Photonics company Lumentum has reaped substantial rewards from the AI infrastructure investment wave, delivering a quarterly report card that comprehensively exceeded expectations and sending a signal of accelerating demand to the market through strong forward guidance.
Lumentum reported results for the first quarter of fiscal year 2027 (ended September 26, 2026), with net revenue of $1.263 billion, surging 136.5% year-over-year; adjusted earnings per share of $4.57, above the market estimate of $4.21; and adjusted gross margin of 53.2%, exceeding the estimated 51.3%.
Meanwhile, the company's second-quarter net revenue guidance is $1.575 billion to $1.625 billion, far exceeding the market estimate of $1.48 billion, and adjusted earnings per share guidance of $5.90 to $6.20, also significantly better than the estimated $5.07.
Beyond the performance highlights, Lumentum President and CEO Michael Hurlston disclosed that the company secured a second major near-packaged optics/co-packaged optics (NPO/CPO) project order this quarter, backed by purchase commitments exceeding $5 billion. He also stated that demand visibility for optical circuit switching (OCS) has expanded significantly in recent months and is expected to grow into a business segment with annual revenue in the billions of dollars. Lumentum shares rose 2.46% in pre-market trading in the U.S.
Revenue and Profit Margins Break Through Across the Board
Lumentum's first fiscal quarter net revenue was $1.263 billion, up 25.5% quarter-over-quarter and up 136.5% year-over-year. Revenue in the same period of the prior fiscal year was only $534 million, showing that the company's scale has more than doubled within a year.
Profitability improved substantially in tandem. GAAP gross margin rose from 34.0% a year earlier to 51.0%, while non-GAAP gross margin reached 53.2%, expanding approximately 1,380 basis points year-over-year. Non-GAAP operating margin was 42.3%, jumping 2,360 basis points from 18.7% in the same period last year; non-GAAP operating income was $534.4 million, exceeding analysts' estimate of $500.7 million.
By product type, the systems business performed particularly prominently, with revenue of $508.4 million this quarter, up 228.8% year-over-year and up 42.4% quarter-over-quarter; components business revenue was $754.2 million, up 98.9% year-over-year and up 16.1% quarter-over-quarter. The rapid growth of the systems business reflects the strong surge in demand for high-value-added products such as OCS.
Major NPO/CPO Order Landed, OCS Enters Multi-Billion-Dollar Track
The most strategically significant development this quarter came from another major order breakthrough in the NPO/CPO field. Michael Hurlston said the company achieved a "second major NPO/CPO project win," backed by purchase commitments exceeding $5 billion. This long-term order commitment not only provides visibility support for the company's future revenue but also validates Lumentum's competitive position in the AI data center optical interconnect field.
Regarding OCS, Hurlston noted that demand visibility has "expanded significantly" over the past few months, and the company expects the optical switching business to develop into a "business stream with annual revenue in the billions of dollars." Pump lasers and OCS were the main drivers of growth this quarter, and the cloud module business also showed a positive trend of margin improvement.
Q2 Guidance Massively Beats Expectations, Single-Quarter Increment Comparable to Full-Quarter Revenue Two Years Ago
Looking ahead to the second fiscal quarter, Lumentum expects net revenue in the range of $1.575 billion to $1.625 billion, non-GAAP operating margin of 45.0% to 46.0%, and non-GAAP diluted earnings per share of $5.90 to $6.20, with all three metrics comprehensively exceeding market expectations.
Hurlston described this in a more intuitive way: "We expect to achieve approximately $350 million in quarter-over-quarter growth in the second quarter, a figure that already exceeds the company's entire quarterly revenue from two years ago." He also emphasized that the second-quarter operating margin is expected to exceed 45%.
In absolute terms, if calculated at the midpoint of the second-quarter guidance of $1.6 billion, the company's single-quarter revenue will grow approximately threefold compared to a year ago, with the growth slope remaining steep.
Cash Flow and Balance Sheet Position
As of September 26, 2026, Lumentum held cash, cash equivalents, and short-term investments totaling $2.0 billion, a decrease of $758.8 million from the end of the previous quarter. On the current assets side, accounts receivable increased to $625.7 million and inventory increased to $807.7 million, reflecting the consumption of working capital from rapid business expansion.
In terms of capital expenditures, net property, plant, and equipment increased to $1.4104 billion this quarter, up significantly from $1.1591 billion at the end of the previous quarter, with capacity ramp-up at the Greensboro, North Carolina production base still progressing. The company's adjusted EBITDA was $578 million, up substantially from $127.6 million in the same period last year.
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