Aug 11, 2026 earnings call — Optics growth driven by AI data center demand
Revenue surged 109% year-over-year to $1.01 billion, and non-GAAP gross margin crossed 50%.
Revenue $1.0B (est $1.0B) · EPS $3.23 (est $2.97) · Next-quarter revenue outlook $1.2B–$1.3B
Key quotes
"As AI compute workloads increased in both speed and bandwidth, data center architects are turning to optical links as a primary means of connectivity."
"We continue to expect a fourfold increase in our pump laser shipments over the next several quarters to meet this escalating demand."
"Fourth quarter non-GAAP operating margin was 36.6%, which was up 440 basis points sequentially and up 2,160 basis points year-on-year."
Analyst Q&A 9
Timing of new financial targets
Q (Joseph Cardoso · JPMorgan): How should we think about the next financial targets given stronger demand, better mix, and new opportunities like ELS, NPO, and OCS?
A: They said they will publish new financial targets, likely at the next OFC. Management said revenue and margins are running ahead and that new things like NPO, CW lasers, and OCS may add more upside; they added nearly $250 million to the guide and see more opportunity ahead.
"We'll come out with some new financial targets, probably at the next OFC." — Michael E. Hurlston (CEO)
Pricing and China competition impact
Q (Simon Leopold · Raymond James): Can you reprice backlog with customers and how did that affect gross margin this quarter and outlook? Also, what about new Chinese indium phosphide fabs and future competition?
A: They said they did some repricing and saw pricing benefit to gross margin, though mix was the larger driver this quarter. On Chinese competition, they have seen no impact to their numbers, expect differentiation in EMLs and lasers, and noted some Chinese suppliers are not delivering in the market today.
"We saw some benefit, as Wajid said in his prepared remarks, on the gross margin line on pricing." — Michael E. Hurlston (CEO)
OCS revenue and Greensboro timing
Q (Michael Genovese · Rosenblatt): Can you confirm the first triple-digit OCS revenue quarter and when ultra-high-powered CW lasers hit triple-digit quarters? Any update on Greensboro capacity timing?
A: They confirmed the guide expects the first triple-digit OCS revenue quarter in the first quarter and said it should be meaningfully above the 3-digit mark. For ultra-high-powered lasers they expect about a $50 million run-rate by year-end and the first triple-digit quarter around the third quarter; Greensboro is progressing well with first revenue in early 2028 and ramp through 2028 into full production by end of '28 into '29.
"So in the guide, which is the first quarter, we expect our first triple-digit OCS revenue quarter, we'd expect to be meaningfully above the 3-digit mark." — Michael E. Hurlston (CEO)
OCS guide and customer build vs buy
Q (Papa Sylla · Citi): Are you running ahead of the $400 million-plus OCS guide for second half 2026, and will customers with internal programs shift to buying from Lumentum? Also, update on supply/demand imbalance since last quarter.
A: They said they are tracking to the $400 million guide but not running ahead, noting earlier supply chain issues are resolved and execution is on plan. They expect to absorb the majority of one customer's internal supply and to become the #1 supplier in early '27; on supply/demand, EML remains behind demand and high-powered lasers are further behind because demand accelerated.
"I would expect sometime in early '27 that we cross over and be the #1 supplier and actually have momentum from there in terms of our OCS shipments." — Michael E. Hurlston (CEO)
ELS module sales and economics
Q (Christopher Rolland · Susquehanna): Are you selling ELS modules as well as ELS lasers, and what do the economics look like for full modules versus just lasers?
A: They said they have their first ELS module order and that its ASP is meaningfully higher than the lasers, but it will be small to start and ship around midyear/early second half of 2027. Margins on the module are above corporate average but not as good as lasers, so they are trading some margin to accelerate revenue; the module helps customers who don't want to handle individual laser chips.
"Yes, we've got our first ELS module order right? Which from an ASP standpoint is meaningfully higher than the set of lasers that we ship in." — Michael E. Hurlston (CEO)
200G lasers and operating leverage
Q (Vijay Rakesh · Mizuho): Will 200 gig per lane EML and CW be accretive to margins, when will 1.6T cross over, and how should we think about operating leverage into fiscal '27?
A: They said 200 gig per lane EMLs should be majority volume by mid-2027 and are already 25% of mix, expected to be 50% or more by mid-2027; lasers are accretive and the margin gap between EML and CW has narrowed. On operating leverage, the $2 billion guideline was 38% to 42% and they are already near the midpoint at lower revenue; as gross margins improve toward $2 billion, operating margin should improve and the range may move up 100 to 200 basis points versus OFC.
"And so with gross margins improving as we approach $2 billion, we'll see some improvement on the operating margin line as well that corresponds to those gross margin improvement." — Wajid Ali (CFO)
Indium phosphide substrate supply
Q (George Notter · Wolfe): Why did you sign the deal with AXT now, and will you sign LTAs to fill Greensboro capacity?
A: They said ultra-high-powered laser demand surprised them, so in the last 3 months they secured more substrate supply and announced the deal with AXTI to help meet the surge in demand. They are looking to sign arrangements to use Greensboro capacity and expect to have things to discuss over the next couple of quarters about new arrangements there.
"We think we're going to need their help just given the surge in demand." — Michael E. Hurlston (CEO)
NPO timing and in-tray OCS
Q (Thomas O'Malley · Barclays): Does NPO require new silicon generations or can it work with existing ASIC/GPU ramps, and if a customer ramped early next year could you ship NPO solutions? Also, is in-tray OCS additive to TAM and when might it hit the market?
A: They said current TPUs/XPUs/GPUs shipping do not have fast enough SerDes to accept NPO/CPO now; NPO/CPO adoption lines up with new silicon coming mid-2027 toward end-2027 and early 2028, making 2028 the event for optical scale-up. For in-tray OCS they said it is additive to the TAM and would hit for them around 2028; they noted they are the only merchant supplier shipping OCS today and expect early visibility into opportunities.
"I don't think there are existing TPUs, XPUs, GPUs that are shipping that have a fast enough SerDes speed that we could suddenly plop in an NPO or CPO solution, which I think is what you're asking." — Michael E. Hurlston (CEO)
Pump lasers ramp and contract terms
Q (Ruben Roy · Stifel): Where are you in the Rose Orchard pump ramp and exit capacity, and what are the structure and duration of the long-term supply agreements? Also, are NPO discussions standards-based or custom?
A: They said they formed strategic partnerships with NEMs and put in place arrangements that are for the most part 3-year agreements, often with pricing levers and in most instances take-or-pay, which gives demand surety. They said pump lasers are roughly 70% to 80% share and that for NPO they are engaged on both standards-based interfaces and custom implementations, with optical interfaces moving toward standards but form factors remaining proprietary between customers.
"We formed a series of arrangements that for the most part, our 3-year arrangements." — Michael E. Hurlston (CEO)