Performance explosion! Optical module giant Lumentum: Q2 revenue surged 65% year-on-year, AI business order backlog exceeds $400 million, next quarter guidance even more astonishing

Thanks to the strong demand for Optical Circuit Switches (OCS) and Co-Packaged Optics (CPO), optical module giant Lumentum not only delivered a financial report with revenue and profit exceeding expectations, but also provided a guidance for the next quarter with a year-on-year growth of up to 85%, demonstrating its key position in AI computing infrastructure to the market.

On February 3rd, global leader in optical and photonic technology Lumentum Holdings announced its financial performance for the second quarter of fiscal year 2026. The financial report showed that for the quarter ending December 27, 2025, the company's net revenue reached $665.5 million, a staggering year-on-year increase of 65.5%, hitting the high end of the guidance range; the Non-GAAP operating profit margin reached 25.2%, expanding by more than 1700 basis points year-on-year, significantly improving profitability beyond previous expectations.

CEO Michael Hurlston highly praised the performance: "Lumentum achieved an outstanding second quarter performance, with revenue growing over 65% year-on-year and Non-GAAP operating profit margin expanding over 1700 basis points. Revenue reached the high end of the guidance, while profitability and earnings per share expansion far exceeded previous expectations, fully demonstrating the leverage effect of our business model."

What is even more noteworthy is the company's strong momentum in the AI infrastructure sector. The OCS business is rapidly expanding to meet extraordinary customer demand, with a backlog of over $400 million; in the CPO field, the company has recently secured a multi-hundred-million-dollar incremental order, which will be delivered in the first half of 2027. Hurlston stated, “We are just at the starting line of two huge opportunities: Optical Circuit Switches (OCS) and Co-Packaged Optics (CPO).” He emphasized that with the explosive growth in bandwidth and energy efficiency requirements from AI data centers, Lumentum is entering its strongest growth cycle in history.

The company is even more optimistic about the future. The financial report stated that the guidance for the third quarter indicates revenue will reach $780 million to $830 million, with year-on-year growth exceeding 85%; the Non-GAAP operating profit margin is expected to further increase to 30.0%-31.0%, and the Non-GAAP earnings per share is expected to be $2.15 to $2.35, showing strong growth momentum and scaling effects.

After the financial report was released, Lumentum's stock price surged over 5% in after-hours trading, with a cumulative increase of over 400% in the past year

Comprehensive Improvement in Profitability, Operating Profit Margin Hits New High

Lumentum's profitability has shown a comprehensive improvement this quarter. GAAP gross margin reached 36.1%, an increase of 210 basis points from the previous quarter and a significant rise of 1130 basis points year-on-year; Non-GAAP gross margin reached 42.5%, up 310 basis points quarter-on-quarter and up 1020 basis points year-on-year.

The improvement in operating profit is even more pronounced. GAAP operating profit margin jumped from 1.3% last quarter to 9.7%, achieving a massive improvement of 2250 basis points year-on-year, turning from -12.8% in the same period last year to a positive value. Non-GAAP operating profit margin reached 25.2%, up 650 basis points quarter-on-quarter and expanded by 1730 basis points year-on-year, far exceeding last year's 7.9%.

The significant enhancement in profitability is directly reflected in earnings per share. GAAP diluted earnings per share reached $0.89, compared to only $0.05 last quarter and a loss of $0.88 in the same period last year; Non-GAAP diluted earnings per share reached $1.67, growing 52% quarter-on-quarter and soaring nearly 300% year-on-year.

Dual Business Engines Drive Growth, Components and Systems Advance Together

The synergistic development of the two major business lines reflects Lumentum's comprehensive layout in AI data centers, cloud computing, and next-generation communication network infrastructure. With decades of innovation in photonic technology, the company is able to provide a complete product portfolio ranging from high-performance lasers and modules to optical subsystems.

From the product line perspective, Lumentum's components and systems businesses both achieved strong growth.

The components business generated revenue of $443.7 million this quarter, accounting for 66.7% of total revenue, a quarter-on-quarter increase of 17.0% and a year-on-year surge of 68.3%, becoming the main engine of revenue growth.

The systems business also performed excellently, with revenue reaching $221.8 million, accounting for 33.3%, a quarter-on-quarter surge of 43.5% and a year-on-year growth of 60.1%. The accelerated quarter-on-quarter growth in the systems business indicates strong customer demand for the company's overall solutions.

OCS and CPO Become New Growth Drivers, AI Market Demand Explodes

The company's management particularly emphasized the explosive growth potential of Optical Circuit Switches (OCS) and Co-Packaged Optics (CPO) businesses.

In the OCS field, Lumentum is rapidly expanding its production capacity to meet extraordinary customer demand, with current order backlog exceeding $400 million, highlighting the enormous demand for high-speed optical interconnect technology in AI data centers.

In terms of CPO business, the company secured several hundred million dollars in incremental orders this quarter, with products scheduled for delivery in the first half of the 2027 calendar year. Co-packaged optical technology integrates optical devices directly into switch chip packaging, significantly enhancing data transmission speed and reducing power consumption, making it a key technology for next-generation AI training and inference infrastructure.

The company's CEO emphasized that the company's technological roadmap advantages in both optical components and systems make it a key supplier for global AI leaders. As AI infrastructure construction reaches its peak, Lumentum's technological and capacity advantages will continue to translate into performance growth momentum.

Financial Condition is Robust, Cash Reserves are Ample

In terms of the balance sheet, Lumentum maintains a healthy financial condition. As of the end of this quarter, the company held cash, cash equivalents, and short-term investments totaling $1.15553 billion, an increase of $33.5 million from the end of the previous quarter, providing ample funding for future business expansion and R&D investment.

Net accounts receivable amounted to $376.8 million, a significant increase from $250 million at the end of June, matching the revenue growth. Inventory reached $570.4 million, an increase of $100 million from the end of the previous fiscal year, indicating that the company is actively stocking up to meet strong order demand.

Notably, the current portion of long-term debt within current liabilities reached $3.2402 billion, a significant increase from $10.6 million at the end of June, mainly related to the reclassification of convertible bonds. However, considering the company's strong cash flow generation capability and ample cash reserves, overall financial risk is manageable.

Strong Guidance for Q3, Annual Growth Momentum Established

Looking ahead to the third quarter, Lumentum provided guidance that exceeded market expectations. The company expects revenue to reach $780 million to $830 million, with a year-over-year growth of over 85% based on the midpoint, and a quarter-over-quarter growth of approximately 22%, indicating sustained strong growth momentum. In terms of profit margins, the Non-GAAP operating profit margin is expected to further increase to a range of 30.0%-31.0%, continuing to expand from 25.2% in this quarter, indicating that economies of scale and improvements in operational efficiency are still ongoing. The Non-GAAP diluted earnings per share are expected to be between $2.15 and $2.35, representing a 34% growth compared to $1.67 in this quarter based on the median.

Management stated that the company is currently still in the early stages in the two major areas of OCS and CPO. With capacity ramp-up and order deliveries, there is significant growth potential in the future. Coupled with stable demand in traditional telecommunications and industrial manufacturing markets, Lumentum has established a strong growth tone for the year and is expected to continue benefiting from the wave of AI infrastructure construction