Alright that was a pretty good call.
Overall, stock reaction was negative to start and then right now overnight it’s roughly flat.
I think the market didn’t love the revenue print. But the margins were great and the story is intact.
Revenue came in at $808.4M, above the midpoint of the prior guide and up 90% year over year.
The stronger part of the report was profitability. Non-GAAP gross margin reached 47.9%, non-GAAP operating margin reached 32.2%, and non-GAAP EPS came in at $2.37, above the prior guide.
Then guidance moved sharply higher. Lumentum guided Q4 FY26 revenue to $960M–$1.01B, with non-GAAP operating margin of 35%–36% and EPS of $2.85–$3.05. At the midpoint, Q4 revenue would be $985M, putting Lumentum close to a $1B quarterly revenue run-rate.
Lumentum is already approaching $1B of quarterly revenue while OCS and scale-out CPO are still modest contributors, and scale-up CPO remains in its infancy.
None of this is financial advice or a recommendation
The Main Read
It’s all about supply.
Management said the EML supply-demand imbalance is now greater than 30%, compared with the prior 25%–30% framework. Customers are still asking for more than Lumentum can ship, even after the company has been aggressively expanding output. The real question is whether Lumentum can add, qualify, and ship enough capacity across several constrained product lines at the same time.
So far, execution looks strong. But the execution burden is rising.
Revenue Was Solid, Margins Were Excellent
Q3 revenue grew from $665.5M last quarter to $808.4M. Components revenue reached $533.3M, up 20% sequentially and 77% year over year. Systems revenue reached $275.1M, up 24% sequentially and 121% year over year.
The mix is important as Lumentum is getting strength from both sides of the portfolio: laser chips, EMLs, pump lasers, narrow linewidth lasers, transceivers, OCS, and early UHP/CPO contribution.
Operating leverage was a really powerful financial signal. Revenue grew by roughly $143M sequentially, while non-GAAP operating expenses increased by only about $11M. That is how operating margin jumped from 25.2% to 32.2% in one quarter.
The print was bullish even though Q3 revenue landed near the guide midpoint. Lumentum showed that constrained supply, richer mix, pricing discipline, and better utilization can create a very different earnings profile.
Q4 Guidance
At the midpoint, Lumentum is guiding for roughly 22% sequential revenue growth from Q3 to Q4. The company also expects operating margin to move from 32.2% to 35%–36%.
That puts Lumentum much closer to the $1.25B quarterly revenue target management discussed at OFC. The path to that first target now looks more credible.
Management said more than half of Q4 sequential growth should come from Components, with the rest driven by Systems, primarily high-speed transceivers and additional OCS contribution. The guide is broad. EMLs, scale-across components, transceivers, and OCS are driving the near-term guide, while CPO remains early but on schedule for more meaningful December-quarter revenue.
EMLs
LITE shipped twice as many laser chips as it did in the same quarter last year and set new EML shipment records, with 200G EML revenue more than doubling sequentially.
The 200G transition helps both units and mix. Higher-speed EMLs carry better ASPs, and Lumentum is benefiting from both volume growth and richer mix. Even with this production growth, management said the supply-demand imbalance is now greater than 30%. Lumentum expects EML unit growth of more than 50% by the December quarter of 2026 versus the December quarter of 2025, yet demand continues to move faster than supply.
Scale-Across Became a Bigger Part of the Thesis
This was the biggest new theme on the call for me.
Lumentum spent much more time discussing scale-across than I expected. Scale-across is the optical connectivity layer between data centers, buildings, campuses, and distributed compute domains. As hyperscalers run into power and space limits inside individual buildings, they need to link compute across multiple physical locations. Lumentum is monetizing this through pump lasers, narrow linewidth laser assemblies, WSS (Wavelength Selective Switches) and emerging multi-rail technologies.
Management said pump lasers allow scale-across architectures to amplify light across 4, 8, or 16 fiber pairs. Narrow linewidth laser assemblies provide the precision required for 1.6T speeds and higher-order modulation. WSS keeps traffic in the optical domain while supporting high port counts for massive fiber routing between buildings.
The growth numbers were really strong. Narrow linewidth laser assemblies grew for the ninth consecutive quarter and rose over 120% year over year. Pump laser shipments grew 80% year over year. Management said these components remain effectively sold out for the foreseeable future.
Then management said scale-across components are probably more constrained than EMLs, especially pump lasers and narrow linewidth lasers.
Before this call, most of the Lumentum discussion centered around four growth drivers: cloud transceivers, OCS, optical scale-out, and optical scale-up. Scale-across now deserves its own place in the story. It is already contributing to gross margin improvement, and management is working on long-term agreements to help offset the CapEx required to add capacity.
Multi-Rail Means More Optical Content
Multi-rail means more parallel optical paths across large AI networks. More rails require more amplification, more pump lasers, more narrow linewidth lasers, more WSS, and more optical traffic management. Management said multi-rail increases content because more pumps are needed per deployment. Wupen Yuen went further, saying the multi-rail opportunity could be “huge,” while also noting the company is still working toward fuller quantification.
This is a broader read-through for the AI infrastructure stack. More scale-across and multi-rail means more physical fiber routes, higher fiber counts, more optical amplification, more switching, and more connectivity. I will cover the fiber and Corning read-through separately. For Lumentum, scale-across is becoming a real growth and margin lever.
Transceivers Are the Revenue Bridge
Cloud transceivers were the largest driver of Systems growth.
Management said cloud transceiver shipments grew over 40% sequentially, helped by the expanded manufacturing footprint in Thailand. Lumentum is also poised to ramp 1.6T transceiver shipments in Q4 FY26, with a portion of that volume using internal CW lasers. Transceivers are the near-term bridge to the larger OCS and CPO story.
The internal CW laser integration matters. Management said roughly 20% of modules in the Q4 guide should use internal CW lasers, with that share expected to rise over time. That helps both supply control and margin. This also has read through for AOI, which we will discuss in our pre-earnings watchlist for them on Thursday.
Lumentum’s transceiver margins still trail peers, according to management, but 1.6T structurally carries better margins than 800G. The company is improving yields, reducing scrap, and securing more laser supply internally. Lumentum appears to be ahead on 1.6T but remains supply constrained. Management said the company could have shipped quite a bit more in Q3 and could ship quite a bit more in Q4 if supply were available.
OCS Is On Track, But It Is the Tightrope
OCS remains one of the most important parts of the Lumentum story and they really highlighted that today.
Management reiterated that the multi-year, multi-billion-dollar OCS agreement supports sustained growth. The ramp is largely on track, although the pace and slope are gated by supply chain constraints. Management believes the previously discussed $400M of OCS shipments in the back half of calendar 2026 is under control, but 2027 requires another major step up. Michael Hurlston called OCS the biggest single “tightrope” the company is walking.
Bullish because demand is clearly strong. Risky because OCS is a complex ramp, and supply chain pacing can shape quarterly revenue.
The most encouraging comment was around new OCS opportunities. Management said additional opportunities are substantial and in the same order of magnitude as the 2027 backlog discussion. If Lumentum can execute, OCS could become much larger than the first major agreement.
We will discuss OCS more with Coherent tomorrow, and I want to do a new OCS general report this weekend involving Huber + Shumer as well.
CPO and UHP Lasers Remain On Schedule
The CPO story remains intact.
Lumentum said the ultra-high-power laser chip ramp for CPO is proceeding according to plan. The company achieved sequential growth in Q3 and remains on schedule to deliver meaningful revenue in the December quarter and fulfill the multi-hundred-million-dollar purchase order scheduled for the first half of calendar 2027.
Management also said development work continues with multiple CPO customers through collaborations using Lumentum laser chips inside a pluggable turnkey ELS module solution. ELS is important because it moves Lumentum from selling only laser chips toward selling a more complete external light source module. On the call, management said ELS opportunities are getting closer and that significant wins feel “around the corner.” That could become a major 2027 driver.
The sequence is becoming clearer: UHP lasers first, ELS next, scale-up CPO later.
Scale-Up CPO Is Still the Largest Future Driver
The most important long-term line from the call was that current numbers and guidance include only modest initial contributions from scale-out CPO and OCS, while the largest single growth driver, scale-up CPO, remains in its infancy. Management said this gives them confidence that Lumentum remains on track to reach the $2B quarterly revenue goal discussed at OFC.
Lumentum is guiding to almost $1B of quarterly revenue before the largest future driver has meaningfully arrived. If scale-up CPO begins contributing in 2027, and if OCS plus scale-out CPO continue ramping, the $2B target becomes more credible.
Capacity Is the Limiting Factor
The main challenge now is capacity.
Lumentum is ramping EMLs, pump lasers, narrow linewidth lasers, transceivers, OCS, UHP lasers, internal CW lasers, ELS, and the Greensboro InP conversion simultaneously. The Greensboro acquisition is important, but it is a 2028 story. Management said Greensboro sits outside the current numbers and could support more than $5B of incremental revenue if executed properly. Significant contribution is still roughly six quarters away.
Nearer term, Lumentum is relying on existing fabs, contract manufacturing, Thailand expansion, higher utilization, internal CW laser integration, and aggressive CapEx. The balance sheet gives them room. Cash and short-term investments increased to $3.17B, mostly due to NVIDIA’s direct investment. Inventory rose by $62M sequentially to support expected cloud and AI revenue growth, and Q3 CapEx was $125M, primarily focused on manufacturing capacity for cloud and AI customers.
Updated Forecast Framework
I am using calendar year-end quarterly run-rate estimates because Lumentum’s fiscal year ends in June. These are my working ranges, separate from management guidance, based on the Q4 guide and management’s $2B quarterly revenue target.