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Lumentum Holdings Inc. (LITE)·Q2 2025 Earnings Summary

Executive Summary

  • Lumentum delivered a strong Q2 FY25, exceeding the high end of guidance on both revenue and EPS, with net revenue of $402.2M, GAAP diluted loss per share of $0.88, and non-GAAP diluted EPS of $0.42, driven by robust cloud end-market demand. “We exceeded the high end of our guidance ranges for both revenue and earnings per share, driven by strong demand in the cloud end market” .
  • Non-GAAP operating margin expanded to 7.9% (up 490 bps q/q, 600 bps y/y), aided by higher Cloud & Networking revenue and lower SG&A; adjusted EBITDA rose to $57.6M .
  • Q3 FY25 guidance was raised sequentially: revenue $410–$425M, non-GAAP operating margin 9.5–10.5%, and EPS $0.47–$0.53; management reiterated the target of reaching $500M quarterly revenue by end of calendar 2025 .
  • Leadership transition announced: Michael Hurlston appointed CEO effective Feb 7; preliminary Q2 figures pre-announced at the high end or above prior guidance—an added catalyst for sentiment and execution confidence .

What Went Well and What Went Wrong

What Went Well

  • Cloud & Networking strength: segment revenue rose 20% q/q and 18% y/y to $339.2M; EML unit shipments hit another record, including initial 200G lane speed EML deliveries to multiple customers .
  • Mix and margin improvement: non-GAAP operating margin expanded to 7.9% (+490 bps q/q; +600 bps y/y), with adjusted EBITDA at $57.6M; SG&A reductions contributed to profitability .
  • Strategic clarity and confidence: “We remain confident in achieving our previously stated goal of reaching $500 million in quarterly revenue by the end of calendar year 2025” and reiterated during the call, supported by capacity additions and new hyperscale transceiver customer ramps .

What Went Wrong

  • Supply chain constraints: shortages (e.g., hermetic packages for coherent components) constrained upside in Q3 and likely Q4; management noted Cloud & Networking demand “far surpasses” supply in the near term .
  • Yield and underutilization headwinds: initial ramp yield issues in Thailand and underutilized new lines pressured Q2 gross margins; sequential improvement expected as utilization rises .
  • Industrial end-market softness: Industrial Tech revenue was down 21% y/y to $63.0M, with macro headwinds; management guides Industrial Tech down ~$10M sequentially in Q3 .

Financial Results

MetricQ2 FY2024Q1 FY2025Q2 FY2025
Revenue ($USD Millions)$366.8 $336.9 $402.2
GAAP Gross Margin (%)17.4% 23.1% 24.8%
Non-GAAP Gross Margin (%)31.4% 32.8% 32.3%
GAAP Operating Margin (%)(28.7%) (24.5%) (12.8%)
Non-GAAP Operating Margin (%)1.9% 3.0% 7.9%
GAAP Diluted EPS ($)$(1.47) $(1.21) $(0.88)
Non-GAAP Diluted EPS ($)$0.24 $0.18 $0.42
Adjusted EBITDA ($USD Millions)$32.9 $37.0 $57.6

Segment Revenue Breakdown:

Segment ($USD Millions)Q2 FY2024Q1 FY2025Q2 FY2025
Cloud & Networking$286.7 $282.3 $339.2
Industrial Tech$80.1 $54.6 $63.0
Total$366.8 $336.9 $402.2

KPIs:

KPIQ2 FY2024Q1 FY2025Q2 FY2025
Cash + Short-term Investments ($USD Millions)—$916.1 $896.7
Non-GAAP Operating Expenses ($USD Millions)—$100.4 $98.3
Non-GAAP SG&A ($USD Millions)—$37.7 $35.9
Non-GAAP R&D ($USD Millions)—$62.7 $62.4
CapEx ($USD Millions)—$74 $65
Diluted Shares (Non-GAAP) (Millions)67.4 69.1 71.6

Notes: dashes indicate not disclosed in cited materials for that specific quarter.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Revenue ($USD Millions)Q3 FY2025—$410–$425 Raised sequentially vs Q2 actual
Non-GAAP Operating Margin (%)Q3 FY2025—9.5–10.5 Raised sequentially vs Q2 actual
Non-GAAP Diluted EPS ($)Q3 FY2025—$0.47–$0.53 Raised sequentially vs Q2 actual
Approx. Diluted Share Count (Non-GAAP)Q3 FY2025~69.6 (Q2 guide) ~73 Higher share count assumption
Non-GAAP Tax Rate (%)FY202516.5 (Q2 guide) 16.5 (unchanged) Maintained
Net Revenue ($USD Millions)Q2 FY2025$380–$400 Actual $402.2 Beat high end
Non-GAAP Diluted EPS ($)Q2 FY2025$0.30–$0.40 Actual $0.42 Beat high end
Long-term TargetBy end CY2025$500M quarterly revenue Reiterated Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 FY2024 and Q1 FY2025)Current Period (Q2 FY2025)Trend
AI/Cloud demand & EML rampRecord datacom chip bookings; EML capacity fully subscribed into CY2025; preparing 1.6T transceivers; expanding Thailand transceiver capacity Another record EML shipments; initial 200G lane EML deliveries; strong hyperscaler demand; Datacom transceivers ramp at largest customer; additional new customers in qualification Strengthening; accelerating ramps
Optical Switching & CPOOptical switch eval units shipped; positive feedback; longer-term scale Optical circuit switch highlighted as future-critical; deployment realistic in CY2025; low latency and power advantages; CPO seen as opportunity Building; 2025–2026 deployment path
Supply chain constraintsIndustry-wide indium phosphide shortage; capacity investments underway Shortages in hermetic packages/coherent components constrain upside in Q3/Q4; working to qualify alternatives Headwind; mitigation ongoing
Tariffs/macroDiversifying manufacturing outside China; Thailand ramp Minimal near-term tariff impact due to non-China footprint; shipments largely from Thailand/Japan; watch policy changes Risk managed; limited impact
Telecom/DCIEarly signs of inventory normalization; strength in ZR/ZR+ tunable lasers; 130/200 Gbaud coherent demand DCI strength continues; telecom “shipping in what they ship out”; long-haul demand strong; recovery not back to pandemic peaks Stabilizing; DCI additive
R&D execution & CapExElevated FY25 CapEx for transceivers/datacom components Q2 CapEx $65M focused on Thailand clean rooms and InP wafer capacity; more CapEx in H2 FY25 for EML expansion Investment ramping
Leadership—CEO transition: Michael Hurlston appointed; preliminary Q2 beats pre-announced New leadership; execution continuity

Management Commentary

  • “With our strong market position and improving industry trends, we remain confident in achieving our previously stated goal of reaching $500 million in quarterly revenue by the end of calendar year 2025” — Alan Lowe, CEO .
  • “In the second quarter, we exceeded the high end of our guidance ranges for both revenue and earnings per share, driven by strong demand in the cloud end market” — Alan Lowe .
  • CFO on margins: “Second quarter non-GAAP operating margin was 7.9%… primarily driven by improved Cloud & Networking profitability and lower SG&A expenses” — Wajid Ali .
  • On supply constraints: “We’re actually having some supply chain shortages on some critical components… we could have probably seen a double-digit increase sequentially had we not had some of those supply chain shortages” — Wajid Ali .
  • Leadership transition: “Michael Hurlston has been appointed President and Chief Executive Officer… [and] preliminary Q2 results… are at the high end of, or above, prior financial guidance” .

Q&A Highlights

  • Capacity and mix: Datacom chips and transceivers drive sequential growth; telecom adds modestly; supply constraints cap upside in Q3/Q4 .
  • 200G EML trajectory: Capacity growth of ~40% from June ’24 to June ’25, then another ~40% by end CY2025; demand outstrips supply into CY2026; adding tools and larger wafers .
  • Gross margin dynamics: Ramp yields and underutilized Thailand lines weighed on Q2; sequential GM improvement expected as utilization improves and EML shipments rise .
  • DCI & coherent: Strong demand for 400G/800G ZR modules and high-speed coherent components; capacity additions underway; view that pluggables are additive, not cannibalizing .
  • Tariffs: Limited near-term impact given minimal China footprint and Thailand/Japan manufacturing; small margin impact assumed .
  • Customer ramps: One new hyperscaler shipping begun in Q2; another to start production in fiscal Q4; both potentially as large as the anchor customer over time .

Estimates Context

  • Wall Street consensus via S&P Global was unavailable due to API limits during retrieval; however, management reported Q2 revenue and non-GAAP EPS above the high end of guidance ($380–$400M; $0.30–$0.40), implying a likely positive surprise versus prior expectations and setting up for sequential guidance raises in Q3 .
  • Given the raised Q3 guide (revenue, operating margin, EPS), estimates for revenue, margins, and EPS are likely to drift higher in the near term, contingent on supply chain mitigation and yield improvements .

Key Takeaways for Investors

  • Beat and raise: Q2 revenue and EPS exceeded guidance; Q3 guide lifts sequentially, signaling continued momentum in Cloud & Networking; focus near-term on capacity and supply constraints that gate upside .
  • AI-cloud photonics leverage: Another record EML quarter and initial 200G lane shipments position Lumentum well for 800G/1.6T ramps across hyperscalers; watch the cadence of new customer qualifications and volumes .
  • Margins inflecting: Non-GAAP operating margin expanded 490 bps q/q; expect further gross margin improvement as Thailand utilization improves and EML shipments ramp, though increased R&D spend may mute operating leverage .
  • DCI additive tailwind: Strong demand for ZR/ZR+ modules and long-haul/coherent components supports multi-quarter growth in telecom-adjacent exposure; monitor supplier package constraints .
  • Leadership change with execution continuity: Michael Hurlston (optical/semis veteran) appointed CEO; preliminary Q2 at/above guidance underscores near-term execution confidence .
  • Medium-term thesis: Path to $500M quarterly revenue by end CY2025 underpinned by capacity additions, hyperscaler transceiver wins, EML mix shift to 200G, and emerging optical switching/CPO opportunities .
  • Trading implications: Positive momentum from beat/raise and CEO transition; near-term stock volatility may hinge on visibility to resolving supply shortages and observed sequential margin improvement in Q3/Q4 .
Additional Source Documents Reviewed:
- Q2 FY25 8-K and press release (financials and guidance) **[1633978_0001628280-25-004265_lite-20250206.htm:0]** **[1633978_0001628280-25-004265_lite_ex991xq2fy25.htm:0]** **[1633978_0001628280-25-004265_lite_ex991xq2fy25.htm:1]** **[1633978_0001628280-25-004265_lite_ex991xq2fy25.htm:8]** **[1633978_035efabc54084b61b87ddc67aa9cb2e7_0]** **[1633978_035efabc54084b61b87ddc67aa9cb2e7_1]**.  
- Q2 FY25 earnings call transcript **[1633978_LITE_3414752_0]**–**[1633978_LITE_3414752_21]**.  
- Q1 FY25 8-K and press release (prior quarter comparables and guidance) **[1633978_0001628280-24-046302_lite_ex991xq1fy25.htm:0]** **[1633978_0001628280-24-046302_lite_ex991xq1fy25.htm:1]** **[1633978_0001628280-24-046302_lite_ex991xq1fy25.htm:8]** **[1633978_fef60536bbee49819e7c88589aeb75a4_0]**–**[1633978_fef60536bbee49819e7c88589aeb75a4_12]**.  
- Q4 FY24 8-K and press release (y/y context and trends) **[1633978_0001628280-24-037191_lite_ex991xq4fy24.htm:0]**–**[1633978_0001628280-24-037191_lite_ex991xq4fy24.htm:9]** **[1633978_83829f08c974467696aeef93cb5e5b3f_0]**–**[1633978_83829f08c974467696aeef93cb5e5b3f_14]**.  
- Leadership transition press release and preliminary Q2 figures **[1633978_b5a7c36e1d7e414c8f0ba1ff541b3240_0]**–**[1633978_b5a7c36e1d7e414c8f0ba1ff541b3240_5]**.