickly cannibalize 100-gig EMLs or just to layer on top initially?

Question: Dylan Ollivier - Susquehanna International Group - Analyst : Great, thank you.

Question: Karl Ackerman - BNP Paribas Exane - Analyst : Yes, thank you. I have two. I believe you said that your cloud transceiver revenues would grow 50% sequentially on the contribution from all three of your cloud customers. I have to ask, though, is this tied to -- it sounds like it's tied to a new GPU or ASIC program ramping at least at one of them. But I guess how much of this, if at all, is from customers pulling forward transceiver demand ahead of potential tariffs. And if not, how do you manage that supply and demand balance with these three customers? I have a follow-up, please.

Question: Karl Ackerman - BNP Paribas Exane - Analyst : I did one if I may. Wajid, you spoke of moving production away from contract manufacturers to in-house solutions. I'm curious, is that for your industrial tech products? Or does that relate more towards cloud and networking? And similarly, do you need to add substantial capacity to move that production in-house, please? Thank you.

Question: Michael Genovese - Rosenblatt Securities, Inc. - Analyst : Great. Thanks. I'm not sure if I missed this in the prepared remarks, but do we get an update on telecom performance in the quarter and the sort of product issue last quarter with just getting supply, if that has been solved yet?

Question: Michael Genovese - Rosenblatt Securities, Inc. - Analyst : Great. And I guess I want to revisit the question whether there's any caution in the guidance for the back half of the year related to macro or tariffs. If I just take the transceiver comment up 50% sequentially, I mean to me, that that gets us $30 million more revenue. That gets us the whole growth in the guide. I know Industrial is supposed to be down, but you've got EMLs growing, you've got telecom that should be up. Is there an extra business conservatism in here? Or am I overthinking this?

Question: Michael Genovese - Rosenblatt Securities, Inc. - Analyst : Thanks so much. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 06, 2025 / 9:00PM, LITE.OQ - Q3 2025 Lumentum Holdings Inc Earnings Call

Question: David Vogt - UBS Equities - Analyst : Great. Thanks for taking my question. I just want to go back to the telecom business for a second. I jumped on late, and I apologize. Was there anything in the quarter that was similar to last quarter, when I mean by that, there was some channel normalization last quarter. and even in the quarter before. Just trying to get a sense for what's core underlying demand, particularly in the face of tariffs or the risk of tariffs or the potential tariffs. And I'll give you my follow-up, and I might have missed this because I jumped on late, could you share with us sort of how the core transceiver business grew in the March quarter relative to either last year or last quarter? Thanks.

Question: David Vogt - UBS Equities - Analyst : Great, thanks, guys.

Question: David Vogt - UBS Equities - Analyst : Nope, those are my two. Thank you.

Question: Alek Valero - Loop Capital - Analyst : Hey, guys. Thanks for taking my question. This is Alek on for [Nanda]. So I have a question on co-packaged optics. What's your view on when co-packaged optics truly have a chance to gain traction in data center and provide competition to transceivers.

Question: Alek Valero - Loop Capital - Analyst : Got it. That's very helpful. And just as a quick follow-up, can you remind us the economic difference between transceivers and co-packaged optics.

Question: Alek Valero - Loop Capital - Analyst : Got it. (multiple speakers)

Question: Alek Valero - Loop Capital - Analyst : I was going to ask, does co-packaged optics come with an ASP increase compared to transceivers?