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Lumentum Holdings Inc. (LITE)·Q1 2026 Earnings Summary

Executive Summary

  • Q1 FY26 delivered $533.8M revenue (+58.4% y/y, +11.0% q/q), non-GAAP EPS $1.10, and non-GAAP operating margin 18.7%, all at the high end of guidance; GAAP EPS was $0.05 .
  • Results beat Wall Street consensus: revenue $533.8M vs $526.5M*, and non-GAAP EPS $1.10 vs $1.03*; Q2 FY26 guidance calls for $630–$670M revenue, 20–22% non-GAAP operating margin, and $1.30–$1.50 non-GAAP EPS, implying >20% sequential growth .
  • Components led strength ($379.2M, 71% of revenue, +18.4% q/q, +63.9% y/y); systems were $154.6M (29% of revenue, -3.6% q/q, +46.5% y/y) .
  • Management flagged intensifying EML supply/demand tightness (shortfall widened to ~25–30%), capacity/yield improvements (+~40% unit capacity planned), and impending ramps in optical circuit switches (OCS) and co-packaged optics (CPO) as key catalysts .

What Went Well and What Went Wrong

What Went Well

  • “Revenue, operating margin, and earnings per share all came in at the high end of our guidance ranges” ; non-GAAP operating margin expanded 370 bps q/q and 1,570 bps y/y to 18.7% .
  • Components posted broad-based strength (EML laser chips, narrow linewidth DCI assemblies, pump lasers), with 7th consecutive quarter of narrow linewidth growth and record pump laser quarter .
  • Strong Q2 outlook: “We expect more than 20 percent sequential revenue growth…even before meaningful contributions from…optical circuit switches and co-packaged optics” .

What Went Wrong

  • Systems revenue declined sequentially (-3.6% q/q), with continued softness in industrial lasers and transceivers roughly flat as capacity was retooled in Thailand .
  • EML supply/demand imbalance worsened (from ~20% shortfall to ~25–30%), forcing daily allocation decisions and selective customer consolidation .
  • Elevated non-GAAP adjustments persisted (e.g., $46.5M stock-based comp; $34.4M amortization of intangibles; $8.3M restructuring; $5.9M notes inducement expense), highlighting reliance on non-GAAP profitability .

Financial Results

Income Statement and Margins (GAAP and Non-GAAP)

MetricQ3 FY25Q4 FY25Q1 FY26
Revenue ($USD Millions)$425.2 $480.7 $533.8
GAAP Gross Margin %28.8% 33.3% 34.0%
Non-GAAP Gross Margin %35.2% 37.8% 39.4%
GAAP Operating Margin %(8.9)% (1.7)% 1.3%
Non-GAAP Operating Margin %10.8% 15.0% 18.7%
GAAP Diluted EPS ($)($0.64) $2.96 $0.05
Non-GAAP Diluted EPS ($)$0.57 $0.88 $1.10

Product Type Revenue Mix

Product Type ($USD Millions)Q1 FY25Q4 FY25Q1 FY26
Components$231.4 $320.3 $379.2
Systems$105.5 $160.4 $154.6
Total$336.9 $480.7 $533.8

KPIs and Balance Sheet Highlights

KPIQ3 FY25Q4 FY25Q1 FY26
Adjusted EBITDA ($USD Millions)$71.0 $98.7 $127.6
Cash + Short-term Investments ($USD Millions)$866.7 $877.1 $1,121.8
Inventories ($USD Millions)$422.9 $470.1 $531.6
Non-GAAP Operating Expenses ($USD Millions)——$110.5
Capital Expenditure ($USD Millions)——$76

Results vs. S&P Global Consensus

MetricQ1 FY26 Consensus*Q1 FY26 ActualSurprise
Revenue ($USD Millions)526.5*533.8 +$7.3M / +1.4%
Primary (non-GAAP) EPS ($)1.03*1.10 +$0.07 / +6.8%
MetricQ2 FY26 Consensus*Q2 FY26 GuidanceMidpoint vs. Consensus
Revenue ($USD Millions)646.0*$630–$670 Midpoint $650 ≈ +$4.0M
Primary (non-GAAP) EPS ($)1.38*$1.30–$1.50 Range straddles consensus

Values retrieved from S&P Global.*

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueQ1 FY26$510–$540M Actual $533.8M Achieved high end
Non-GAAP Operating MarginQ1 FY2616.0%–17.5% Actual 18.7% Above guided range
Non-GAAP EPSQ1 FY26$0.95–$1.10 Actual $1.10 High end
RevenueQ2 FY26—$630–$670M New; implies >20% q/q growth
Non-GAAP Operating MarginQ2 FY26—20%–22% New; sequentially higher vs Q1
Non-GAAP EPSQ2 FY26—$1.30–$1.50 New
Non-GAAP Tax RateFY26 basis for EPS16.5% 16.5% Maintained
Share Count AssumptionQ2 FY26—~83.5M diluted New parameter

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 FY25 and Q4 FY25)Current Period (Q1 FY26)Trend
AI/cloud demandQ3: “strong demand from cloud customers” ; Q4: confidence in surpassing $600M by June 2026 or earlier >60% of revenue tied to cloud/AI infrastructure; broad-based demand across DCI, long-haul, and data center Strengthening and broadening
Transceiver production (800G/1.6T)Q3/Q4: 800G modules contributing ; build toward >$600M quarters Transceivers ~flat q/q in Q1 due to Thailand capacity build; guide for sustained growth with 800G and 1.6T layering Transitioning to sustained ramp
Indium Phosphide capacity/EML mixCapacity constraints highlighted; EML chips strong +~40% unit capacity expected next few quarters; 200G EMLs ~10% mix in early CY26 Capacity expanding; richer mix
CW lasers (for 800G/1.6T)Limited prior disclosure70 mW CW shipping; 100 mW CW sampling now, production mid-2026; intended for internal transceivers Early ramp; strategic internal use
Optical Circuit Switches (OCS)ECOC optimism; groundwork laid Hardware largely qualified at three customers; software qualification gating; ramp plan to ~$100M/qtr by Dec 2026 Execution progressing; rising confidence
Co-Packaged Optics (CPO)Investor-day and PRs; NVIDIA ecosystem partner Heightened interest (OCP), ELSFP pluggable demo; sampling expected in Q1 CY26 Demand visibility improving
Pricing/marginsGradual margin recovery in Q3/Q4 Targeted price increases; 200G EML mix and new products to lift margins; Q2 non-GAAP OM 20–22% Upward bias
Industrial lasersQ3/Q4 mixed Sequential decline amid market softness Weak

Management Commentary

  • CEO: “Our guidance indicates we expect more than 20 percent sequential revenue growth, even before meaningful contributions from…optical circuit switches and co-packaged optics…cloud transceivers…should now be on a sustainable upward path” .
  • CEO: “We estimate that over 60% of our total company revenue now comes from cloud and AI infrastructure” .
  • CFO: “Non-GAAP gross margin was 39.4%, up 160 bps q/q and 660 bps y/y due to better manufacturing utilization and favorable product mix…non-GAAP operating margin was 18.7%” .
  • CEO: “We are only at the beginning of our growth journey in cloud and AI infrastructure” .
  • OCS trajectory: “Ramp…to that $100 million a quarter target in December of 2026…hardware is generally qualified…software…keeps me up at night” .

Q&A Highlights

  • Transceiver ramp visibility: Confidence driven by improved execution and early participation in customer ramps; layering effect expected across 800G and 1.6T, with largest customer dominating near term .
  • Indium Phosphide capacity and mix: ~40% unit capacity addition planned; 200G EMLs targeted to ~10% mix in early CY26; capacity allocated to highest-margin EMLs .
  • CW lasers: 70 mW CW shipping; 100 mW CW sampling now for internal transceivers, production mid-2026 .
  • Supply/demand imbalance: Shortfall widened to ~25–30% despite added supply; strategic customer consolidation via LTAs; targeted price increases .
  • OCS milestones: Three customers in labs; hardware largely through gates; software qualification expected by March quarter for two majors; revenue ramp plan outlined .

Estimates Context

  • Q1 FY26 beat: Revenue $533.8M vs $526.5M consensus*, non-GAAP EPS $1.10 vs $1.03 consensus* .
  • Q2 FY26 guide vs consensus: Revenue guidance $630–$670M vs $646.0M consensus*; EPS guidance $1.30–$1.50 vs $1.38 consensus* .
  • Implication: Modest positive revision bias likely on revenue and EPS given strong mix, capacity additions, and pricing initiatives discussed by management .
    Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Components-led upside and margin expansion: Mix shift toward higher-margin 200G EMLs and improved fab yields support continued gross margin and operating margin uplift into Q2 and CY26 .
  • Transceiver growth resuming: Thailand capacity build complete; expect sustained revenue growth in 800G near term and 1.6T starting mid-2026, with layering effect and better margin profile than 800G .
  • OCS and CPO as 2H CY26 catalysts: OCS software qualification is the key gating factor; management confident in ~$100M/qtr OCS by Dec 2026; CPO/ELSFP momentum and ecosystem validation (including NVIDIA) build optionality .
  • Supply/demand imbalance creates pricing leverage: Widening shortfall (~25–30%) allows targeted price increases and disciplined customer selection, aiding margin trajectory .
  • Near-term setup: Q2 guide (>20% q/q) signals broad-based strength across components and systems; watch execution on transceiver ramp and software milestones for OCS as potential stock catalysts .
  • Balance sheet/investment: Inventories and CapEx up to support cloud/AI growth; cash/short-term investments rose to $1.12B; monitor debt structure (current portion and long-term) as expansion continues .
  • Non-GAAP reliance persists: Continue to track GAAP-to-non-GAAP adjustments and tax rate assumptions (16.5%) in assessing sustainable profitability .