Outstanding Performance! Optical Module Giant Lumentum: Q2 Revenue Surged 65% Year-over-Year, AI Business Backlog Exceeds $400 Million, Next Quarter Guidance More Astonishing

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

On February 3, global leader in optical and photonic technologies Lumentum Holdings announced its financial results for the second quarter of fiscal year 2026. The earnings report showed that for the quarter ending December 27, 2025, the company achieved a net revenue of $665.5 million, a 65.5% year-over-year increase, reaching the high end of guidance; Non-GAAP operating profit margin was 25.2%, expanding over 1700 basis points year-over-year, with significantly improved profitability exceeding previous expectations.

CEO Michael Hurlston highly praised the performance: “Lumentum delivered an outstanding second quarter, with revenue up over 65% YoY and Non-GAAP operating profit margin expanding over 1700 basis points. Revenue reached the high end of guidance, and the growth in profitability and EPS far exceeded expectations, fully demonstrating the leverage of our business model.”

More notably, the company’s momentum in AI infrastructure is strong. The OCS business is rapidly expanding to meet extraordinary customer demand, with order backlog exceeding $400 million; in the CPO field, the company secured a new incremental order worth hundreds of millions of dollars, scheduled for delivery in the first half of 2027. Hurlston stated plainly, “We are just at the starting line of two huge opportunities: Optical Circuit Switches (OCS) and Co-Packaged Optics (CPO).” He emphasized that as AI data centers experience explosive growth in bandwidth and energy efficiency requirements, Lumentum is entering its most robust growth cycle in history.

The company’s outlook for the future is even more optimistic. The quarterly guidance indicates revenue of $780 million to $830 million, representing over 85% YoY growth; Non-GAAP operating profit margin is expected to further improve to 30.0%-31.0%, and Non-GAAP EPS is projected to be $2.15-$2.35, showing strong growth momentum and scale effects.

After the earnings release, Lumentum’s stock surged over 5% in after-hours trading, with a cumulative increase of over 400% in the past year.

Profitability Fully Improved, Operating Margin Hits New High

Lumentum’s profitability this quarter showed comprehensive improvement. GAAP gross margin reached 36.1%, up 210 basis points from the previous quarter and significantly up 1130 basis points from the same period last year; Non-GAAP gross margin was 42.5%, up 310 basis points quarter-over-quarter and 1020 basis points year-over-year.

Operational profitability improvements are even more remarkable. GAAP operating profit margin jumped from 1.3% last quarter to 9.7%, a massive improvement of 2250 basis points YoY, turning from -12.8% last year to positive. Non-GAAP operating profit margin reached 25.2%, up 650 basis points quarter-over-quarter and 1730 basis points YoY, far higher than last year’s 7.9%.

The significant increase in profitability is directly reflected in EPS. GAAP diluted EPS was $0.89, compared to $0.05 last quarter and a loss of $0.88 in the same period last year; Non-GAAP diluted EPS was $1.67, up 52% quarter-over-quarter and nearly 300% YoY.

Dual Business Engines Drive, Components and Systems Progress Simultaneously

The coordinated 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 photonic technology innovation, the company can offer a complete product portfolio from high-performance lasers and modules to optical sub-systems.

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

The components business this quarter generated $443.7 million in revenue, accounting for 66.7% of total revenue, up 17.0% quarter-over-quarter and 68.3% year-over-year, becoming the main driver of revenue growth.

The systems business also performed well, with revenue reaching $221.8 million, accounting for 33.3%, up 43.5% quarter-over-quarter and 60.1% YoY. The accelerated quarter-over-quarter growth of the systems business indicates strong customer demand for the company’s overall solutions.

OCS and CPO Become New Growth Poles, Explosive Demand in AI Market

Management particularly emphasized the explosive growth potential of Optical Circuit Switches (OCS) and Co-Packaged Optical Devices (CPO).

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

In CPO, the company secured a new order worth hundreds of millions of dollars this quarter, with products scheduled for delivery in the first half of 2027. Co-Packaged Optics integrates optical devices directly into switch chip packages, significantly boosting data transfer speeds and reducing power consumption, making it a key technology for next-generation AI training and inference infrastructure.

The CEO emphasized that the company’s technological advantages in both optical components and systems make it a critical supplier for global AI leaders. As AI infrastructure construction peaks, Lumentum’s technological and capacity advantages will continue to translate into performance growth.

Strong Financial Position, Ample Cash Reserves

On the balance sheet, Lumentum maintains a healthy financial position. As of this quarter’s end, the company held $1.1553 billion in cash, cash equivalents, and short-term investments, an increase of $33.5 million from the previous quarter, providing ample funds for future expansion and R&D investments.

Accounts receivable net was $376.8 million, a significant increase from $250 million at the end of June, matching revenue growth. Inventory reached $570.4 million, up $100 million from the end of the last fiscal year, indicating active stocking to meet strong order demand.

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

Strong Q3 Guidance, Full-Year Growth Confirmed

Looking ahead to Q3, Lumentum provided guidance exceeding market expectations. The company expects revenue of $780 million to $830 million, with a median estimate of over 85% YoY growth and about 22% QoQ growth, indicating continued strong momentum.

In terms of margins, Non-GAAP operating profit margin is expected to further expand to 30.0%-31.0%, continuing the growth from this quarter’s 25.2%. Non-GAAP diluted EPS is projected at $2.15-$2.35, with the median up 34% from this quarter’s $1.67.

Management stated that the company is still in the early stages in both OCS and CPO fields, and with capacity ramp-up and order deliveries, future growth potential is huge. Coupled with steady demand from traditional telecom and industrial manufacturing markets, Lumentum has established a strong growth trajectory for the full year and is poised to continue benefiting from the wave of AI infrastructure development.

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