This blog digs into Lumentum Holdings’ latest quarterly results, the AI-fueled demand backdrop, and the two big growth areas—optical circuit switches (OCS) and co-packaged optics (CPO)—that could shape where the company goes next in data-center optics. We’ll also look at the outlook, profitability targets, and a few risks that might influence the near-term path.
Quarterly results beat estimates as AI demand accelerates
Lumentum posted adjusted EPS of $1.67 on revenue of $665.5 million for the quarter ending December 27. That beat what analysts had expected.
For the March quarter, management guided revenue to land somewhere between $780 million and $830 million, with non-GAAP EPS of $2.15 to $2.35. Both numbers topped consensus estimates. After-hours, shares rose about 3%—though at one point during the day, the stock surged as much as 17%.
Management pointed out that more than 65% year-over-year revenue growth came from activity tied to AI infrastructure. That lines up with what we’re seeing across hyperscale data-center spending right now.
This environment has pushed the company to double down on two strategic growth avenues at the center of its longer-term revenue mix. CEO Michael Hurlston called out optical circuit switches (OCS) and co-packaged optics (CPO) as the major opportunities ahead.
These areas are shaping Lumentum’s trajectory as data-center optics keep playing a critical role in AI workloads and cloud-scale architectures. It’s a space that feels like it’s only going to get more important.
OCS and CPO: two growth engines
Lumentum shared that its OCS backlog now exceeds $400 million. Most of those shipments are planned for the first half of fiscal 2027, and multiple customers are in the mix, which helps diversify the pipeline.
The company also secured an additional multi-hundred-million-dollar order for CPO. That’s a sign of broader engagement in advanced optical integration for AI data centers.
CFO Wajid Ali projected a non-GAAP operating margin of 30–31% for the coming quarter. If they hit the midpoint of their revenue guidance, it’d be a new quarterly revenue record.
He suggested the company expects strong operating leverage as AI-driven demand stays solid. The numbers seem to back that up.
Market context and the data-center optics backdrop
Analysts and investors see data-center optics as a key barometer for cloud providers’ AI spending. That means Lumentum’s results get a lot of attention in the sector.
The company’s progress in OCS and CPO ramps could point toward higher margins and deeper market penetration as AI workloads keep scaling and data-center architectures evolve. That’s the hope, at least.
Lumentum’s backlog and growing orders in these optical segments might hint at a broader demand cycle for AI infrastructure components. Of course, there are always execution risks, and long lead times for CPO ramps could become a headache down the line.
Risks and considerations
- Potential hyperscaler pullbacks could temper demand for data-center optical components.
- Execution challenges on long lead-time CPO ramps could undermine the upbeat outlook.
Lumentum’s December-quarter results show a real connection between AI infrastructure deployment and the need for advanced optical products.
The company’s focus on OCS and CPO points to a shift toward higher-value growth that might keep momentum going as AI adoption speeds up for major cloud providers.
Here is the source article for this story: Lumentum stock jumps after earnings beat, AI optics demand lifts outlook