Mike Genovese

Mike Genovese inquired about the allocation of Lumentum's increased indium phosphide capacity between components and systems. He also questioned if the strong EPS outlook could be even higher, given the growth of high-margin products.

Answer

President and CEO Michael Hurlston stated that the vast majority of indium phosphide output would be sold externally, with a mix shift towards 200G EMLs. He noted that demand far exceeds supply, leading to allocation decisions prioritizing 200-gig EMLs, 100-gig EMLs, and then CW lasers for internal consumption. EVP and CFO Wajid Ali confirmed that the 40% increase in indium phosphide capacity, focused on higher-gross-margin laser chips, would positively impact EPS in future quarters, building on the current quarter's strong performance.

Mike Genovese asked how the increased Indium Phosphide capacity output would be split between Lumentum's components and systems segments. He followed up by questioning if the impressive EPS outlook could be even higher, given the growth of high-margin products.

Answer

President and CEO Michael Hurlston stated that the vast majority of Indium Phosphide output would be sold into the external market, with a mix shift towards 200G EMLs. He noted that demand far outstrips supply, leading to allocation decisions prioritizing highest dollar value and margin components. EVP and CFO Wajid Ali added that the 40% increase in Indium Phosphide capacity is focused on higher-margin laser chips, which will have a positive effect on earnings per share as it flows through in coming quarters.

Mike Genovese inquired about the number of significant customers driving the 15% sequential telecom growth. He also asked for details on DataCom customers and products contributing revenue beyond the main transceiver customer, including upcoming projects, and clarified if current non-largest customer DataCom revenue is mostly merchant type.

Answer

Chairman and CEO Seamus Grady stated that telecom growth was driven by a mix of customers across traditional telecom and DCI, including new wins, indicating broad-based growth. For DataCom, he mentioned the largest customer, Hyperscale Direct opportunities, and merchant transceiver manufacturers. Mr. Grady confirmed that revenue outside the biggest DataCom customer is primarily from merchant transceiver business and other DataCom products.

Mike Genovese inquired about the number of customers significantly driving the 15% sequential growth in Telecom revenue. He also asked for details on DataCom customers and products contributing to revenue beyond the largest customer, including any upcoming projects, and clarified if the revenue outside the biggest customer is primarily from merchant-type business.

Answer

Seamus Grady, Chairman and CEO, stated that the Telecom growth was broad-based, driven by a mix of DCI, traditional Telecom, and new wins across a number of customers. For DataCom, he mentioned the largest customer remains a key driver, alongside efforts in Hyperscale Direct (supplying Hyperscalers with their designs) and merchant transceiver manufacturers. Mr. Grady noted that these opportunities take time to materialize, typically an 18-month gestation period. He confirmed that revenue outside of the biggest DataCom customer is mostly from merchant transceiver business and other DataCom products.

Mike Genovese asked if 800G customers are transitioning to 200G per-lane lasers and whether the noted supply constraints for this technology were impacting multiple customers.

Answer

CEO Seamus Grady confirmed that the growth focus for 800G is on 200G per-lane products and that the supply constraints affect both 800G and 1.6T products using this technology. He clarified that while they are engaged with multiple customers, the primary revenue impact from the shortage in the current quarter is with their main datacom customer.

Mike Genovese inquired about the impact of component price increases on gross margins, Extreme Networks' strategy to lift Average Selling Prices (ASPs) through Extreme Platform ONE and general price adjustments, and the company's overall plan for gross margin improvement. He also asked about the impact of a potential federal government shutdown on Extreme's business and the competitive dynamics against Cisco and Juniper Networks.

Answer

President and CEO Ed Meyercord explained that memory and optics prices have risen, leading to a mid-single-digit price increase expected to impact Q3 and Q4, alongside other tactical supply chain initiatives. EVP and CFO Kevin Rhodes confirmed the price increases, noting industry-wide trends and an expected 100-200 basis point margin improvement by year-end. Rhodes also stated that Extreme Platform ONE is expected to drive a 10-15% increase in ASPs for cloud applications. Meyercord clarified that the federal shutdown had minimal impact due to Extreme's small market share and recent certifications opening new opportunities. Regarding competition, Meyercord highlighted talent acquisition and roadmap confusion benefiting Extreme from HPE's acquisition of Juniper, and disruption in Cisco's partner program creating opportunities with mid-tier and smaller partners. Rhodes added that competitive markets are "frothy" for Extreme.

Mike Genovese asked about the impact of component price increases on gross margins, Extreme Networks' plans to increase average selling prices (ASPs) through Extreme Platform One or other price adjustments, and the strategy for future gross margin improvement. He also inquired about the impact of a potential federal government shutdown on Extreme's business and the competitive dynamics against Cisco and Juniper Networks.

Answer

President and CEO Edward B. Meyercord and Executive Vice President and CFO Kevin Rhodes explained that memory and optics prices have increased, leading to a mid-single-digit price increase to recover costs, with expected impact in Q3 and Q4 FY26. They anticipate gross margins to recover to 63% by year-end and a 10-15% ASP increase from Extreme Platform One. Regarding the federal shutdown, Mr. Meyercord noted minimal impact due to Extreme's small market share and recent certifications opening new opportunities. On competition, Mr. Meyercord highlighted talent acquisition from HPE/Juniper, confusion around HPE/Juniper's roadmap, and disruption from Cisco's partner program overhaul as creating significant opportunities for Extreme Networks, particularly with mid-tier partners. Mr. Rhodes added that competitive markets are currently 'frothy' for Extreme.

Mike Genovese of Rosenblatt Securities requested more detail on ADTRAN's market share gains and asked if operating leverage would again become a key part of the narrative, considering foreign exchange impacts.

Answer

CEO & Chairman Tom Stanton detailed market share gains in the US Tier 2 space, cross-selling wins, and new customer additions. SVP & CFO Tim Santo explained that while ForEx caused line-item volatility, it was largely EPS-neutral, and he is building a more robust hedging strategy. Stanton added that the company is at a "tipping point" where operating leverage will become more visible.

Mike Genovese asked if the third-generation platform is a software-only update, inquired about the drivers of Tier 1 customer strength, and sought management's confidence level in the BEAD program becoming a significant industry catalyst.

Answer

CEO Michael Weening confirmed the platform is a software and cloud architecture upgrade that works with all existing systems. CFO Cory Sindelar clarified that large customer strength was mainly due to a reclassification, not a pull-in from a specific Tier 1. Both executives reiterated that the BEAD program is not factored into their forecast, believing it will eventually be significant but will take longer than expected to materialize.