Rich Peter
Investor, Crypto, US Stocks & High-Dividend ETFs
Lumentum's FY28 EPS target of $40, given at Citi's TMT conference, far tops prior consensus on explosive, high-certainty demand for optical circuit switches and AI optics. Quarterly revenue passed $1.01B, up 109% year over year, and FY27 Q1 guidance of $1.225-1.275B hits $1.25B a quarter early as 800G ramps and 1.6T starts. Larger GPU clusters rely on optical links, and supply constraints keep Lumentum backlogged with pricing power; non-GAAP operating margin reached 36-40%. x.comÂ
Lumentum is a pick-and-shovel play on AI data centers shifting to optical interconnects as copper hits hard physical limits. Its laser diodes, pump lasers and 800G and 1.6T transceiver assemblies have become essential AI hardware. Recent quarters showed 90% revenue growth and non-GAAP operating margins of 32%-35%. Multi-year indium phosphide agreements with AXT through 2031 should prevent supply bottlenecks as capacity grows. Q4 guidance calls for $960 million to $1.01 billion in revenue. x.comÂ
AI bandwidth demand still favors Coherent and Lumentum, but tight customer financing can delay orders and lasting valuations need durable profits. A model provider losing share need not reduce total bandwidth use. Coherent could beat and raise guidance; Lumentum may only meet estimates this quarter, improving next quarter. If margins partly reflect scarce indium phosphide, added supply will test whether upgrades, volume and cost gains sustain earnings. These earnings calls remain forecasts. … Show more
Lumentum's EPS is expected to grow from $8 in FY26 to $34+ by FY28, nearly 4x, as AI optics demand explodes, with Nvidia's backing behind it. The stock is forming a massive cup pattern. x.comÂ
Lumentum is a great business, but at $954 its risk/reward is not attractive. Applying 30x to fiscal 2028 non-GAAP EPS of $40 gives a 2027 price target of $1,200, about 26% upside, or roughly 15% after adjusting for execution, financial, technology and supply risks. Reaching it needs on-time manufacturing ramps, sustained pricing power and cash flow without excessive dilution. Lost pricing power plus slipping OCS or laser ramps would break the thesis; a significant dip would offer a better entry. … Show more
Marvell risks paying a peak-scarcity price for Lumentum if optical supply catches up by 2028-30. The proposed ~$99B deal values Lumentum at roughly 20x guided annualized revenue and 58x estimated after-tax operating income, while Lumentum, Coherent and Chinese suppliers are adding laser capacity. The DSP-and-laser combination has strategic logic, but durable scarcity economics and Nvidia's response remain uncertain. x.comÂ
Optical transceiver demand exceeds supply, and 1.6T lifts revenue per module for suppliers able to qualify capacity. Applied Optoelectronics raised at least $1.62B through 2026 ATMs; its last reported monthly capacity was 200,000 modules versus a year-end target above 650,000. Credo expects over $600M in FY2027 revenue across optical DSPs, PICs and modules, not modules alone. Shipments, yields and margins must prove out. Lumentum and Coherent already price in much expected growth. x.comÂ
Lumentum looks only slightly attractive, and only after another 10% drop, at about 24.5 times its guided $40 FY28 EPS at $980. Its upside is almost entirely driven by optical circuit switch demand from lead customer Google, which also points to a great 2027-2028 for fellow Google OCS supplier Huber+Suhner. Total OCS demand now exceeds the 8 million units first cited. x.comÂ
Lumentum's 109% year-on-year growth and sold-out capacity through 2029 make selling its AI optics exposure questionable. Bloomberg reported Marvell is in advanced talks to buy it; the appeal depends on the price, especially when holders of an $80 billion Lumentum would become holders of a $320 billion-plus Marvell growing 37%. x.comÂ
Optics and photonics should be among AI's biggest winners as faster GPU networks need optical connections that suppliers cannot expand quickly enough. Lumentum says some components are sold out through early 2029; Sivers is investing $30M to target more than 100M lasers a year, with operations expected in Q4 2027. Potential US restrictions on Chinese transceivers could reshape supply in 2027. Applied Optoelectronics and Sivers are the favorites. x.com x.comÂ
Lumentum requires paying up heavily for a company that is not yet making money. Revenue grew 109% year over year, but it trades at about 25 times annualized sales, and it is growing less than memory makers at ten times their valuation. @ZeekTyt cites Lumentum's CEO expecting to supply only about 30% of requested laser demand as CPO and NPO ramp in 2027, with balance around 2029-30. x.com x.comÂ
Lumentum's AI demand is no longer a future story; it is already showing up in the numbers. Cloud and AI revenue more than doubled year over year, with components up 103% and systems up 123%. 200G EML shipments hit a record above 25% of EML revenue, CPO laser shipments are growing toward meaningful revenue by year-end, pump lasers rose 80% under long-term supply deals, initial 1.6T transceivers shipped, and the OCS ramp is on track under a multi-year, multibillion-dollar agreement. x.comÂ
