Lumentum Beats Expectations as NPO and CW Lasers Open Additional Growth Opportunities, J.P. Morgan Says
J.P.
J.P. Morgan's research note says Lumentum maintained strong execution. Fourth-quarter fiscal 2026 revenue reached $1,006 million, 109% higher year over year and above the market consensus estimate.
The company's first-quarter fiscal 2027 outlook was also well above expectations, with revenue guided to $1,225 million to $1,275 million and operating margin guided to 39.5% to 40.5%. Management raised its longer-term operating-margin target to 40% to 44%, from 38% to 42% previously.
The note identifies several potential sources of incremental growth. Commercial continuous-wave lasers could account for a sizable share of datacom-chip revenue over the next several quarters. Lumentum has received its first order for an external light source, or ELS, with deliveries scheduled for the second half of 2026. Pump-laser shipments are up more than 80% year over year, and the company has signed a three-year long-term agreement.
Management said newly added InP capacity in China would have no material impact. The company is differentiating itself through its EML technology and yield advantages. J.P. Morgan raised its fiscal 2027 and fiscal 2028 EPS estimates by 12.6% and 12.1%, respectively.
The note argues that Lumentum has not only addressed concerns about a rising share of transceiver-related business, but also opened potential growth beyond expectations through opportunities such as NPO and CW lasers. It also says concerns about pricing pressure for optical components may be overstated and highlights management's view that additional Chinese capacity will have no material impact.
The note identifies three catalysts: formal results for the first quarter of fiscal 2027, ending in September, to validate the guidance; progress on ELS deliveries in the second half of 2026; and confirmation that NPO volume begins ramping at the end of 2027.
The company's first-quarter fiscal 2027 outlook was also well above expectations, with revenue guided to $1,225 million to $1,275 million and operating margin guided to 39.5% to 40.5%. Management raised its longer-term operating-margin target to 40% to 44%, from 38% to 42% previously.
The note identifies several potential sources of incremental growth. Commercial continuous-wave lasers could account for a sizable share of datacom-chip revenue over the next several quarters. Lumentum has received its first order for an external light source, or ELS, with deliveries scheduled for the second half of 2026. Pump-laser shipments are up more than 80% year over year, and the company has signed a three-year long-term agreement.
Management said newly added InP capacity in China would have no material impact. The company is differentiating itself through its EML technology and yield advantages. J.P. Morgan raised its fiscal 2027 and fiscal 2028 EPS estimates by 12.6% and 12.1%, respectively.
The note argues that Lumentum has not only addressed concerns about a rising share of transceiver-related business, but also opened potential growth beyond expectations through opportunities such as NPO and CW lasers. It also says concerns about pricing pressure for optical components may be overstated and highlights management's view that additional Chinese capacity will have no material impact.
The note identifies three catalysts: formal results for the first quarter of fiscal 2027, ending in September, to validate the guidance; progress on ELS deliveries in the second half of 2026; and confirmation that NPO volume begins ramping at the end of 2027.