Lumentum Holdings Q2 2026 Lumentum Holdings Inc Earnings Call | AllMind AI Earnings | AllMind AI
Q2 2026 Lumentum Holdings Inc Earnings Call
Listen only mode, please. Also note. This event is being recorded for replay purposes. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please raise your hand. If you have dialed in to today's call, please press star 9, to raise your hand, and star 6 to unmute. At this time, I would like to turn the conference call over to Kathy to vice president of investor relations MTA, please go ahead.
Thank you, Kevin and welcome to the mentioned, second quarter of fiscal year, 2026 earnings call. This is Kathy Todd lumens, vice president of investor relations joining me today are Michael Hurston president and chief executive officer, Roger Ali, Executive Vice, President and Chief Financial Officer and Wu president Global business units. Today's call will include Ford looking statements including without limitation statements regarding our future operating results, strategies Trends and expectations for our products and technologies that are being made under the Safe. Harbor of the Securities, litigation Reform, Act of 1995, these statements are subject to risks and uncertainties that could cause actual results to differ materially from our current expectations, particularly the risks set forth in our SEC filings under risk factors and elsewhere.
We encourage you to review our most recent filings with the SEC. Particularly the risk factors described in our 10 queue for the fiscal quarter ended, September 27th 2025 and in our most recent 10q for the fiscal quarter end of December 27th.
2025 to be filed by lamentum with the FCC.
The forward-looking statements provided during this call are based on momentum as reasonable beliefs and expectations as of today. The momentum undertakes. No obligation to update or revise these statements except as required by applicable law.
please also note that unless otherwise stated all Financial results and projections just discussed in this call are non-gaap
Non-gaap financials have inherent limitations and are not to be considered in isolation, from, or as a substitute for or Superior to financials prepared in accordance with gaap.
You can find a Reconciliation between non-gaap and gaap measures and information of about our use of non-gaap measures and practices that could impact your financial results in our press release and our filings with the SEC.
The mentors press release with the fiscal second quarter results in accompanying, supplemental. Sides are available on our website at www.am.com under the investors section.
We encourage you to be viewed. These materials carefully with that, I'll turn the call over to Michael.
Thank you, Cathy and good afternoon. Everyone lamentum, delivered a standout second quarter with over 65% year-over-year, Revenue growth and non-gaap operating margin increasing by greater than 1700 basis points.
At 665.5 million. We set a company record for quarterly, revenue for the second reporting period in a row.
We are now recognized as a foundational engine of the AI Revolution.
Virtually, every AI network is powered by lamenta technology.
Either through our direct hyperscale or Partnerships, or is the critical component supplier that enables our Network equipment manufacturer customers.
Our momentum is accelerating.
While we previously projected Crossing 750 million in quarterly Revenue by mid 2026. We now expect to comfortably surpass that Milestone next quarter.
Kathryn Ta: Lumentum.com under the Investors section. We encourage you to review these materials carefully. With that, I'll turn the call over to Michael.
Kathy Ta: Lumentum.com under the Investors section. We encourage you to review these materials carefully. With that, I'll turn the call over to Michael.
our March Revenue Guidance with an 805 million midpoint represents an impressive 85 Plus percent year-over-year increase
Michael Hurlston: Thank you, Kathy, and good afternoon, everyone. Lumentum delivered a standout second quarter, with over 65% year-over-year revenue growth and non-GAAP operating margin increasing by greater than 1,700 basis points. At $665.5 million, we set a company record for quarterly revenue for the second reporting period in a row. We are now recognized as a foundational engine of the AI revolution. Virtually every AI network is powered by Lumentum Technology, either through our direct hyperscaler partnerships or as the critical component supplier that enables our network, equipment, manufacturer, customers. Our momentum is accelerating. While we previously projected crossing $750 million in quarterly revenue by mid-2026, we now expect to comfortably surpass that milestone next quarter. Our March revenue guidance, with an $805 million midpoint, represents an impressive 85+% year-over-year increase.
Michael Hurlston: Thank you, Kathy, and good afternoon, everyone. Lumentum delivered a standout second quarter, with over 65% year-over-year revenue growth and non-GAAP operating margin increasing by greater than 1,700 basis points. At $665.5 million, we set a company record for quarterly revenue for the second reporting period in a row. We are now recognized as a foundational engine of the AI revolution. Virtually every AI network is powered by Lumentum Technology, either through our direct hyperscaler partnerships or as the critical component supplier that enables our network, equipment, manufacturer, customers. Our momentum is accelerating. While we previously projected crossing $750 million in quarterly revenue by mid-2026, we now expect to comfortably surpass that milestone next quarter. Our March revenue guidance, with an $805 million midpoint, represents an impressive 85+% year-over-year increase.
We previously identified 3 primary catalysts for momentum's future growth.
Cloud transceivers.
Optical circuit switches or OCS.
And C- package Optics or CPO.
The headline for this quarter is that the vast majority of this growth is still ahead of us and we've increased confidence as to the timing and magnitude of the ramps.
While our Q2 results in Q3 guidance, reflect meaningful contributions from cloud transceivers, we are only just beginning to unlock the massive potential of OCS and CPO.
I will now break down our Q2 performance starting with execution and our primary growth drivers.
Michael Hurlston: We previously identified three primary catalysts for Lumentum's future growth: Cloud Transceivers, Optical Circuit Switches, or OCS, and Co-packaged Optics, or CPO. The headline for this quarter is that the vast majority of this growth is still ahead of us, and we have increased confidence as to the timing and magnitude of the ramps. While our Q2 results and Q3 guidance reflect meaningful contributions from Cloud Transceivers, we are only just beginning to unlock the massive potential of OCS and CPO. Beyond these high-growth drivers, our Q2 performance was anchored by sustained execution on our foundational components business, specifically in laser chips for cloud applications and in specialized components for DCI. I will now break down our Q2 performance, starting with execution and our primary growth drivers. Our OCS business is exceeding internal expectations.
Michael Hurlston: We previously identified three primary catalysts for Lumentum's future growth: Cloud Transceivers, Optical Circuit Switches, or OCS, and Co-packaged Optics, or CPO. The headline for this quarter is that the vast majority of this growth is still ahead of us, and we have increased confidence as to the timing and magnitude of the ramps. While our Q2 results and Q3 guidance reflect meaningful contributions from Cloud Transceivers, we are only just beginning to unlock the massive potential of OCS and CPO. Beyond these high-growth drivers, our Q2 performance was anchored by sustained execution on our foundational components business, specifically in laser chips for cloud applications and in specialized components for DCI. I will now break down our Q2 performance, starting with execution and our primary growth drivers. Our OCS business is exceeding internal expectations.
Our OCS business is exceeding internal expectations while we originally targeted, our first 10 million quarter for fiscal Q3 we cleared that bar, 3 months ahead of schedule.
We previously identified three primary catalysts for momentum's future growth.
Cloud transceivers.
Optical circuit switches or OCS.
This outperformance is a direct result of the seamless collaboration between our engineering and operations teams, proving our ability to scale complex technology and pace.
And co-packaged Optics or CPO.
Customer demand for OCS is intensifying.
Our order backlog now has surged. Well, past 400 million.
The headline for this quarter is that the vast majority of this growth is still ahead of us, and we've increased confidence as to the timing and magnitude of the ramps.
The majority of which is slated for shipment and the second half of this calendar year.
Barring any unforeseen manufacturing or supply chain? Disruptions, we are well positioned to deliver on this substantial pipeline.
While our Q2 results and Q3 guidance reflect meaningful contributions from cloud transceivers, we are only just beginning to unlock the massive potential of OCS and CPO.
Our execution in cloud transceivers has reached a definitive Turning Point.
Beyond these high growth drivers are Q2 performance, was anchored by sustained, execution, or a foundational components business.
In Q2 transceiver Revenue grew significantly and outperformed the Legacy Cloud light run rate.
Specifically in laser chips for cloud applications, and in specialized components for DCI.
And we expect continued growth in Q3.
I will now break down our Q2 performance, starting with execution and our primary growth drivers.
We focused on time to Market in the business and have greatly improved our execution through the design cycle.
Michael Hurlston: While we originally targeted our first $10 million quarter for fiscal Q3, we cleared that bar three months ahead of schedule. This outperformance is a direct result of the seamless collaboration between our engineering and operations teams, proving our ability to scale complex technology at pace. Customer demand for OCS is intensifying. Our order backlog now has surged well past $400 million, the majority of which is slated for shipment in the second half of this calendar year. Barring any unforeseen manufacturing or supply chain disruptions, we are well positioned to deliver on this substantial pipeline. Our execution in Cloud Transceivers has reached a definitive turning point. In Q2, transceiver revenue grew significantly and outperformed the legacy CloudLite run rate, and we expect continued growth in Q3. We have focused on time-to-market in the business and have greatly improved our execution through the design cycle.
Michael Hurlston: While we originally targeted our first $10 million quarter for fiscal Q3, we cleared that bar three months ahead of schedule. This outperformance is a direct result of the seamless collaboration between our engineering and operations teams, proving our ability to scale complex technology at pace. Customer demand for OCS is intensifying. Our order backlog now has surged well past $400 million, the majority of which is slated for shipment in the second half of this calendar year. Barring any unforeseen manufacturing or supply chain disruptions, we are well positioned to deliver on this substantial pipeline. Our execution in Cloud Transceivers has reached a definitive turning point. In Q2, transceiver revenue grew significantly and outperformed the legacy CloudLite run rate, and we expect continued growth in Q3. We have focused on time-to-market in the business and have greatly improved our execution through the design cycle.
As a result, we are now in the lead pack of transceiver suppliers as customers, transition their networks to 1.6 T speeds.
Our OCS business is exceeding internal expectations while we originally targeted, our first 10 million quarter for fiscal Q3 we cleared that bar, 3 months ahead of schedule.
Beyond design execution. We are also improving the profitability of our transceiver business with better yields and lower scrap rates.
Just outperformance is a direct result of the seamless collaboration between our engineering and operations teams, proving our ability to scale complex technology and pace.
Customers demand for OCS is intensifying.
Our order backlog now has surged well past $400 million.
The majority of which is slated for shipment and the second half of this calendar year.
Turning to CPO, we have secured an additional multi hundred million dollar purchase order for our ultra high power, lasers that support Optical scale out applications. We expect shipments for this incremental order in the first half of calendar 2027
Barring any unforeseen manufacturing or supply chain disruption. We are well, positioned to deliver on this substantial pipeline.
Meanwhile, we continue to execute on the initial orders. We have discussed previously, and remain firmly on track for material shipment. And flexion of uhp chefs in the second half of this calendar year,
Our execution in cloud transceivers has reached a definitive turning point.
In Q2 transceiver Revenue grew significantly and outperformed the Legacy Cloud light run rate.
And we expect continued growth in Q3.
Furthermore, we have established a clear line of sight into the broader, external light source, for ALS Market, which would enable us to participate more holistically than as a standalone. Laser chip supplier.
Michael Hurlston: As a result, we are now in the lead pack of transceiver suppliers as customers transition their networks to 1.6T speeds. Beyond design execution, we are also improving the profitability of our transceiver business with better yields and lower scrap rates. Turning to CPO, we have secured an additional $multi-hundred million purchase order for ultra-high power lasers that support optical scale-out applications. We expect shipments for this incremental order in the first half of calendar 2027. Meanwhile, we continue to execute on the initial orders we have discussed previously and remain firmly on track for material shipment inflection of UHP chips in the second half of this calendar year. Furthermore, we have established a clear line of sight into the broader External Light Source (ELS) market, which would enable us to participate more holistically than as a standalone laser chip supplier.
Michael Hurlston: As a result, we are now in the lead pack of transceiver suppliers as customers transition their networks to 1.6T speeds. Beyond design execution, we are also improving the profitability of our transceiver business with better yields and lower scrap rates. Turning to CPO, we have secured an additional $multi-hundred million purchase order for ultra-high power lasers that support optical scale-out applications. We expect shipments for this incremental order in the first half of calendar 2027. Meanwhile, we continue to execute on the initial orders we have discussed previously and remain firmly on track for material shipment inflection of UHP chips in the second half of this calendar year. Furthermore, we have established a clear line of sight into the broader External Light Source (ELS) market, which would enable us to participate more holistically than as a standalone laser chip supplier.
We focused on time to market in the business and have greatly improved our execution through the design cycle.
By expanding into pluggable external light source modules, we would dramatically increase our serviceable Market.
As a result, we are now in the lead pack of transceiver suppliers as customers transition their networks to 1.6T speeds.
In addition the else allows us to diversify our customer base as several new partners. Adopting Next Generation scale out. Architectures are looking for more TurnKey Solutions.
Beyond design execution, we are also improving the profitability of our transceiver business with better yields and lower scrap rates.
We have built significant men momentum through our leadership and crowd transceiver OCS and scale out CPO.
Now, a fourth growth driver is taking shape.
1 poised to be a generational game-changer for the industry.
Optical scale up.
Today, data center architectures. Have a clear divide
Turning to CPO, we have secured an additional multi hundred million dollar purchase order for ultra high power lasers that support Optical scale out applications. We expect shipments for this incremental order in the first half of calendar 2027.
Optical links handle scale out networking.
Connecting relatively longer links within the data center.
Meanwhile, we continue to execute on the initial orders. We have discussed previously, and remain firmly on track for material shipment inflection of uhp ships. In the second half of this calendar year.
conversely copper links dominate scale up connectivity referring to the ultra short, reach high speed pass within a single Rack or a cluster
While copper has long been the gold standard for scale up for Simplicity and costs it is hitting a physical wall.
Michael Hurlston: By expanding into pluggable external light source modules, we would dramatically increase our serviceable market. In addition, the ELS allows us to diversify our customer base, as several new partners adopting next-generation scale-out architectures are looking for more turnkey solutions. We have built significant momentum through our leadership in Cloud Transceiver, OCS, and scale-out CPO. Now, a fourth growth driver is taking shape, one poised to be a generational game changer for the industry: optical scale-up. Today, data center architectures have a clear divide. Optical links handle scale-out networking, connecting relatively longer links within the data center. Conversely, copper links dominate scale-up connectivity, referring to the ultra-short reach, high-speed paths within a single rack or a cluster. While copper has long been the gold standard for scale-up for simplicity and cost, it is hitting a physical wall. An industry pivot is underway to bypass the scaling limits of copper.
Michael Hurlston: By expanding into pluggable external light source modules, we would dramatically increase our serviceable market. In addition, the ELS allows us to diversify our customer base, as several new partners adopting next-generation scale-out architectures are looking for more turnkey solutions. We have built significant momentum through our leadership in Cloud Transceiver, OCS, and scale-out CPO. Now, a fourth growth driver is taking shape, one poised to be a generational game changer for the industry: optical scale-up. Today, data center architectures have a clear divide. Optical links handle scale-out networking, connecting relatively longer links within the data center. Conversely, copper links dominate scale-up connectivity, referring to the ultra-short reach, high-speed paths within a single rack or a cluster. While copper has long been the gold standard for scale-up for simplicity and cost, it is hitting a physical wall. An industry pivot is underway to bypass the scaling limits of copper.
Furthermore, we have established a clear line of sight into the broader, external light source, for ALS Market, which would enable us to participate more holistically than as a standalone. Laser chip supplier.
By expanding into pluggable external light source modules, we would dramatically increase our serviceable market.
An industry pivot is underway to bypass the scaling limits of copper by late calendar 2027. We would expect our first scale-up CPO shipments, replacing longer copper connections. We are already deeply embedded in design and cycles. For this leveraging, our ultra high power lasers and external light source modules.
We have built significant momentum through our leadership and crowd transceiver OCS and scale out CPO.
As we look into the not so distant future, it is only right to assume that Optics, begins to capture more and more of the connectivity eventually, so sue and copper.
Now, a fourth growth driver is taking shape—poised to be a generational game-changer for the industry.
Optical scale up.
In response to these demand projections, we have initiated proactivity, proactive capacity planning.
Today, data center architectures. Have a clear divide
Optical links handle scale-out networking.
Given the sheer magnitude of the scale up Optics Market. We are carefully. Assessing our projected wafer output clamps,
Connecting relatively longer links within the data center.
We are an active negotiations with leading customers to offset our Capital requirements in exchange for long-term Supply, assurances.
Conversely copper links dominate scale up connectivity referring to the ultra short reach high-speed pass within a single Rack or a cluster.
These discussions underscore, the critical nature of our technology, and their road maps.
Now, let's look closer at the key performance metrics to Define our second quarter.
While copper has long been the gold standard for scale up for Simplicity and costs it is hitting a physical wall.
Michael Hurlston: By late calendar 2027, we would expect our first scale-up CPO shipments, replacing longer copper connections. We are already deeply embedded in design in cycles for this, leveraging our ultra-high power lasers and external light source modules. As we look into the not-so-distant future, it is only right to assume that optics begins to capture more and more of the connectivity, eventually subsuming copper. In response to these demand projections, we have initiated proactive capacity planning. Given the sheer magnitude of the scale-up optics market, we are carefully assessing our projected wafer output plans. We are in active negotiations with leading customers to offset our capital requirements in exchange for long-term supply assurances. These discussions underscore the critical nature of our technology and their roadmaps. Now, let's look closer at the key performance metrics that defined our second quarter.
Michael Hurlston: By late calendar 2027, we would expect our first scale-up CPO shipments, replacing longer copper connections. We are already deeply embedded in design in cycles for this, leveraging our ultra-high power lasers and external light source modules. As we look into the not-so-distant future, it is only right to assume that optics begins to capture more and more of the connectivity, eventually subsuming copper. In response to these demand projections, we have initiated proactive capacity planning. Given the sheer magnitude of the scale-up optics market, we are carefully assessing our projected wafer output plans. We are in active negotiations with leading customers to offset our capital requirements in exchange for long-term supply assurances. These discussions underscore the critical nature of our technology and their roadmaps. Now, let's look closer at the key performance metrics that defined our second quarter.
In our last earnings call, we introduced 2 primary product categories.
Foundational, building block for larger Solutions and systems which are Standalone products, providing full functionality such as Optical transceivers Optical circuit switches and Industrial lasers.
And Industry pivot is underway to bypass the scaling limits of copper by late calendar 2027. We would expect our first scale-up CPO shipments replacing longer copper connections. We are already deeply embedded in design and cycles. For this leveraging, our ultra high power lasers and external light source modules.
Components revenue for the quarter reached 444 million representing a 17% sequential increase and 68% year-over-year growth.
As we look into the not-so-distant future, it is only right to assume that optics begins to capture more and more of the connectivity eventually. So, student copper...
This performance was fueled by broad-based demands of laser chips.
In response to these demand projections, we have initiated proactivity, proactive capacity planning.
Laser assemblies and inline subsystems going primarily into inter data center DCI and Long Haul applications.
Given the sheer magnitude of the scale up Optics Market. We are carefully. Assessing our projected wafer output clamps,
We are inactive negotiations with leading customers to offset our Capital requirements in exchange for long-term Supply assurances. These discussions underscore the critical nature of our technology and their road maps.
We achieved another quarterly company record in EML. Laser shipments led by 100 Gig Lane speeds and bolstered by a ramp and 200 gig devices.
Michael Hurlston: In our last earnings call, we introduced two primary product categories: components, the foundational building block for larger solutions, and systems, which are standalone products providing full functionality such as optical transceivers, optical circuit switches, and industrial lasers. Components revenue for the quarter reached $444 million, representing a 17% sequential increase and 68% year-over-year growth. This performance was fueled by broad-based demand across laser chips, laser assemblies, and inline subsystems going primarily into inter-data center (DCI) and long-haul applications. Our laser chip business, serving Cloud Transceiver customers, drove outsized sequential growth this quarter. We achieved another quarterly company record in EML laser shipments, led by 100 gig lane speeds and bolstered by a ramp in 200 gig devices. Simultaneously, we expanded our footprint in next-generation architectures, shipping CW lasers for 800 gig manufacturers, and increased volumes of ultra-high power laser shipments for CPO applications.
Michael Hurlston: In our last earnings call, we introduced two primary product categories: components, the foundational building block for larger solutions, and systems, which are standalone products providing full functionality such as optical transceivers, optical circuit switches, and industrial lasers. Components revenue for the quarter reached $444 million, representing a 17% sequential increase and 68% year-over-year growth. This performance was fueled by broad-based demand across laser chips, laser assemblies, and inline subsystems going primarily into inter-data center (DCI) and long-haul applications. Our laser chip business, serving Cloud Transceiver customers, drove outsized sequential growth this quarter. We achieved another quarterly company record in EML laser shipments, led by 100 gig lane speeds and bolstered by a ramp in 200 gig devices. Simultaneously, we expanded our footprint in next-generation architectures, shipping CW lasers for 800 gig manufacturers, and increased volumes of ultra-high power laser shipments for CPO applications.
Now, let's look closer at the key performance metrics to Define our second quarter.
In our last earnings call, we introduced 2 primary product categories.
Simultaneously, we expanded our footprint in Next Generation architectures, shipping CW, lasers for 800 gig manufacturers and increased volumes of ultra high-powered, laser shipments for CPO applications.
Our Indian phosphine wafer Fab capacity remains at a premium.
Components are the foundational building blocks for larger solutions and systems. They are standalone products, providing full functionality, such as optical transceivers, optical circuit switches, and industrial lasers.
Fully allocated to meet surging customer demand. We have front-loaded our 40% expansion, Target, delivering on over half of that. This past quarter.
Components revenue for the quarter reached 444 million representing a 17% sequential increase and 68% year-over-year growth.
We are scaling rapidly through Precision Tool, optimization and yield gains.
This performance was fueled by broad-based demand across laser chips.
This execution will help to ensure that an additional capacity comes online as planned over the next 2 quarters and Beyond.
Laser assemblies and inline subsystems going primarily into inter data center DCI and Long Haul applications.
Well, not able to size it, we now have line of sight to a significant block of additional capacity starting in the second half of 2026. Both through current activities in Saga mojarra.
And better utilization of our Caswell United Kingdom and to cow Japan BS.
We achieved another quarterly company record in EML. Laser shipments led by 100 Gig Lane speeds and bolstered by a ramp and 200 gig devices.
Beyond sheer volume or Q2 Revenue was propelled by a favorable. Mix shift toward 200 gig Lane speeds which provide a meaningful ASP uplift.
while these high-speed devices represent an approximately 5% of unit volume, they contributed roughly 10% of data center, laser chip Revenue
Michael Hurlston: Our indium phosphide wafer fab capacity remains at a premium, fully allocated to meet surging customer demand. We have front-loaded our 40% expansion target, delivering on over half of that this past quarter. We are scaling rapidly through precision tool optimization and yield gains. This execution will help to ensure that additional capacity comes online as planned over the next two quarters and beyond. While not able to size it, we now have line of sight to a significant block of additional capacity starting in the second half of 2026, both through current activities in Sagamahara and better utilization of our Caswell (United Kingdom), and Takao (Japan) fabs. Beyond sheer volume, our Q2 revenue was propelled by a favorable mix shift toward 200 gig lane speeds, which provide a meaningful ASP uplift.
Michael Hurlston: Our indium phosphide wafer fab capacity remains at a premium, fully allocated to meet surging customer demand. We have front-loaded our 40% expansion target, delivering on over half of that this past quarter. We are scaling rapidly through precision tool optimization and yield gains. This execution will help to ensure that additional capacity comes online as planned over the next two quarters and beyond. While not able to size it, we now have line of sight to a significant block of additional capacity starting in the second half of 2026, both through current activities in Sagamahara and better utilization of our Caswell (United Kingdom), and Takao (Japan) fabs. Beyond sheer volume, our Q2 revenue was propelled by a favorable mix shift toward 200 gig lane speeds, which provide a meaningful ASP uplift.
Simultaneously, we expanded our footprint in Next Generation architectures, shipping CW, lasers for 800 gig manufacturers and increased volumes of ultra high-powered, laser shipments for CPO applications.
Our Indian philosophy wafer fab capacity remains at a premium.
Fully allocated to meet surging customer demand.
Moving to our scale across business, we continue to see the same momentum in components supporting Optical links ranging from inner Compass to longer reach topologies.
We have front-loaded our 40% expansion Target to delivering on over half of that this past quarter.
We are scaling rapidly through Precision Tool, optimization and yield gains.
Shipments of our narrow line, width laser assemblies. Grew for the eighth consecutive quarter a Clear Proof point of robust market, demand, and our successful manufacturing expansion.
This execution will help to ensure that additional capacity comes online as planned over the next two quarters and beyond.
Our longwall portfolio also saw gains with both coherent components and aligned subsystem products, growing sequentially and year-over-year.
While not able to size it. We now have line of sight to a significant block of additional capacity starting in the second half of 2026. Both through current activities in Saga mojarra.
And better utilization of our Caswell United Kingdom and to cow Japan BS.
In addition, we achieved another record quarter for our pump lasers, supporting not only long hauls terrestrial and subk networks, but also new scale. Across architectures with Revenue in this product line surging over 90%. Compared to the prior year.
Michael Hurlston: While these high-speed devices represented approximately 5% of unit volume, they contributed roughly 10% of data center laser chip revenue. Moving to our scale-out business, we continue to see sustained momentum in components supporting optical links ranging from inner campus to longer reach topologies. Shipments of our narrow linewidth laser assemblies grew for the eighth consecutive quarter, a clear proof point of robust market demand and our successful manufacturing expansion. Our long-haul portfolio also saw gains, with both coherent components and inline subsystem products growing sequentially and year-over-year. In addition, we achieved another record quarter for our pump lasers, supporting not only long-haul terrestrial and subsea networks, but also new scale-out architectures, with revenue in this product line surging over 90% compared to the prior year. Finally, 3D Sensing grew modestly following a new smartphone launch and some incremental share gains.
Michael Hurlston: While these high-speed devices represented approximately 5% of unit volume, they contributed roughly 10% of data center laser chip revenue. Moving to our scale-out business, we continue to see sustained momentum in components supporting optical links ranging from inner campus to longer reach topologies. Shipments of our narrow linewidth laser assemblies grew for the eighth consecutive quarter, a clear proof point of robust market demand and our successful manufacturing expansion. Our long-haul portfolio also saw gains, with both coherent components and inline subsystem products growing sequentially and year-over-year. In addition, we achieved another record quarter for our pump lasers, supporting not only long-haul terrestrial and subsea networks, but also new scale-out architectures, with revenue in this product line surging over 90% compared to the prior year. Finally, 3D Sensing grew modestly following a new smartphone launch and some incremental share gains.
Finally 3D sensing grew modestly following, a new smartphone launched and some incremental share games.
Beyond sheer volume, our Q2 revenue was propelled by a favorable mix shift toward 200-gig lane speeds, which provide a meaningful ASP uplift.
While these high-speed devices represent approximately 5% of unit volume, they contributed roughly 10% of data center laser chip revenue.
Moving to our scale across business, we continue to see sustained momentum in components supporting optical links, ranging from inner compass to longer reach topologies.
In systems Revenue reached 222 million representing a significant 43% sequential and 60% year-over-year increase Cloud transceivers accounted for the Lion Share of this growth of increasing by approximately 50 million dollars on quarter as we successfully leveraged, our expanded manufacturing capacity in Thailand.
2 point of robust market demand and are successful manufacturing expansion.
as noted last quarter, we have moved past the production volatility seen in earlier, C calendar, 2025 and are now on a sustainable growth trajectory
Our longwall portfolio also saw gains, with both coherent components and aligned subsystem products growing sequentially and year-over-year.
Our Q3 guidance reflects this momentum. As we begin to see the revenue layering benefits typically enjoyed by larger. Transceiver makers.
As noted earlier, Optical circuit switches continue to grow and we're the good news story of the last quarter.
In addition, we achieved another record quarter for our pump lasers, supporting not only Long Haul terrestrial and subsea networks, but also new scale across architectures, with revenue in this product line surging over 90% compared to the prior year.
On the other hand, as our Cloud related, business continues to accelerate. We see a different dynamic in the industrial and Market here. Shipments, remain, roughly flat sequentially in Q2.
Finally 3D sensing grew modestly following, a new smartphone launched and some incremental share gains.
Michael Hurlston: In systems, revenue reached $222 million, representing a significant 43% sequential, and 60% year-over-year increase. Cloud Transceivers accounted for the lion's share of this growth, increasing by approximately $50 million on quarter as we successfully leveraged our expanded manufacturing capacity in Thailand. As noted last quarter, we have moved past the production volatility seen in earlier calendar 2025 and are now on a sustainable growth trajectory. Our Q3 guidance reflects this momentum as we begin to see the revenue layering benefits typically enjoyed by larger transceiver makers. As noted earlier, optical circuit switches continue to grow and were the good news story of the last quarter. On the other hand, as our cloud-related business continues to accelerate, we see a different dynamic in the industrial end market. Here, shipments remain roughly flat sequentially in Q2.
Michael Hurlston: In systems, revenue reached $222 million, representing a significant 43% sequential, and 60% year-over-year increase. Cloud Transceivers accounted for the lion's share of this growth, increasing by approximately $50 million on quarter as we successfully leveraged our expanded manufacturing capacity in Thailand. As noted last quarter, we have moved past the production volatility seen in earlier calendar 2025 and are now on a sustainable growth trajectory. Our Q3 guidance reflects this momentum as we begin to see the revenue layering benefits typically enjoyed by larger transceiver makers. As noted earlier, optical circuit switches continue to grow and were the good news story of the last quarter. On the other hand, as our cloud-related business continues to accelerate, we see a different dynamic in the industrial end market. Here, shipments remain roughly flat sequentially in Q2.
This performance reflects the persistent cyclical softness. We continue to see in the broader industrial Market.
With that said, we have an increasing design, wind funnel, for our newly introduced Pico blade compact line of products.
Record with our guidance midpoint exceeding, historical Revenue Levels by a substantial margin.
In systems Revenue reached 222 million representing a significant 43% sequential and 60% year-over-year increase Cloud transceivers accounted for the Lion Share of this growth of increasing by approximately 50 million dollars on quarter as we successfully leveraged, our expanded manufacturing capacity in Thailand.
Within this Outlook, we anticipate that approximately 2/3 of the sequential increase in Revenue will be driven by our components portfolio reflecting broad-based strength across Cloud applications.
As noted last quarter, we have moved past the production volatility seen in earlier C calendar 2025 and are now on a sustainable growth trajectory.
The remaining 1/3 will stem from systems, fueled by the continued ramp of high-speed transceivers and additional contributions from OCS.
Regulatory requirements, guidance, reflects this momentum. As we begin to see the revenue layering benefits typically enjoyed by larger transceiver makers.
In summary lamentum is established itself as a market leader, in transformative, Optical Technologies.
As noted earlier, optical circuit switches continue to grow and were the good news story of the last quarter.
Our position across OCS, Optical scale out and Optical scale up, is the Envy of the industry.
Michael Hurlston: This performance reflects the persistent cyclical softness we continue to see in the broader industrial market. With that said, we have an increasing design wind funnel for our newly introduced Pico compact line of products. Looking ahead to Q3, we expect to achieve a new quarterly revenue record, with our guidance midpoint exceeding historical revenue levels by a substantial margin. Within this outlook, we anticipate that approximately 2/3 of the sequential increase in revenue will be driven by our components portfolio, reflecting broad-based strength across cloud applications. The remaining 1/3 will stem from systems, fueled by the continued ramp of high-speed transceivers and additional contributions from OCS. In summary, Lumentum has established itself as a market leader in transformative optical technologies. Our position across OCS, optical scale-out, and optical scale-up is the envy of the industry.
Michael Hurlston: This performance reflects the persistent cyclical softness we continue to see in the broader industrial market. With that said, we have an increasing design wind funnel for our newly introduced Pico compact line of products. Looking ahead to Q3, we expect to achieve a new quarterly revenue record, with our guidance midpoint exceeding historical revenue levels by a substantial margin. Within this outlook, we anticipate that approximately 2/3 of the sequential increase in revenue will be driven by our components portfolio, reflecting broad-based strength across cloud applications. The remaining 1/3 will stem from systems, fueled by the continued ramp of high-speed transceivers and additional contributions from OCS. In summary, Lumentum has established itself as a market leader in transformative optical technologies. Our position across OCS, optical scale-out, and optical scale-up is the envy of the industry.
On the other hand, as our Cloud related, business continues to accelerate. We see a different dynamic in the industrial and Market here. Shipments, remain, roughly flat sequentially in Q2.
Furthermore, we are now meaningfully participating in the well, documented growth in the optical transceiver Market.
This performance reflects the persistent cyclical softness. We continue to see in the broader industrial Market.
With all that said, we continue to believe that our current performance is only a precursor of things to come.
Now, I'll hand the call over to watch it.
With that said, we have an increase in design, wind funnel, for our newly introduced Pico Blade compact line of products.
Looking ahead to Q3, we expect to achieve a new quarterly revenue record with our guidance. The midpoint exceeds historical revenue levels by a substantial margin.
Thank you. Michael second, quarter revenue of 665.55 million was at the high end of our guidance. And not that EPS of a 1.67 was well above our prior expectations demonstrating, The Leverage of our business model
Within this Outlook, we anticipate that approximately 2/3 of the sequential increase in Revenue will be driven by our components portfolio reflecting broad-based strength across Cloud applications.
Gaap gross margin for the second. Quarter was 36.1% Gap. Operating margin was 9.7%. Gaap, net income was 78.2 million and gaap. Net income per share was 89 cents.
The remaining one-third will stem from systems, fueled by the continued ramp of high-speed transceivers and additional contributions from OCS.
In summary, Lumentum has established itself as a market leader in transformative optical technologies.
Michael Hurlston: Furthermore, we are now meaningfully participating in the well-documented growth in the optical transceiver market. With all that said, we continue to believe that our current performance is only a precursor of things to come. Now I'll hand the call over to Wajid. Thank you, Michael. Q2 revenue of $665.5 million was at the high end of our guidance, and a non-GAAP EPS of $1.67 was well above our prior expectations, demonstrating the leverage of our business model. GAAP gross margin for Q2 was 36.1%, GAAP operating margin was 9.7%, GAAP net income was $78.2 million, and GAAP net income per share was $0.89. Turning to our non-GAAP results, Q2 gross margin was 42.5%, which was up 310 basis points sequentially and up 1,020 basis points year-on-year.
Michael Hurlston: Furthermore, we are now meaningfully participating in the well-documented growth in the optical transceiver market. With all that said, we continue to believe that our current performance is only a precursor of things to come. Now I'll hand the call over to Wajid.
Turning to our non-gaap results. Second quarter, gross margin was 42.5%, which was up, 310 basis, point sequentially, and up a thousand 2020 basis points year on year.
Our position across OCS, optical scale-out, and optical scale-up is the envy of the industry.
Furthermore, we are now meaningfully participating in the well-documented growth in the optical transceiver market.
With all that said, we continue to believe that our current performance is only a precursor of things to come.
Wajid Ali: Thank you, Michael. Q2 revenue of $665.5 million was at the high end of our guidance, and a non-GAAP EPS of $1.67 was well above our prior expectations, demonstrating the leverage of our business model. GAAP gross margin for Q2 was 36.1%, GAAP operating margin was 9.7%, GAAP net income was $78.2 million, and GAAP net income per share was $0.89. Turning to our non-GAAP results, Q2 gross margin was 42.5%, which was up 310 basis points sequentially and up 1,020 basis points year-on-year.
Due to better manufacturing utilization across the majority of our product lines increased pricing on select products and favorable product. Mix mix Improvement was primarily driven by our ramp in data center laser chips.
Now, I'll hand the call over to watch it.
Second quarter, non-gaap operating margin was 25.2%, which was up, 650 basis. Point sequentially and up 1730 basis points year on year, primarily driven by Revenue growth and components products.
Thank you. Michael second quarter of Revenue of 665.55 million, was at the high end of our guidance. And not have EPS of a 1.67 was well above our prior expectations demonstrating, The Leverage of our business model
Well continuing to invest in critical R&D programs serving cloud, and AI customers. We have maintained the rigorous cost controls necessary to optimize our business model.
GAAP growth margin for the second quarter was 36.1%. GAAP operating margin was 9.7%. GAAP net income was $78.2 million, and GAAP net income per share was $0.89.
Second quarter non-gaap operating, profit was 167.7 million and adjusted, EBA dub was 198.3 Million.
Michael Hurlston: Due to better manufacturing utilization across the majority of our product lines, increased pricing on select products, and favorable product mix. Mix improvement was primarily driven by our ramp in data center laser chips. Q2 non-GAAP operating margin was 25.2%, which was up 650 basis points sequentially and up 1,730 basis points year-over-year, primarily driven by revenue growth and components products. While continuing to invest in critical R&D programs serving cloud and AI customers, we have maintained the rigorous cost controls necessary to optimize our business model. Q2 non-GAAP operating profit was $167.7 million, and adjusted EBITDA was $198.3 million. Q2 non-GAAP operating expenses totaled $114.9 million, or 17.3% of revenue, an increase of $4.4 million from the Q1 and an increase of $16.6 million from the same quarter last year in order to support our expanding cloud opportunities.
Wajid Ali: Due to better manufacturing utilization across the majority of our product lines, increased pricing on select products, and favorable product mix. Mix improvement was primarily driven by our ramp in data center laser chips. Q2 non-GAAP operating margin was 25.2%, which was up 650 basis points sequentially and up 1,730 basis points year-over-year, primarily driven by revenue growth and components products. While continuing to invest in critical R&D programs serving cloud and AI customers, we have maintained the rigorous cost controls necessary to optimize our business model. Q2 non-GAAP operating profit was $167.7 million, and adjusted EBITDA was $198.3 million. Q2 non-GAAP operating expenses totaled $114.9 million, or 17.3% of revenue, an increase of $4.4 million from the Q1 and an increase of $16.6 million from the same quarter last year in order to support our expanding cloud opportunities.
Turning to our non-gaap results. Second quarter, gross margin was 42.5%, which was up, 310 basis, point sequentially, and up 1,020 basis points year on year.
Second quarter, non-gaap operating, expenses totaled 1, 114.9, million or 17.3% of Revenue. An increase of 4.4 million from the first quarter and an increase of 16.6 million from the same quarter last year. In order to support our expanding Cloud opportunities.
Due to better manufacturing utilization across the majority of our product lines increased pricing on select products and favorable product. Mix mix Improvement was primarily driven by our ramp in data center laser chips.
Q2 non-gaap sgna. Expense was 45 million. Non-gaap R&D expense, was 69.9 million interest. In other income, was 4.6 million on a non-gaap basis.
Second quarter, non-gaap operating margin was 25.2%, which was up, 650 basis. Point sequentially and up 1730 basis points year on year, primarily driven by Revenue growth and components products.
Second quarter non-gaap. Net income was 143.9 million and non-gaap net income. Per share was 1.67.
Model.
Are diluted weighted shares for the second quarter was 86.1 Million on a non-gaap basis.
Turning to the balance sheet.
Second quarter non-gaap operating, profit was 167.7 million and adjusted, EBA dub was 198.3 Million.
During the second quarter, our cash and short-term Investments increased by 33 million to 1.16 billion dollars, our inventory levels increased by 39 million sequentially. To support the expected growth in our cloud and AI Revenue.
In Q2, we spent 84 million in capex, primarily focused on manufacturing capacity to support cloud and AI customers.
Michael Hurlston: Q2 non-GAAP SG&A expense was $45 million, non-GAAP R&D expense was $69.9 million, interest and other income was $4.6 million on a non-GAAP basis. Second quarter non-GAAP net income was $143.9 million, and non-GAAP net income per share was $1.67. Our diluted weighted shares for the second quarter were 86.1 million on a non-GAAP basis. Turning to the balance sheet, during the second quarter, our cash and short-term investments increased by $33 million to $1.16 billion. Our inventory levels increased by $39 million sequentially to support the expected growth in our cloud and AI revenue. In Q2, we spent $84 million in CapEx, primarily focused on manufacturing capacity to support cloud and AI customers. Turning to revenue details, components revenue was $443.7 million, which increased 17% sequentially in Q2 and 68% year-on-year. Systems revenue of $221.8 million increased 43% sequentially in Q2 and 60% year-on-year.
Wajid Ali: Q2 non-GAAP SG&A expense was $45 million, non-GAAP R&D expense was $69.9 million, interest and other income was $4.6 million on a non-GAAP basis. Second quarter non-GAAP net income was $143.9 million, and non-GAAP net income per share was $1.67. Our diluted weighted shares for the second quarter were 86.1 million on a non-GAAP basis. Turning to the balance sheet, during the second quarter, our cash and short-term investments increased by $33 million to $1.16 billion. Our inventory levels increased by $39 million sequentially to support the expected growth in our cloud and AI revenue. In Q2, we spent $84 million in CapEx, primarily focused on manufacturing capacity to support cloud and AI customers. Turning to revenue details, components revenue was $443.7 million, which increased 17% sequentially in Q2 and 68% year-on-year. Systems revenue of $221.8 million increased 43% sequentially in Q2 and 60% year-on-year.
Second quarter, non-GAAP operating expenses totaled $114.9 million, or 17.3% of revenue, an increase of $4.4 million from the first quarter and an increase of $16.6 million from the same quarter last year, in order to support our expanding cloud opportunities.
Q2 non-GAAP SG&A expense was $45 million. Non-GAAP R&D expense was $69.9 million. Interest and other income was $4.6 million on a non-GAAP basis.
43% sequentially in Q2 and 60% year on year.
Second quarter non-gaap. Net income was 143.9 million and non-gaap net income per share was a $1.67.
Our diluted weighted shares for the second quarter was 86.1 million on a non-GAAP basis.
Turning to the balance sheet.
Now, let me move to our guidance for the third quarter of fiscal year 26, which is on a non-gaap basis. And is based on our assumptions as of today,
We anticipate net revenue for the third quarter of fiscal year, 26 to be in the range of 780 to 830 million.
During the second quarter, our cash and short-term investments increased by $33 million to $1.16 billion. Our inventory levels increased by $39 million sequentially, to support the expected growth in our cloud and AI revenue.
The 805 million midpoint would represent another new all-time quarterly Revenue record for lamenta.
In Q2, we spent $84 million in capex, primarily focused on manufacturing capacity to support cloud and AI customers.
We project third quarter. Non-gaap operating margin to be in the range of 30% to 31% and diluted net income for share to be in the range of
$2.15 to $2.35.
Our non-gaap EPS, guidance is based on a non-gaap annual effective tax rate of 16 and a half percent.
These projections also assume shares used for non-gaap diluted earnings of approximately 92 million shares.
Turning to revenue details. Components Revenue was 443.7 Million which increased 17% sequentially in Q2 and 68% year, on year systems revenue of 221.8 million increased 43% sequentially in Q2 and 60% year on year.
Michael Hurlston: Now let me move to our guidance for the third quarter of fiscal year 2026, which is on a non-GAAP basis and is based on our assumptions as of today. We anticipate net revenue for the third quarter of fiscal year 2026 to be in the range of $780 to $830 million. The $805 million midpoint would represent another new all-time quarterly revenue record for Lumentum. We project third quarter non-GAAP operating margin to be in the range of 30% to 31%, and diluted net income per share to be in the range of $2.15 to $2.35. Our non-GAAP EPS guidance is based on a non-GAAP annual effective tax rate of 16.5%. These projections also assume shares used for non-GAAP diluted earnings of approximately 92 million shares. With that, I'll turn the call back to Kathy to start the Q&A session. Kathy? Thank you, Wajid.
Wajid Ali: Now let me move to our guidance for the third quarter of fiscal year 2026, which is on a non-GAAP basis and is based on our assumptions as of today. We anticipate net revenue for the third quarter of fiscal year 2026 to be in the range of $780 to $830 million. The $805 million midpoint would represent another new all-time quarterly revenue record for Lumentum. We project third quarter non-GAAP operating margin to be in the range of 30% to 31%, and diluted net income per share to be in the range of $2.15 to $2.35. Our non-GAAP EPS guidance is based on a non-GAAP annual effective tax rate of 16.5%. These projections also assume shares used for non-GAAP diluted earnings of approximately 92 million shares. With that, I'll turn the call back to Kathy to start the Q&A session. Kathy?
With that, I'll turn the call back to Kathy to start the Q&A session. Kathy,
Thank you, ajin.
to allow as many people as possible and opportunity to ask questions,
Now, let me move to our guidance for the third quarter of fiscal year '26, which is on a non-GAAP basis and is based on our assumptions as of today,
Please keep to 1 question and 1 follow-up. Kevin, let's now begin the Q&A session.
We anticipate net revenue for the third quarter of fiscal year 2026 to be in the range of $780 million to $830 million.
We will now begin the question and answer session, a reminder, that if you would like to ask a question, please raise your hand. If you have dialed in to today's call, please press star 9, to raise your hand, and start 6 to unmute, please stand by, as we compile the Q&A roster,
The 805 million midpoint would represent another new all-time quarterly Revenue record for lamenta.
and your first question comes from the line of Simon Leopold with reman James.
Your line is open, please go ahead.
We project third quarter non-GAAP operating margin to be in the range of 30% to 31%, and diluted net income per share to be in the range of
Great, thank you for taking the question. Hopefully, you can hear me, okay?
$2.15 to $2.35.
Our non-gaap EPS, guidance is based on a non-gaap annual effective tax rate of 16 and a half percent.
These projections also assume shares used for non-GAAP diluted earnings of approximately 92 million shares.
Kathy Ta: Thank you, Wajid. To allow as many people as possible an opportunity to ask questions, please keep to one question and one follow-up. Kevin, let's now begin the Q&A session.
Yeah, we can hear you signing. Yeah, yeah. Yeah, I can work soon. Um, so I just wanted to see if uh, you could maybe double click on on the OCS Market which sounds quite a bit better than what you discussed last quarter. So maybe if we could hear a little bit more color in terms of how you're seeing the market, the exit rate and and the customer diversification, and I'll give you my follow-up because it's a relatively quick.
With that, I'll turn the call back to Kathy to start the Q&A session. Happy
Michael Hurlston: To allow as many people as possible an opportunity to ask questions, please keep to one question and one follow-up. Kevin, let's now begin the Q&A session. We will now begin the question and answer session. A reminder that if you would like to ask a question, please raise your hand. If you have dialed into today's call, please press star 9 to raise your hand and star 6 to unmute. Please stand by as we compile the Q&A roster. And your first question comes from the line of Simon Leopold with Raymond James. Your line is open. Please go ahead. Great. Thank you for taking the question. Hopefully, you can hear me okay. Yeah, we can hear you fine. Yeah. Yay, I can work Zoom.
Thank you, ajin.
To allow as many people as possible an opportunity to ask questions,
In that you've raised prices. It's there any way you can help us quantify what impact your price increases have had on the growth. Thank you.
Operator: We will now begin the question and answer session. A reminder that if you would like to ask a question, please raise your hand. If you have dialed into today's call, please press star 9 to raise your hand and star 6 to unmute. Please stand by as we compile the Q&A roster. And your first question comes from the line of Simon Leopold with Raymond James. Your line is open. Please go ahead.
Let's now begin the Q&A session. Please keep to one question and one follow-up.
We will now begin the question and answer session. A reminder that if you would like to ask a question, please raise your hand. If you have dialed in to today's call, please press star 9 to raise your hand, and star 6 to unmute. Please stand by as we compile the Q&A roster.
And your first question comes from the line of Simon Leopold with Raymond James.
Your line is open, please go ahead.
Simon Leopold [Managing Director: Great. Thank you for taking the question. Hopefully, you can hear me okay.
Michael Hurlston: Yeah, we can hear you fine.
Great, thank you for taking the question. Hopefully, you can hear me okay?
Simon Leopold [Managing Director: Yeah. Yay, I can work Zoom. So I just wanted to see if you could maybe double-click on the OCS market, which sounds quite a bit better than what you discussed last quarter. So maybe if we could hear a little bit more color in terms of how you're seeing the market, the exit rate, and the customer diversifications. And I'll give you my follow-up because it's relatively quick, in that you've raised prices. Is there any way you can help us quantify what impact your price increases have had on the growth? Thank you.
Michael Hurlston: So I just wanted to see if you could maybe double-click on the OCS market, which sounds quite a bit better than what you discussed last quarter. So maybe if we could hear a little bit more color in terms of how you're seeing the market, the exit rate, and the customer diversifications. And I'll give you my follow-up because it's relatively quick, in that you've raised prices. Is there any way you can help us quantify what impact your price increases have had on the growth? Thank you. Yeah, hey, Simon. Yeah, the OCS market is definitely developing a lot better than we believed. It's accelerated, certainly from a time standpoint. So the data point we gave today is that our backlog has increased to well in excess of $400 million, most of which is going to be shipped in the first two quarters of fiscal 2027.
Yeah, hey Simon. Um, yeah, the OCS Market is definitely developing a lot better than we believed. Uh, it's accelerated certainly from a, from a Time standpoint. So the data point we gave today is that our backlog has increased to, well, in excess of 400 million, most of which is going to be shipped in the first 2 quarters of fiscal 2027. So we're really going to exit the calendar year on quite a an increased philosophy. If you're a member of you and I discussed last time, we believed our Q4, the calendar Q4 would be around a hundred million dollars. It looks like it'll be quite a bit higher than that. Although, we're not breaking up that 400 between the 2 quarters.
Yeah, we can hear you, Simon. Yeah, yeah, I can work Zoom. Um, so I just wanted to see if, uh, you could maybe double-click on the OCS Market, which sounds quite a bit better than what you discussed last quarter. So maybe if we could hear a little bit more color in terms of how you're seeing the market, the exit rate, and the customer diversification. And I'll give you my follow-up because it's a relatively quick.
Uh so we it's a broad-based. Uh you know, that there's multiple customers making up that that backlog, um, you know, we've talked about shipping the 3 customers and and that continues
Michael Hurlston: Yeah, hey, Simon. Yeah, the OCS market is definitely developing a lot better than we believed. It's accelerated, certainly from a time standpoint. So the data point we gave today is that our backlog has increased to well in excess of $400 million, most of which is going to be shipped in the first two quarters of fiscal 2027.
Uh, but those customers are, are increasing their demands rather significantly and thus, the demand on us, has gone up quite appreciably. So we feel pretty good about that. I think as we enter calendar year 2027, you know it it should go up from there. Um, in terms of, of what we see, uh, in in our backlog, in terms of our Revenue,
um, on the second question, you know, obviously price increases are, are definitely having an impact both on Topline and, and gross margin.
Michael Hurlston: So we're really going to exit the calendar year on quite an increased velocity. If you remember, you and I discussed last time, we believed our Q4, the calendar Q4, would be around $100 million. It looks like it'll be quite a bit higher than that, although we're not breaking up that $400 million between the two quarters. So it's a broad base. There's multiple customers making up that backlog. We've talked about shipping to 3 customers, and that continues. But those customers are increasing their demands rather significantly, and thus, the demand on us has gone up quite appreciably. So we feel pretty good about that. I think as we enter calendar year 2027, it should go up from there in terms of what we see in our backlog and in terms of our revenue.
Michael Hurlston: So we're really going to exit the calendar year on quite an increased velocity. If you remember, you and I discussed last time, we believed our Q4, the calendar Q4, would be around $100 million. It looks like it'll be quite a bit higher than that, although we're not breaking up that $400 million between the two quarters. So it's a broad base. There's multiple customers making up that backlog. We've talked about shipping to 3 customers, and that continues. But those customers are increasing their demands rather significantly, and thus, the demand on us has gone up quite appreciably. So we feel pretty good about that. I think as we enter calendar year 2027, it should go up from there in terms of what we see in our backlog and in terms of our revenue.
Um, you know, they are starting to flow through in the q1 or or the, uh, the March guide, right? Where we're seeing a lot more of that. As we said last quarter to you and to others, we'd expect a little bit of an impact in the December quarter, and we've had a little bit but not a lot. We see a little bit more in March.
Yeah, hey Simon. Um, yeah, the OCS Market is definitely developing a lot better than we believed. Uh, it's accelerated certainly from a, from a Time standpoint. So the data point we gave today is that our backlog has increased to well, in excess of 400 million dollars, most of which is going to be shipped in the first 2 quarters of fiscal 2027. So we're really going to exit the calendar year on quite a an increase philosophy. If you remember you and I discussed last time, we believed our Q4. The calendar Q4 would be around a hundred million dollars. It looks like it'll be quite a bit higher than that. Although we're not breaking up that 400 between the 2 quarters.
Uh, so we
It's a broad-based, uh, you know, that there's multiple customers making up that backlog. Um, you know, we've talked about shipping to the 3 customers and that continues.
Uh margin certainly a little bit more but you know we're doing a lot of things to benefit margin including cost down uh a lot of work on manufacturing scrap and yield there's just been a lot of intense Focus from myself woopen wajid on on the gross margin line so a lot of things are contributing to that and you know for the first time we're moving uh up into the 40s.
Uh, but those customers are, are increasing their demands rather significantly and thus, the demand on us, has gone up quite appreciably. So we feel pretty good about that. I think as we enter calendar year 2027, you know, it it it should go up from there. Um, in terms of of what we see in uh in in our backlog, in terms of our Revenue,
Thank you. Thank you, Simon.
Michael Hurlston: On the second question, obviously, price increases are definitely having an impact both on top line and gross margin. They are starting to flow through in the Q1 or the March guide, right, where we're seeing a lot more of that. As we said last quarter to you and to others, we'd expect a little bit of impact in the December quarter, and we've had a little bit but not a lot. We see a little bit more in March. I don't know if we've quantified how much of it is. I think it's relatively modest in terms of the overall revenue impact. Margin, certainly a little bit more, but we're doing a lot of things to benefit margin, including cost down, a lot of work on manufacturing, scrap, and yield. There's just been a lot of intense focus from myself, Wupen Yuen, Wajid, on the gross margin line.
Michael Hurlston: On the second question, obviously, price increases are definitely having an impact both on top line and gross margin. They are starting to flow through in the Q1 or the March guide, right, where we're seeing a lot more of that. As we said last quarter to you and to others, we'd expect a little bit of impact in the December quarter, and we've had a little bit but not a lot. We see a little bit more in March. I don't know if we've quantified how much of it is. I think it's relatively modest in terms of the overall revenue impact. Margin, certainly a little bit more, but we're doing a lot of things to benefit margin, including cost down, a lot of work on manufacturing, scrap, and yield. There's just been a lot of intense focus from myself, Wupen Yuen, Wajid, on the gross margin line.
And your next question comes from the line of semic chattery with JP Morgan.
Your line is open, please go ahead.
Um, on the second question, you know, obviously price increases are definitely having an impact both on topline and gross margin.
Um, you know, they are starting to flow through in the q1 or or the, uh, the March guide, right? Where we're seeing a lot more of that. As we said last quarter to you and to others, we'd expect a little bit of an impact in the December quarter, and we've had a little bit but not a lot. We see a little bit more in March.
Um, I don't know if we've quantified how much of it is. I think it's relatively modest, you know, in terms of the overall revenue impact.
Thank you, thanks for taking my questions. Michael, was it good to speak to you? Um, maybe I'll start off on the, um, Indian plus fight, capacity, ramp, and just to clarify what you said in your prepared remarks, you pulled forward or front-end loaded, some of that capacity increase that you had planned. And we're going to see the effect of that in the March quarter guide, just to confirm that. And then what does it mean for the end state in terms of the sort of 40 50 increase that you had planned? Um does that change change the end state in terms of how much capacity you can add those existing Fabs? And you as you're talking about Alternatives with your customers, does it really sort of focus on the existing Fab or you assessing sort of new Fabs and then have a quick follow up. Thank you.
Michael Hurlston: So a lot of things are contributing to that, and for the first time, we're moving up into the 40s. Thank you. Thank you, Simon. And your next question comes from the line of Samik Chatterjee with J.P. Morgan. Your line is open. Please go ahead. Thank you. Thanks for taking my questions. Michael, Wajid, Kathy, good to speak to you. Maybe I'll start off on the indium phosphide capacity ramp. And just to clarify what you said in your prepared remarks, you pulled forward or front-end loaded some of that capacity increase that you had planned, and we're going to see the effect of that in the March quarter guide just to confirm that. And then what does it mean for the end state in terms of the sort of 40, 50% capacity increase that you had planned?
Michael Hurlston: So a lot of things are contributing to that, and for the first time, we're moving up into the 40s.
Simon Leopold [Managing Director: Thank you.
Uh margins certainly a little bit more but you know, we're doing a lot of things to benefit margin including cost down a lot of work on manufacturing scrap and yield there's just been a lot of intense Focus from myself wooin wajid on on the gross margin line. So a lot of things are contributing to that and you know for the first time we're moving uh up into the 40s.
Kathy Ta: Thank you, Simon.
Thank you.
Operator: And your next question comes from the line of Samik Chatterjee with J.P. Morgan. Your line is open. Please go ahead.
Thank you, Simon.
Yeah, sonic, um, look, you know, we're we're definitely doing better than expected. I think that we characterized in the last call that we'd see a 40% impact from our September quarter, uh, over the next 3. So December March and June
And your next question comes from the line of sammic chattery with JP Morgan.
Samik Chatterjee [Managing Director: Thank you. Thanks for taking my questions. Michael, Wajid, Kathy, good to speak to you. Maybe I'll start off on the indium phosphide capacity ramp. And just to clarify what you said in your prepared remarks, you pulled forward or front-end loaded some of that capacity increase that you had planned, and we're going to see the effect of that in the March quarter guide just to confirm that. And then what does it mean for the end state in terms of the sort of 40, 50% capacity increase that you had planned? Does that change the end state in terms of how much capacity you can add to those existing fabs? And as you're talking about alternatives with your customers, does it really sort of focus on the existing fab, or are you assessing sort of new fabs? And then have a quick follow-up. Thank you.
Your line is open, please go ahead.
Uh what what we're saying here is that we probably got somewhere a little bit, north of 20% in the uh in the December quarter alone. So in the results in the December quarter and then guide, you know, we're not necessarily saying how much of the the increase is there. There's obviously more I would expect at this point that given that we see kind of half of the uh impact in the in the first of the 3 periods that we had outlined that we were going to do a little bit better than 40%, but we haven't Quantified that
Michael Hurlston: Does that change the end state in terms of how much capacity you can add to those existing fabs? And as you're talking about alternatives with your customers, does it really sort of focus on the existing fab, or are you assessing sort of new fabs? And then have a quick follow-up. Thank you. Yeah, Samik. Look, we're definitely doing better than expected. I think that we characterized in the last call that we'd see a 48% impact from our September quarter over the next three, so December, March, and June. What we're saying here is we probably got somewhere a little bit north of 20% in the December quarter alone. So in the results in the December quarter, in the guide, we're not necessarily saying how much of the increase is there. There's obviously more.
Michael Hurlston: Yeah, Samik. Look, we're definitely doing better than expected. I think that we characterized in the last call that we'd see a 48% impact from our September quarter over the next three, so December, March, and June. What we're saying here is we probably got somewhere a little bit north of 20% in the December quarter alone. So in the results in the December quarter, in the guide, we're not necessarily saying how much of the increase is there. There's obviously more.
Thank you, thanks for taking my questions. Michael, was it good to speak to you? Um, maybe I'll start off on the, um, Indian first fight capacity ramp, and just to clarify what you said in your prepared remarks, you pulled forward, or front-end loaded, some of that capacity increase that you planned. And we're going to see the effect of that in the March quarter guide, just to confirm that. And then, what does it mean for the end state in terms of the sort of 40-50% capacity increase that you had planned? Um, does that change the end state in terms of how much capacity you can add to those existing Fabs? And as you're talking about alternatives with your customers, does it really sort of focus on the existing Fab, or are you assessing sort of new Fabs? And then I have a quick follow-up. Thank you.
You know, what we are saying is now we have line of sight to more capacity increases grew the next 4 quarters, meaning probably the second half of 2026 calendar, 2026 and into early 2027 by virtue of the improvements that we continue to see in Saga Mara. So so that 40% is all Saga mahara. But we would now start to see some impact from our our Caswell facility in the United Kingdom and also contributions from our second family in Japan to cow.
Yeah, so, um, look, you know, we're definitely doing better, and the next fact that I think that we characterized in the last call is that we see a 40% impact from our September quarter over the next three—so December, March, and June.
So the the all of these things together say that we have line of sight to do a little bit better than we outlined on the last call and certainly extend the ramp more more appreciably than perhaps we said on the last call.
Michael Hurlston: I would expect at this point that given that we see kind of half of the impact in the first of the 3 periods that we'd outlined, that we were going to do a little bit better than 40%, but we haven't quantified that. What we are saying is now we have line of sight to more capacity increases through the next 4 quarters, meaning probably the second half of 2026, calendar 2026, and into early 2027, by virtue of the improvements that we continue to see in Sagamihara. So the 40% is all Sagamihara, but we would now start to see some impact from our Caswell facility in the United Kingdom and also contributions from our second fab in Japan, Takao.
Michael Hurlston: I would expect at this point that given that we see kind of half of the impact in the first of the 3 periods that we'd outlined, that we were going to do a little bit better than 40%, but we haven't quantified that. What we are saying is now we have line of sight to more capacity increases through the next 4 quarters, meaning probably the second half of 2026, calendar 2026, and into early 2027, by virtue of the improvements that we continue to see in Sagamihara. So the 40% is all Sagamihara, but we would now start to see some impact from our Caswell facility in the United Kingdom and also contributions from our second fab in Japan, Takao.
Uh what what we're saying here is? We probably got somewhere a little bit, north of 20% in the uh in the December quarter alone. So in the results in the December quarter and the guide, you know, we're not necessarily saying how much of the the increases there, there's obviously more I would expect at this point that given that we see kind of half of the, uh, impact in the, in the first of the 3 periods that we'd outlined that we were going to do a little bit better than 40%, but we haven't Quantified that
Got it, got it. Oh, and Michael. Um I mean just follow up following up on that any new Fabs being considered when you sort of talking to your customers and then for my second question on transceivers. I mean, you took a sizable step up here in the December quarter. I think you're taking another bit of a step up into March. You had previously indicated, you sort of want to
Maybe manage that business to 250 million a quarter run rate. I mean, is that still sort of how you're thinking about it or because the most of the demand is from 1 customer. Um, you sort of can scale further than that, any updated thoughts on that. Thank you.
Yeah. I mean, um, on the, on the transceiver question, I do think that it's going to be more difficult than we outlined in the last call to sort of cap that
Michael Hurlston: So all of these things together say that we have line of sight to do a little bit better than we outlined on the last call and certainly extend the ramp more appreciably than perhaps we said on the last call. Got it. Got it. And Michael, I mean, just following up on that, any new fabs being considered when you're sort of talking to your customers? And then for my second question on transceivers, I mean, you took a sizable step up here in the December quarter. I think you're taking another bit of a step up into March. You had previously indicated you sort of want to maybe manage that business to $250 million a quarter run rate. I mean, is that still sort of how you're thinking about it, or because most of the demand is from on-customer, you sort of can scale further than that?
Michael Hurlston: So all of these things together say that we have line of sight to do a little bit better than we outlined on the last call and certainly extend the ramp more appreciably than perhaps we said on the last call.
Samik Chatterjee [Managing Director: Got it. Got it. And Michael, I mean, just following up on that, any new fabs being considered when you're sort of talking to your customers? And then for my second question on transceivers, I mean, you took a sizable step up here in the December quarter. I think you're taking another bit of a step up into March. You had previously indicated you sort of want to maybe manage that business to $250 million a quarter run rate. I mean, is that still sort of how you're thinking about it, or because most of the demand is from on-customer, you sort of can scale further than that? Any updated thoughts on that? Thank you.
Kingdom and also contributions from our second fam in Japan to cow. So the, the all of these things together say that we have line of sight to do a little bit better than we outlined on the last call and certainly extend the ramp more more appreciably than perhaps we said on the last call.
To a billion dollars. We're definitely seeing a lot a lot of demand for our transceiver products. Not only from the primary customer, but from other customers as well. So suddenly, you know, as, as I said, we've turned a bit of a corner. Um, whooped is here, and I think he's done a super job with the transceiver business, improving March.
Virgins. Improving executions primarily improving our design time our our time to sample.
Got it, got it. Oh, and Michael. Um I mean just follow up following up on that any new Fabs being conserved when you start talking to your customers and then for my second question on transceivers. I mean, you took a sizable step up here in the December quarter. I think you're taking another bit of a step up into March. You had previously indicated, you sort of want to
Michael Hurlston: Any updated thoughts on that? Thank you. Yeah. I mean, on the transceiver question, I do think that it's going to be more difficult than we outlined in the last call to sort of cap that to $1 billion. We're definitely seeing a lot, a lot of demand for our transceiver products, not only from the primary customer, but from other customers as well. So suddenly, as I said, we've turned a bit of a corner. Wupen Yuen is here, and I think he's done a super job with the transceiver business, improving margins, improving executions, primarily improving our design time, our time to sample. And as I said, we've actually gotten to the front of the pack as a result of that. So I feel a lot better about the transceiver business. That being said, still a margin headwind, right?
And as I said, we've actually got into the front of the pack as a result of that. So I feel a lot better about the transceiver business. That being said, still a margin headwind, right? So, no change from where we are before a little bit less of a margin headwind because we've made these improvements, but still a margin headwind. Uh, I think, however, it will be a challenge, we are seeing appreciable growth.
Maybe manage that business to a $250 million a quarter run rate. I mean, is that still sort of how you're thinking about it, or because most of the demand is from one customer, you sort of can scale for those then? Any updated thoughts on that? Thank you.
Michael Hurlston: Yeah. I mean, on the transceiver question, I do think that it's going to be more difficult than we outlined in the last call to sort of cap that to $1 billion. We're definitely seeing a lot, a lot of demand for our transceiver products, not only from the primary customer, but from other customers as well. So suddenly, as I said, we've turned a bit of a corner. Wupen Yuen is here, and I think he's done a super job with the transceiver business, improving margins, improving executions, primarily improving our design time, our time to sample. And as I said, we've actually gotten to the front of the pack as a result of that. So I feel a lot better about the transceiver business. That being said, still a margin headwind, right?
And see your products.
Wage is here. I think we can manage the portfolio.
Yeah, I mean, um, on the, on the transceiver question, I do think that it's going to be more difficult than we outlined in the last call to sort of cap that.
To a billion dollars. We're definitely seeing a lot a lot of demand for our transceiver products. Not only from the primary customer, but from other customers as well. So suddenly, you know, as, as I said, we've turned a bit of a corner. Um, whooped is here, and I think he's done a super job with the transceiver business. Improving margins, improving. Executions primarily improving our design time, our our time to sample,
To increase in Gross, margins and increasing operating margins in the face of a business, that might be greater than a billion dollars. Am I wrong? Yeah. No, that's fair. I mean, I think when we made the comments about 250 million dollars, a quarter or a billion dollars that Michael alluded to, uh, our thinking on the rest of the business probably wasn't as large as how we're thinking about it today. Uh, certainly OCS CPO, the multi hundred million dollar, uh, order that Mike Michael talked about in his prepared remarks. All of those things are contributing to a larger pie for momentum and so as part of
Michael Hurlston: So no change from where we are before, a little bit less of a margin headwind because we've made these improvements, but still a margin headwind. I think, however, it will be a challenge. We are seeing appreciable growth in the demand of our transceiver products. Wajid is here. I think we can manage the portfolio to increasing gross margins and increasing operating margins in the face of a business that might be greater than $1 billion. Am I wrong? Yeah, no, that's fair. I mean, I think when we made the comments about $250 million a quarter or $1 billion that Michael alluded to, our thinking on the rest of the business probably wasn't as large as how we're thinking about it today.
Michael Hurlston: So no change from where we are before, a little bit less of a margin headwind because we've made these improvements, but still a margin headwind. I think, however, it will be a challenge. We are seeing appreciable growth in the demand of our transceiver products. Wajid is here. I think we can manage the portfolio to increasing gross margins and increasing operating margins in the face of a business that might be greater than $1 billion. Am I wrong?
The uh our operating margin profile as revenues grow. So um, you know, the fact that the rest of the business business is growing faster than we expected allows us to um,
and as I said, we've actually got into the front of the pack as a result of that. So I feel a lot better about the transceiver business. That being said, still a margin headwind, right? So, no change from where we are before a little bit less of a margin headwind because we've made these improvements, but still a margin headwind. Uh, I think, however, it will be a challenge, we are seeing appreciable growth.
In the demand of our transceiver products, wage is here. I think we can manage the portfolio.
Wajid Ali: Yeah, no, that's fair. I mean, I think when we made the comments about $250 million a quarter or $1 billion that Michael alluded to, our thinking on the rest of the business probably wasn't as large as how we're thinking about it today. Certainly, OCS, CPO, the $multi-hundred-million-dollar order that Michael talked about in his prepared remarks, all of those things are contributing to a larger pie for Lumentum. And so as part of our operating margin profile is revenue growth. So the fact that the rest of the business is growing faster than we expected allows us to grow the transceiver business. And then because 1.6T margins are significantly better than 800G, that's also helping us say yes to more orders that are coming in. And Michael's right. They're coming in substantially higher than we had expected.
Uh, to grow the transceiver business. And then you know, because 1.6 team margins uh are significantly better than 800 G. Uh, that's also helping us uh, you know, say yes to more orders that are coming in uh, and and Michael's, right? They're coming in substantially higher than we had expected Kathy. What was Sonic's first part of the question? Okay yeah, sonic I mean to that question. Yes that is an active investigation where we're certainly looking at
Michael Hurlston: Certainly, OCS, CPO, the $multi-hundred-million-dollar order that Michael talked about in his prepared remarks, all of those things are contributing to a larger pie for Lumentum. And so as part of our operating margin profile is revenue growth. So the fact that the rest of the business is growing faster than we expected allows us to grow the transceiver business. And then because 1.6T margins are significantly better than 800G, that's also helping us say yes to more orders that are coming in. And Michael's right. They're coming in substantially higher than we had expected. Kathy, what was Samik's first part of the question? New fabs. New fabs. Okay. Yeah, Samik, I mean, to that question, yes, that is an active investigation.
To increase in gross margins and increasing operating margins in the face of a business, that might be greater than a billion dollars. Am I wrong? Yeah. No, that's fair. I mean, I think when we made the comments about $250 million a quarter or $1 billion that Michael alluded to, uh, our thinking on the rest of the business probably wasn't as large as how we're thinking about it today. Uh, certainly.
How we can bring on more capacity, whether it be creatively in the current Fabs that we have or bringing on new new Fab capacity, uh, by, you know acquisition or or, or something of that nature. So it's an active discussion of the company, um, you know, nothing to talk about at this particular point, but it is certainly something that's top of mind for us.
OCS CPO, the multi hundred million dollar, uh, order that Mike Michael talked about in his prepared remarks. All of those things are contributing to a larger pie for lamentum and so as part of
Thank you. Thanks for taking my questions. Thanks so much.
And your next question comes from Ryan Koontz of medium and Co your line is open. Please go ahead.
our operating margin profile as revenues grow. So, um, you know, the fact that the rest of the business is growing faster than we expected allows us to, um,
Michael Hurlston: Kathy, what was Samik's first part of the question? New fabs.
Uh, to grow the transceiver business. And then, you know, because 1.16 margins, uh, are significantly better than 800G, uh, that's also helping us, uh, you know, say yes to more orders that are coming in, uh, and Michael's right—they're coming in substantially higher than we had expected.
Kathy Ta: New fabs.
Michael Hurlston: Okay. Yeah, Samik, I mean, to that question, yes, that is an active investigation. We're certainly looking at how we can bring on more capacity, whether it be creatively in the current fabs that we have or bringing on new fab capacity by acquisition or something of that nature. So it's an active discussion, the company. Nothing to talk about at this particular point, but it is certainly something that's top of mind for us.
Great. Thank you. Um, I want to double click on the transceiver Market, if we could, and the and the transition to 1.16 T, obviously, some great progress at 800 here. Um, is that primarily being driven by emails today, how do you see the Readiness of cipo at 1.6t being prepared and and then what are your kind of derivatives? Uh, you know, uh laser supplier opportunities, how are they stacking up overall for the 1.6 C transition. Thank you.
Michael Hurlston: We're certainly looking at how we can bring on more capacity, whether it be creatively in the current fabs that we have or bringing on new fab capacity by acquisition or something of that nature. So it's an active discussion, the company. Nothing to talk about at this particular point, but it is certainly something that's top of mind for us. Thank you. Thanks for taking my questions. Thanks, Samik. And your next question comes from Ryan Koontz of Needham & Co. Your line is open. Please go ahead. Great. Thank you. I want to double-click on the transceiver market if we could and the transition to 1.6T. Obviously, some great progress at 800G here. Is that primarily being driven by EMLs today? How do you see the readiness of SiPh at 1.6T being prepared? And then what are your kind of derivative laser supplier opportunities?
A little bit to the, um, the the laser part of the market and then maybe throw the ball to, to woo pack because it's 2 separate things. And certainly for our business, the transceivers. As we've characterized a couple of times. Our transceivers are mostly silicon photonics. Uh, but what we're seeing right now from our customers is, is
Samik Chatterjee [Managing Director: Thank you. Thanks for taking my questions.
Kathy, what was Sonic's? First part of the question. Okay. Yeah, sonic I mean to that question. Yes that is an active investigation. We're certainly looking at how we can bring on more capacity, whether it be creatively in the current Fabs that we have or bringing on new new Fab capacity, uh, by, you know, acquisition or or, or something of that nature. So it's an active discussion, the company, um, you know, nothing to talk about at this particular point, but it is certainly something that top of mind for us,
Kathy Ta: Thanks, Samik.
Operator: And your next question comes from Ryan Koontz of Needham & Co. Your line is open. Please go ahead.
Thank you. Thanks for taking my questions. Thank
Ryan Koontz [Senior Analyst: Great. Thank you. I want to double-click on the transceiver market if we could and the transition to 1.6T. Obviously, some great progress at 800G here. Is that primarily being driven by EMLs today? How do you see the readiness of SiPh at 1.6T being prepared? And then what are your kind of derivative laser supplier opportunities? How are they stacking up overall for the 1.6T transition? Thank you.
and your next question comes from Ryan Koontz of medium and Co your line is open. Please go ahead.
Michael Hurlston: How are they stacking up overall for the 1.6T transition? Thank you. Yeah, Ryan. I mean, let me talk a little bit to the laser part of the market and then maybe throw the ball to Wupen Yuen because it's two separate things. And certainly for our business, the transceivers, as we've characterized a couple of times, our transceivers are mostly silicon photonics. But what we're seeing right now from our customers is a strong EML demand. Most of the initial transceivers that are going to 1.6T are based on EMLs, and that's good. Our 200-gig lane speed, as we said, is actually doing a little bit better than we expected. I think on the last call, we had said that the 5% revenue, 5% of mix would be this quarter. It was a quarter earlier than we'd expected.
Michael Hurlston: Yeah, Ryan. I mean, let me talk a little bit to the laser part of the market and then maybe throw the ball to Wupen Yuen because it's two separate things. And certainly for our business, the transceivers, as we've characterized a couple of times, our transceivers are mostly silicon photonics. But what we're seeing right now from our customers is a strong EML demand. Most of the initial transceivers that are going to 1.6T are based on EMLs, and that's good. Our 200-gig lane speed, as we said, is actually doing a little bit better than we expected. I think on the last call, we had said that the 5% revenue, 5% of mix would be this quarter. It was a quarter earlier than we'd expected.
Great. Thank you. Um, I want to double click on the transceiver Market. If we could, and the and the transition to 1.6 T. Obviously, some great progress at 800 here. Um, is that primarily being driven by emails today, how do you see the Readiness of scifo at 1.6 T being prepared? And and then what are your kind of derivatives? Uh you know, uh laser supplier opportunities, how are they stacking up overall for the 1.60 transition? Thank you.
Strong EML, demand. Most of the initial transceivers that are going to 1.6 are based on emls and that's good. Um, our 200 gig lane speed as we, as we said is, is actually doing a little bit better than we expected. I think, in the last call, we had said that the 5% revenue of 5% a mix would be this quarter. It was a quarter earlier than we'd expected and that's primarily because 1.6t is a coming on, I think faster than we initially anticipated. Uh, and that is heavily being driven by 200 gig emls. Uh, that being said, I still think, you know, consistent with what we said over the past. We would expect silicon photonics to be the majority of the transceiver shipments in what at the 1.6 node. Uh, we, we think the numbers are so large, you know, based on what we're seeing in terms of the demand,
From our customers that are EML shipments. Even in the face of a mixed ship toward silicon photonics, the absolute number of emls will go up for us and rather appreciably. Um, so we feel really, really good about the way the market is shaping up our lead on emls is, you know, Second To None. We're introducing 200 gig, differential emls. Now to give us another leg up in that market. So we feel pretty good about the way that setting up Woolen on the
Try and see where side you want to talk about our transceivers and and how we're thinking about 1.16.
Michael Hurlston: And that's primarily because 1.6T is coming on, I think, faster than we initially anticipated. And that is heavily being driven by 200-gig EMLs. That being said, I still think, consistent with what we said over the past, we would expect silicon photonics to be the majority of the transceiver shipments at the 1.6T node. We think the numbers are so large based on what we're seeing in terms of the demand from our customers that our EML shipments, even in the face of a mix shift toward silicon photonics, the absolute number of EMLs will go up for us and rather appreciably. So we feel really, really good about the way the market is shaping up. Our lead on EMLs is second to none. We're introducing 200-gig differential EMLs now to give us another leg up in that market.
Michael Hurlston: And that's primarily because 1.6T is coming on, I think, faster than we initially anticipated. And that is heavily being driven by 200-gig EMLs. That being said, I still think, consistent with what we said over the past, we would expect silicon photonics to be the majority of the transceiver shipments at the 1.6T node. We think the numbers are so large based on what we're seeing in terms of the demand from our customers that our EML shipments, even in the face of a mix shift toward silicon photonics, the absolute number of EMLs will go up for us and rather appreciably. So we feel really, really good about the way the market is shaping up. Our lead on EMLs is second to none. We're introducing 200-gig differential EMLs now to give us another leg up in that market.
The ball to, to woo pack. Is it 2 separate things, and certainly for our business, the transceivers. As we've characterized a couple of times our transceivers are mostly silicon photonics. But what we're seeing right now from our customers is is a strong EML demand. Most of the initial transceivers that are going to 1.6 are based on emls and that's good. Um, our 200 gig lane speed as we, as we said is, is actually doing a little bit better than we expected. I think, in the last call, we had said that the 5% revenue of 5% a mix would be this quarter. It was a quarter earlier than we'd expected and that's primarily because 1.6t is a coming on, I think faster than we initially anticipated. Uh, and that is heavily being driven by 200 gig emls. Uh, that being said, I still think, you know, consistent with what we said over the past, we would expect silicon photonics,
To be the majority of the transceiver. Shipments in what? At the 1.6 node? Uh, we, we think the numbers are so large, you know, based on what we're seeing in terms of the demand from our customers that are EML shipments, even in the face of a mix shift toward silicon photonics, the absolute number of emls will go up for us and rather appreciably. Um, so we feel really, really good about the way the market is shaped.
Architectures. And then the single topics starting to take more share on the kind of parallel fiber applications. We see these kind of the hand in hand grow as a similar page. And that's why, you know, Michael is talking about EML continue to grow despite the facts. Uh, single comments will take up more share, uh in 1.60 generation. But overall as a as a, what you talked about, we see 1.60 generation of products, having a higher growth margin and the module level. Uh and then we of course will benefit the continuously on the, on the, on the laser fronts, uh, each generation as well.
Michael Hurlston: So we feel pretty good about the way that's setting up. Wupen Yuen, on the transceiver side, you want to talk about our transceivers and how we're thinking about 1.6T? Yeah, thanks, Michael. So on the transceiver 1.6T products, there's still really, by and large, two groups of applications. One group requires WDM-based solutions. One group requires basically parallel fiber-based solutions. And therefore, you will see that EML is pretty dominant in the WDM-based architectures. And then the silicon photonics starting to take more share on the kind of parallel fiber applications. We see these kind of hand-in-hand grow at a similar pace. And that's why Michael was talking about EML will continue to grow despite the fact silicon photonics will take up more share in 1.6T generation. But overall, as what you talk about, we see 1.6T generation of products having a higher gross margin at the module level.
Michael Hurlston: So we feel pretty good about the way that's setting up. Wupen Yuen, on the transceiver side, you want to talk about our transceivers and how we're thinking about 1.6T?
Wupen Yuen [President: Yeah, thanks, Michael. So on the transceiver 1.6T products, there's still really, by and large, two groups of applications. One group requires WDM-based solutions. One group requires basically parallel fiber-based solutions. And therefore, you will see that EML is pretty dominant in the WDM-based architectures. And then the silicon photonics starting to take more share on the kind of parallel fiber applications. We see these kind of hand-in-hand grow at a similar pace. And that's why Michael was talking about EML will continue to grow despite the fact silicon photonics will take up more share in 1.6T generation. But overall, as what you talk about, we see 1.6T generation of products having a higher gross margin at the module level. Then, of course, we'll benefit continuously on the laser front in this generation as well.
Great. And any update on your plans on, you know, uh vertically integrating your own, your own CW. Lasers at 1.6. T. Is that still still the plan record still the plan? Yeah, we we had shipped, uh, you know, CW lasers to the external market for the first time Ryan.
Shaping up our lead on EMLs is, you know, second to none. We're introducing 200-gig differential EMLs now to give us another leg up in that market, so we feel pretty good about the way that's setting up. We'll put on the transceiver side. You want to talk about our transceivers and how we're thinking about 1.16?
Uh, last quarter. Uh, those shipments continue to sort of help us develop and improve our CW, Laser Technology, I would say our timeline is pushed out a bit. Uh, in terms of that introduction, we were talking about introducing that our, our own CW lasers in our own transceivers kind of
Q2 is and I think it's probably pushed out to late Q2 early. Q3 it's probably been a 2 to 3 month. Push out relative to that introduction but still very much part of the plan to continue to increase the gross margin in our transceiver business,
Michael Hurlston: Then, of course, we'll benefit continuously on the laser front in this generation as well. Great. Any update on your plans on vertically integrating your own CW lasers at 1.6T? Is that still the plan, right? Still the plan. Yeah, we had shipped CW lasers to the external market for the first time, Ryan, last quarter. Those shipments continue to sort of help us develop and improve our CW laser technology. I would say our timeline has pushed out a bit in terms of that introduction. We were talking about introducing our own CW lasers in our own transceivers kind of Q2-ish. I think it's probably pushed out to late Q2, early Q3. It's probably been a 2 to 3-month push out relative to that introduction, but still very much part of the plan to continue to increase the gross margin in our transceiver business. Great. Thanks.
Ryan Koontz [Senior Analyst: Great. Any update on your plans on vertically integrating your own CW lasers at 1.6T? Is that still the plan, right?
Yeah that's Michael. So you know on the trans people who is 16 products there's still really by and large 2 groups of applications. 1 group requires wdm based uh Solutions 1 group requires basically a parallel fiber based Solutions and therefore you will see that EML is uh pretty dominant in the wdm based architectures and then the single topics starting to take more share on the kind of parallel fiber applications. We see these kind of the hand in hand grow at a similar pace. And that's why, you know, Michael is talking about EML will continue to grow despite the facts. Uh, single comments will take up more share, uh, in 1, more specific generation. But overall, as a as a, what you talked about, we see 1.60 generation of products, having a higher growth module and the module level. Uh, and then we, of course, we benefited continuously on the, on the, on the laser fronts, uh, each generation as well.
Great. Thanks. And maybe just a quick follow-up on on the laser opportunity in CPO, do you view that competitive landscape any different than you view? The transceiver, laser Market are there nuances there that investors should be aware of relative to bigger barriers to entry, or your capabilities relative to to, to the overall market for CPO. Yeah, I mean, look, I I I think on
Michael Hurlston: Still the plan. Yeah, we had shipped CW lasers to the external market for the first time, Ryan, last quarter. Those shipments continue to sort of help us develop and improve our CW laser technology. I would say our timeline has pushed out a bit in terms of that introduction. We were talking about introducing our own CW lasers in our own transceivers kind of Q2-ish. I think it's probably pushed out to late Q2, early Q3. It's probably been a 2 to 3-month push out relative to that introduction, but still very much part of the plan to continue to increase the gross margin in our transceiver business.
Right? Any update on your plans on, you know, uh, vertically integrating your own CW lasers at 1.6? Is that still the plan? Still the plan? Yeah, we, uh, we had shipped.
Uh, you know, CW lasers to the external market for the first time, Ryan. Uh, last quarter, those shipments continue to sort of help us develop and improve our CW laser technology. I would say our timeline is pushed out a bit, uh, in terms of that introduction. We were talking about introducing our own CW lasers in our own transceivers, kind of—
Michael Hurlston: Great. Thanks. Maybe just a quick follow-up on the laser opportunity in CPO. Do you view that competitive landscape any different than you view the transceiver laser market? Are there nuances there that investors should be aware of relative to bigger barriers to entry or your capabilities relative to the overall market for CPO?
Q2 is, and I think it's probably pushed out to late Q2, early Q3. It's probably been a two to three-month push out relative to that introduction, but still very much part of the plan to continue to increase the gross margin in our transceiver business,
Michael Hurlston: Maybe just a quick follow-up on the laser opportunity in CPO. Do you view that competitive landscape any different than you view the transceiver laser market? Are there nuances there that investors should be aware of relative to bigger barriers to entry or your capabilities relative to the overall market for CPO? Yeah. I mean, look, I think on CPO, we feel really good about our position. I mean, certainly for EMLs, we also feel very good about our position, but I think we feel even better about our position on high-powered lasers going into CPO. Remember a couple of things, right? One, the power level that needs to be delivered here, 400 milliwatts, is not something that many people can do. But perhaps more importantly, remember, you and I have talked about this, that the technology has been proven out in our subsea applications.
A really good about our position. I mean, certainly for emls uh we also feel very good about our position but I think we feel even better about our position on high powered, lasers going into CPL, remember a couple of things, right? 1 the power level that that needs to be delivered here, 400. Ms. Is not something that many people can do. Perhaps more importantly. Remember, when you and I have talked about this that the technology has been proven out in our subk applications 1 of the big issues with CPO, has always been reliability and I think now we we can gain real customer confidence I mean it is it is much more broad-based. I think that people think in terms of customer engagement now on CPO and that is primarily
Driven by the reliability that we're able to prove out.
Correct. Thanks for the commentary.
Thanks Ryan. Good question. Thanks Ryan. And your next question comes from VJ Resh of Bank of America.
Michael Hurlston: Yeah. I mean, look, I think on CPO, we feel really good about our position. I mean, certainly for EMLs, we also feel very good about our position, but I think we feel even better about our position on high-powered lasers going into CPO. Remember a couple of things, right? One, the power level that needs to be delivered here, 400 milliwatts, is not something that many people can do. But perhaps more importantly, remember, you and I have talked about this, that the technology has been proven out in our subsea applications.
Your line is open, please go ahead.
Great. Thanks. And maybe just a quick follow-up on on the laser opportunity in CPO, do you view that competitive landscape any different than you view? The transceiver. Laser Market are there nuances there that investors should be aware of relative to bigger Bears entry, or your capabilities relative to to, to the overall market for CPO. Yeah, I mean look, I I think on C
Yeah, hi thanks. Um, Michael Rajiv and Kathy. Uh this is via from Mizzou. Um, congratulations on a great, fantastic set of numbers here. Uh just a quick question. I know you on CPO, you mentioned uh another marketing million uh, might be hundred million dollar or the uh, and um, you know also your your own CPU or ramping. Well, can you size what the CPU quarterly run rate would be with the with the new multi-million dollar multi hundred million dollar order and also I believe CPO for scale up as you mentioned. So,
Michael Hurlston: One of the big issues with CPO has always been reliability. I think now we've gained real customer confidence. I mean, it is much more broad-based, I think, than people think in terms of customer engagement now on CPO. That is primarily driven by the reliability that we're able to prove out. Terrific. Thanks for the commentary. Thanks, Ryan. Good question. Thanks, Ryan. And your next question comes from Vijay Rakesh of Bank of America. Your line is open. Please go ahead. Yeah, hi. Thanks, Michael, Wajid, and Kathy. This is Vijay from Mizuho. Congratulations on a great, fantastic set of numbers here. Just a quick question. I know you're on CPO. You mentioned another multi-hundred-million-dollar order there. Also your own CPO ramping well. Can you size what the CPO quarterly run rate would be with a new multi-million-dollar, multi-hundred-million-dollar order?
Michael Hurlston: One of the big issues with CPO has always been reliability. I think now we've gained real customer confidence. I mean, it is much more broad-based, I think, than people think in terms of customer engagement now on CPO. That is primarily driven by the reliability that we're able to prove out.
Ryan Koontz [Senior Analyst: Terrific. Thanks for the commentary.
Out.
Michael Hurlston: Thanks, Ryan. Good question.
Perfect. Thanks for the commentary.
Kathy Ta: Thanks, Ryan.
Operator: And your next question comes from Vijay Rakesh of Bank of America. Your line is open. Please go ahead.
Yeah, I mean what what we're talking about now is mostly scale out, right? So what we've said in the past is that we would expect, you know, somewhere around 50 million dollars in the fourth calendar quarter, perhaps more. But we're you know, we're kind of pegging it there and then this multi hundred million dollar order. While we're not prepared, to give the size really is clicking in in the first half of 2027.
Thanks, Ryan. Good question. Thanks, Ryan. And your next question comes from BJ Reesh of Bank of America.
Vijay Rakesh: Yeah, hi. Thanks, Michael, Wajid, and Kathy. This is Vijay from Mizuho. Congratulations on a great, fantastic set of numbers here. Just a quick question. I know you're on CPO. You mentioned another multi-hundred-million-dollar order there. Also your own CPO ramping well. Can you size what the CPO quarterly run rate would be with a new multi-million-dollar, multi-hundred-million-dollar order? Also, I believe, CPO for scale-up, as you mentioned, so.
Your line is open. Please go ahead.
Michael Hurlston: Also, I believe, CPO for scale-up, as you mentioned, so. Yeah, I mean, what we're talking about now is mostly scale out, right? So what we've said in the past is that we would expect somewhere around $50 million in the fourth calendar quarter, perhaps more, but we're kind of pegging it there. And then this multi-hundred million dollar order, while we're not prepared to give the size, really is kicking in in the first half of 2027. So it kind of gives you a rough feel. This is definitely ramping. It's ramping across not just one customer, multiple customers. The strain on our fab is high, right? We're very much sold out in our high-powered laser fab. And this is one of actually Wupen Yuen's primary tasks is to figure out how we can bring more capacity online much more quickly.
Michael Hurlston: Yeah, I mean, what we're talking about now is mostly scale out, right? So what we've said in the past is that we would expect somewhere around $50 million in the fourth calendar quarter, perhaps more, but we're kind of pegging it there. And then this multi-hundred million dollar order, while we're not prepared to give the size, really is kicking in in the first half of 2027. So it kind of gives you a rough feel. This is definitely ramping. It's ramping across not just one customer, multiple customers. The strain on our fab is high, right? We're very much sold out in our high-powered laser fab. And this is one of actually Wupen Yuen's primary tasks is to figure out how we can bring more capacity online much more quickly.
Yeah, hi thanks. Um, Michael Rajiv and Kathy, uh, this is Vijay from Mizzou. Um, congratulations on a great, fantastic set of numbers here. Uh, just a quick question. I know you on CPO, you mentioned another Market million uh Market 100 million or the uh and um you know also your your own CPU ramping. Well, can you size what the CPU quarterly run rate would be with the with the new multi-million dollar multi hundred million dollar order and also, I believe it's CPO for scale up as you mentioned. So,
So it kind of gives you a rough feel it's this is definitely ramping, it's ramping across, not just 1 customer multiple customers. Uh The Strain on our Fab is high, right. We're very much sold out in our high-powered laser Fab. And uh this is 1 of actually woop pens. Primary tasks is to figure out how we can bring more capacity, online, much more quickly. I mean, this ramp is hitting us, probably faster than we forecast, even last quarter. Uh, so we have a lot of confidence in the ramp. We have a lot of confidence in, in, in the demand and backlog that we see, now it's going to be really a matter of servicing that.
Yeah, I mean, what we're talking about now is mostly scale-out, right? So, what we've said in the past is that we would expect, you know, somewhere around $50 million in the fourth calendar quarter.
Perhaps more. But we're, you know, we're kind of pegging it there and then this multi hundred million dollar order. While we're not prepared, to give the size really is clicking in in the first half of 2027.
Capacity is sold out. You're adding um, some 40% capacity, more front-end loaded but as you look through, uh, into 2627 given this very strong ramp on EML, um, you know, energy EML and also um, you know what you're seeing. Um, um on the transceiver side, would you expect um, pricing to be a Tailwind through most of this year and into next year too. Thanks.
Michael Hurlston: I mean, this ramp is hitting us probably faster than we forecast even last quarter. So we have a lot of confidence in the ramp. We have a lot of confidence in the demand and backlog that we see. Now it's going to be really a matter of servicing that. Got it. And then on the indium phosphide side, I know you said a lot of the capacity is sold out. You're adding some 40% capacity more front-end loaded. But as you look through into 2026, 2027, given this very strong ramp on EML, 200G EML, and also what you're seeing on the transceiver side, would you expect pricing to be a tailwind through most of this year and into next year too? Thanks. Yeah, I mean, look, we really are sold out. I mean, I think that we've talked about sort of trailing demand.
Michael Hurlston: I mean, this ramp is hitting us probably faster than we forecast even last quarter. So we have a lot of confidence in the ramp. We have a lot of confidence in the demand and backlog that we see. Now it's going to be really a matter of servicing that.
Vijay Rakesh: Got it. And then on the indium phosphide side, I know you said a lot of the capacity is sold out. You're adding some 40% capacity more front-end loaded. But as you look through into 2026, 2027, given this very strong ramp on EML, 200G EML, and also what you're seeing on the transceiver side, would you expect pricing to be a tailwind through most of this year and into next year too? Thanks.
Yeah, I mean, look, uh, we really are are, are, are sold out. I mean, I think that we're, we're, we've talked about sort of trailing demand even as we add capacity. It seems that the demand Supply imbalance increases. Uh, we talked about that last quarter and I'd say again, even as we've added this 20% additional capacity, the demand Supply imbalance is increased and you know I'm going to have a woo pen comment. I think his team is spending a tremendous amount of time. Trying to squeeze product into our allocation bucket. It's it's really like a jigsaw puzzle for these guys to figure it out.
So, it kind of gives you a rough feel, and this is definitely ramping. It's ramping across not just one customer, but multiple customers. Uh, the strain on our fab is high, right? We're very much sold out in our high-powered laser fab. And, uh, this is one of actually Woo Pen's primary tasks—to figure out how we can bring more capacity online much more quickly. I mean, this ramp is hitting us probably faster than we forecast, even last quarter. Uh, so we have a lot of confidence in the ramp. We have a lot of confidence in, in, in the demand and backlog that we see. Now it's going to be really a matter of servicing that.
The good news for us is that we'd expect now to increase Supply, uh, throughout the calendar year. We've obviously sort of indicated that we have another 20% to go over the next couple of quarters that probably is going to come up a bit, just given our current trajectory. And now what we're saying is we have line of sight for additional capacity in the last 2, quarters of the calendar,
Michael Hurlston: Yeah, I mean, look, we really are sold out. I mean, I think that we've talked about sort of trailing demand.
Got it, and then, um, on the Indian fast fight side, I know you said a lot of the capacity is sold out. You're adding some 40% capacity, more front-end loaded, but as you look through into '26-'27, given this very strong ramp on EML, um, Neutron of GML, and also, um, in what you're seeing, um, um, on the transceiver side, would you expect, uh, pricing to be a tailwind through most of this year and into next year too? Thanks.
Michael Hurlston: Even as we add capacity, it seems that the demand-supply imbalance increases. We talked about that last quarter. And I'd say again, even as we've added this 20% additional capacity, the demand-supply imbalance has increased. And I'm going to have Wupen Yuen comment. I think his team is spending a tremendous amount of time trying to squeeze product into our allocation bucket. It's really like a jigsaw puzzle for these guys to figure it out. The good news for us is that we'd expect now to increase supply throughout the calendar year. We've obviously sort of indicated that we have another 20% to go over the next couple of quarters. That probably is going to come up a bit just given our current trajectory. And now what we're saying is we have line of sight for additional capacity in the last two quarters of the calendar year.
Michael Hurlston: Even as we add capacity, it seems that the demand-supply imbalance increases. We talked about that last quarter. And I'd say again, even as we've added this 20% additional capacity, the demand-supply imbalance has increased. And I'm going to have Wupen Yuen comment. I think his team is spending a tremendous amount of time trying to squeeze product into our allocation bucket. It's really like a jigsaw puzzle for these guys to figure it out. The good news for us is that we'd expect now to increase supply throughout the calendar year. We've obviously sort of indicated that we have another 20% to go over the next couple of quarters. That probably is going to come up a bit just given our current trajectory. And now what we're saying is we have line of sight for additional capacity in the last two quarters of the calendar year.
Year in that, we obviously have this mixed issue where our 200 gig lasers are a big portion of the mix. Today's small 5%. We've said that by the end of the calendar year, we'd expect to be 25% of our mix to be 200 gig. And you can see in the prepared remarks roughly 2 to 1 on the pricing. So our ASP will increase. Margins will increase in that balance as we get more and more 200 gig, the really good news for story for us. I think are these differential 200 gigs which offers significant price. Uh, Power reductions for customers, that isn't yet another uh Tailwind on ASP that we'd expect to see. And another big big enhancer on gross margin
Yeah, I mean look, uh we really are are are, are sold out. I mean, I think that we're, we've talked about sort of trailing demand even as we add capacity. It seems that the demand Supply imbalance increases. Uh, we talked about that last quarter and I'd say again, even as we've added this 20% additional capacity, the demand Supply imbalances increased and you know I'm going to have a woo pen comment. I think his team is spending a tremendous amount of time. Trying to squeeze product into our allocation bucket. It's it's really like a jigsaw puzzle for these guys to figure it out.
I mean, how are you thinking about it?
Michael Hurlston: In that, we obviously have this mix issue where our 200-gig lasers are a big portion of the mix. Today, small, 5%. We've said that by the end of the calendar year, we'd expect to be 25% of our mix to be 200 gig. And you can see in the prepared remarks, roughly 2 to 1 on the pricing. So our ASP will increase, margins will increase in that balance as we get more and more 200 gig. The really good news first story for us, I think, is the differential 200 gigs, which offers significant power reductions for customers. That is yet another tailwind on ASP that we'd expect to see and another big, big enhancer on gross margin. Wupen Yuen, I mean, how are you thinking about it? Yeah, thanks, Michael.
Michael Hurlston: In that, we obviously have this mix issue where our 200-gig lasers are a big portion of the mix. Today, small, 5%. We've said that by the end of the calendar year, we'd expect to be 25% of our mix to be 200 gig. And you can see in the prepared remarks, roughly 2 to 1 on the pricing. So our ASP will increase, margins will increase in that balance as we get more and more 200 gig. The really good news first story for us, I think, is the differential 200 gigs, which offers significant power reductions for customers. That is yet another tailwind on ASP that we'd expect to see and another big, big enhancer on gross margin. Wupen Yuen, I mean, how are you thinking about it?
Yeah, that's my goal. So yeah, your vision for the world Echo is described right in terms of capacity increase and uh I think all team continued to really drive the yield up and reduce the, the die size of the chips. For example, uh, definitely would have to squeeze every bit of the, the capacity output that we can get from our current files. Um, as Michael already pointed out, um, the, the demand Supply imbalance continue to, uh, to, uh, increase and therefore, we're doing everything we can, uh, trying to grow that uh, Supply base, um, and then continue to to drive the uh, the yield up. So all very good, but very challenging. Uh, we look forward to serving the market with a better better.
Relatives and more chips.
Got it. Thanks fantastic. Thanks uh Michael when and Cathy thank you. Thank you Vijay. Good speaking.
And your next question comes from Papa Sila of City.
Your line is open, please go ahead.
In that balance, as we get more and more 200G, the really good news for a story for us, I think, is these differential 200Gs, which offer significant price—uh, power reductions for customers. That is yet another, uh, tailwind on ASP that we'd expect to see, and another big, big enhancer on gross margin.
Wupen Yuen [President: Yeah, thanks, Michael. So yeah, in addition to what Michael described, right, in terms of capacity increase, and I think our team continue to really drive the yield up and reduce the die size of the chips, for example, definitely we're trying to squeeze every bit of the capacity output that we can get from our current fabs. As Michael already pointed out, the demand-supply imbalance continued to increase. And therefore, we're doing everything we can trying to grow that supply base and then continue to drive the yield up. So all very good, but very challenging. We look forward to serving the market with better chips and more chips.
I mean, how are you thinking about it?
Michael Hurlston: So yeah, in addition to what Michael described, right, in terms of capacity increase, and I think our team continue to really drive the yield up and reduce the die size of the chips, for example, definitely we're trying to squeeze every bit of the capacity output that we can get from our current fabs. As Michael already pointed out, the demand-supply imbalance continued to increase. And therefore, we're doing everything we can trying to grow that supply base and then continue to drive the yield up. So all very good, but very challenging. We look forward to serving the market with better chips and more chips. Got it. Thanks. Fantastic. Thanks, Michael, Wajid, Wupen Yuen, and Kathy. Thank you. Thank you, Vijay. Good speaking. Thanks. And your next question comes from Papa Sylla of City. Your line is open. Please go ahead. Thank you for taking my questions.
Thank you. Thank you for taking my questions and, uh, congrats on the impressive result. So, Michael, I guess for my first question, um, it is on visibility. I'm curious if you continue to see further visibility from your key AI customers on the EML front, I think, previously, you Quantified for us that the supply demand Gap has moved from 20% to 25 to 30%, um, has that Gap extended, um, and tied to that, it would be helpful to understand how has your longer term contract or commitment with customers changed. Now versus 1 to 2 years ago, our new commitment, for instance, kind of longer in duration. Are we able to add more price in versus before just any color?
Vijay Rakesh: Got it. Thanks. Fantastic. Thanks, Michael, Wajid, Wupen Yuen, and Kathy. Thank you.
Increase. And therefore, we're assuming everything we can, uh, trying to grow that, uh, supply base, um, and then continue to drive the, uh, the yield up. So all very good, but very challenging. Uh, we look forward to serving the market with better chips and more chips.
Yeah, papa look. First uh, I want to thank you for some of the insightful notes you've written over the last. Uh, last couple of weeks, we certainly appreciate the the diligence you're doing on the business.
Michael Hurlston: Thank you, Vijay. Good speaking.
Kathy Ta: Thanks.
Operator: And your next question comes from Papa Sylla of City. Your line is open. Please go ahead.
Got it. Thanks, fantastic. Thanks, uh, Michael, Wen, and Cathy, thank you. Thank you, Vijay. Good speaking.
And your next question comes from Papa Sila of Citi.
Your line is open. Please go ahead.
Papa Sylla [Vice President: Thank you for taking my questions. Congrats on the impressive result. So Michael, I guess for my first question, it is on visibility. I'm curious if you continue to see further visibility from your key AI customers on the EML front. I think previously, you quantified for us that the supply-demand gap has moved from 20% to 25% to 30%. Has that gap extended? And tied to that, it would be helpful to understand how has your longer-term contract or commitment with customers changed now versus one to two years ago? Are newer commitments, for instance, kind of longer in duration? Are we able to add more pricing versus before? Just any color.
Michael Hurlston: Congrats on the impressive result. So Michael, I guess for my first question, it is on visibility. I'm curious if you continue to see further visibility from your key AI customers on the EML front. I think previously, you quantified for us that the supply-demand gap has moved from 20% to 25% to 30%. Has that gap extended? And tied to that, it would be helpful to understand how has your longer-term contract or commitment with customers changed now versus one to two years ago? Are newer commitments, for instance, kind of longer in duration? Are we able to add more pricing versus before? Just any color. Yeah, Papa. Look, first, I want to thank you for some of the insightful notes you've written over the last couple of weeks. We certainly appreciate the diligence you're doing on the business.
Uh, you know, on on woo. Pen's team.
Um, with, with respect to the long-term agreements. I mean, frankly and I'll have logic comment. The company never had these long-term agreements. I mean, it was a very tactical business.
Michael Hurlston: Yeah, Papa. Look, first, I want to thank you for some of the insightful notes you've written over the last couple of weeks. We certainly appreciate the diligence you're doing on the business.
Thank you. Thank you for taking my questions and, uh, congrats on the impressive result. So, Michael, I guess for my first question, um, it is on visibility. I'm curious if you continue to see further availability from your key AI customers on the EML front. I think previously you quantified for us that the supply-demand gap has moved from 20% to 25 to 30%. Um, has that gap extended? And tied to that, it would be helpful to understand how your longer-term contract or commitment with customers has changed now versus 1 to 2 years ago. Are new commitments, for instance, kind of longer in duration? Are we able to add more price in versus before? Just any color?
Michael Hurlston: Number one, obviously, the supply-demand imbalance is still very much there. I would say that it's about the same this quarter as last quarter, even in the face of adding the 20% and what we anticipate in the March guide. If anything, it's incrementally up, but I'd still say it's roughly 25% to 30% off. We're undershipping our customers' demand by somewhere around 30%. It's a relatively big gap. And again, tremendous pressure on Wupen Yuen's team. With respect to the long-term agreements, I mean, frankly, and I'll have Wajid comment, the company never had these long-term agreements. I mean, it was a very tactical business until Wajid and I got involved in the business and started seeing there was a lot of opportunity to institute these long-term agreements. All of our capacity, just to be very clear, on EML is spoken for in these LTAs.
Michael Hurlston: Number one, obviously, the supply-demand imbalance is still very much there. I would say that it's about the same this quarter as last quarter, even in the face of adding the 20% and what we anticipate in the March guide. If anything, it's incrementally up, but I'd still say it's roughly 25% to 30% off. We're undershipping our customers' demand by somewhere around 30%. It's a relatively big gap. And again, tremendous pressure on Wupen Yuen's team. With respect to the long-term agreements, I mean, frankly, and I'll have Wajid comment, the company never had these long-term agreements. I mean, it was a very tactical business until Wajid and I got involved in the business and started seeing there was a lot of opportunity to institute these long-term agreements. All of our capacity, just to be very clear, on EML is spoken for in these LTAs.
Yeah, Papa, look. First, uh, I want to thank you for some of the insightful notes you've written over the last, uh, last couple of weeks. We certainly appreciate the diligence you're doing on the business.
Uh, until you know, Lodge and I got involved in the business and started seeing that, there was a lot of opportunity to Institute these long-term agreements. We all of our capacity just to be very clear on EML is is spoken for, in these LTA, we have very tight ltas, that run through the balance of calendar 2027 and even as we increase the capacity that that everything is spoken for. So we've projected out what we can do. Look, if we do better in capacity we might have a little more to sell but that is really spoken for. Um the we're really proud of the ltas that we were able to get it in place. And look, our customers were very happy.
Um, you know, number 1, obviously the supply and balanced Supply demand and balance is still very much there. I would say that it's about the same this quarter as last quarter, even in the face of adding the 20% and what we anticipated in the market guide, uh, if anything is incrementally up, but I'd still say it's roughly 25 to 30% off or 30. We're under shipping our customers Demand by somewhere around 30%. It's a, it's it's a relatively big gap. And again, tremendous pressure, uh, you know, on on woo, pens team.
Um, with respect to the long-term agreements— I mean, frankly, and I'll have Wajid comment— the company never had these long-term agreements. I mean, it was a very tactical business.
We are we do have pricing leeway in there? I mean, it, I think is as as, as conditions change, uh, why should blue pen? And I will continue to look at the pricing as you know, we've we've done a couple of step-ups and um, you know, our our, our products are just in high demand right across the board. So I think it gives us some some pricing latitude. Uh and and we'll certainly look at that. I mean, why did any comments from, you know? No, I mean I think you've captured it actually. The whole LTA process is actually helped us from a, from a pricing standpoint overall.
Michael Hurlston: We have very tight LTAs that run through the balance of calendar 2027. Even as we increase the capacity, everything is spoken for. So we've projected out what we can do. Look, if we do better in capacity, we might have a little more to sell, but that is really spoken for. We're really proud of the LTAs that we were able to get in place. And look, our customers were very happy. We do have pricing leeway in there. I mean, I think as conditions change, Wajid, Wupen Yuen, and I will continue to look at the pricing. As you know, we've done a couple of step-ups, and our products are just in high demand, right, across the board. So I think it gives us some pricing latitude, and we'll certainly look at that. I mean, Wajid, any comments from you on the LTAs?
Michael Hurlston: We have very tight LTAs that run through the balance of calendar 2027. Even as we increase the capacity, everything is spoken for. So we've projected out what we can do. Look, if we do better in capacity, we might have a little more to sell, but that is really spoken for. We're really proud of the LTAs that we were able to get in place. And look, our customers were very happy. We do have pricing leeway in there. I mean, I think as conditions change, Wajid, Wupen Yuen, and I will continue to look at the pricing. As you know, we've done a couple of step-ups, and our products are just in high demand, right, across the board. So I think it gives us some pricing latitude, and we'll certainly look at that. I mean, Wajid, any comments from you on the LTAs?
Uh, until, you know, Wajid and I got involved in the business and started seeing there was a lot of opportunity to institute these long-term agreements. We, all of our capacity—just to be very clear on EML—is spoken for in these LTAs. We have very tight LTAs that run through the balance of calendar 2027, and even as we—
Increase the capacity that—that everything is spoken for. So we've projected out what we can do. Look, if we do better in capacity, we might have a little more to sell, but that is really spoken for. Um, we're really proud of the LTAs that we were able to get in place. And look, our customers were very happy.
Because then there aren't those same type of quarterly negotiations uh for Price Downs, if anything prices are holding or they're increasing uh, for what customers want. And what we're actually seeing is is that customers are coming back and asking for even more, uh, capacity, uh, and, and more product than we had agreed to in the LTA. And, uh, and that's actually allowing us to uh, have incremental pricing discussions, uh, around those incremental units that they're asking for. Um, so the, the ltas are serving as a nice Baseline. And if customers want more than that, then it allows for a discussion with who pens team and our sales team to ask, for incremental, uh, pricing optimization. So, it's worked out very well for us from a process standpoint. And for those customers that are not willing to sign an LTA, uh, our our, our our having, you know, concerns about their their, uh, continuity of Supply. Because we are allocating to those partners
Michael Hurlston: No, I mean, I think you've captured it. Actually, the whole LTA process has actually helped us from a pricing standpoint overall because then there aren't those same type of quarterly negotiations for price downs. If anything, prices are holding or they're increasing for what customers want. And what we're actually seeing is that customers are coming back and asking for even more capacity and more product than we had agreed to in the LTA. And that's actually allowing us to have incremental pricing discussions around those incremental units that they're asking for. So the LTAs are serving as a nice baseline. And if customers want more than that, then it allows for a discussion with Wupen Yuen's team and our sales team to ask for incremental pricing optimizations. So it's worked out very well for us from a process standpoint.
Wajid Ali: No, I mean, I think you've captured it. Actually, the whole LTA process has actually helped us from a pricing standpoint overall because then there aren't those same type of quarterly negotiations for price downs. If anything, prices are holding or they're increasing for what customers want. And what we're actually seeing is that customers are coming back and asking for even more capacity and more product than we had agreed to in the LTA. And that's actually allowing us to have incremental pricing discussions around those incremental units that they're asking for. So the LTAs are serving as a nice baseline. And if customers want more than that, then it allows for a discussion with Wupen Yuen's team and our sales team to ask for incremental pricing optimizations. So it's worked out very well for us from a process standpoint.
That are committing to us first and then whatever's left over. Then we can talk to those that are not
Got it. Thank you. That's that's very helpful and thank you, Michael, for the, for the feedback just quickly on the follow-up and apologies if it's a little bit of a long-winded type of question, but I I just wanted to double down on the CPU opportunity. Particularly if we contrast it with the opportunity, you have on the EML, slash trying to see your front, uh, I I think previously you discussed in terms of content.
We are, we do have pricing leeway in there. I mean, I think as, as, as conditions change, uh, watching, woo pad and I will continue to look at the pricing. As you know, we've we've done a couple of steps and um, you know, our our, our products are just in high demand right across the board. So I think it gives us some some pricing latitude. Uh, and and we'll certainly look at that. I mean, why did any comments from you on? No, no. I mean, I think you've captured it actually. The whole LTA process is actually helped us from a, from a pricing standpoint overall. Because then there aren't those same type of Corgi negotiations, uh, for Price Downs, if anything prices are holding or they're increasing, uh, for what customers want. And what we're actually seeing is is that customers are coming back and asking for even more, uh, capacity, uh, and, and more product than we had agreed to in the LTA. And, uh, and that's actually allowing us to, uh, have incremental pricing discussions.
For accelerator or content per AI server. The 2 Opportunity on par um and you really benefit from having a higher market share on the CPU side versus the transceiver front. Now that I I guess you have more cells you have more visibility, any change on how you are thinking about content or CPU versus the transceiver business.
Michael Hurlston: For those customers that are not willing to sign an LTA are having concerns about their continuity of supply because we are allocating to those partners that are committing to us first. Then whatever's left over, then we can talk to those that are not. Got it. Thank you. That's very helpful. Thank you, Michael, for the feedback. Just quickly on the follow-up, and apologies if it's a little bit of a long-winded type of question. I just wanted to double down on the CPO opportunity, particularly if we contrast it with the opportunity you have on the EML/transceiver front. I think previously, you discussed in terms of content per accelerator or content per AI server, the two opportunities are mostly on par. You really benefit from having a higher market share on the CPO side versus the transceiver front.
Wajid Ali: For those customers that are not willing to sign an LTA are having concerns about their continuity of supply because we are allocating to those partners that are committing to us first. Then whatever's left over, then we can talk to those that are not.
Papa Sylla [Vice President: Got it. Thank you. That's very helpful. Thank you, Michael, for the feedback. Just quickly on the follow-up, and apologies if it's a little bit of a long-winded type of question. I just wanted to double down on the CPO opportunity, particularly if we contrast it with the opportunity you have on the EML/transceiver front. I think previously, you discussed in terms of content per accelerator or content per AI server, the two opportunities are mostly on par. You really benefit from having a higher market share on the CPO side versus the transceiver front. Now that I guess you have more cells or you have more visibility, any change on how you are thinking about content for CPO versus the transceiver business?
Uh, around those incremental units that they're asking for. Um, so the the ltas are serving has a nice Baseline and if customers want more than that, then it allows for a discussion with who pens team and our sales team to ask, for incremental, uh, pricing optimization. So it's worked out very well for us from a process standpoint. And for those customers that are not willing to sign an LTA, uh, are are, are are having, you know, concerns about their, their, uh, continuity of Supply because we are allocating to those partners that are committing to us first and then whatever's left over. Then we can talk to those that are not
Yeah, I mean, it's exactly as you said, I mean, obviously the dollars are lower for our lasers than they would be if we were able to sell a transceiver, but given the strength of our product in the laser products, we have quite High market share. So in general and Kathy's run the numbers for us, the number of times, the map works out very favorably for us as CPO comes online. What I'll say and I want to highlight again what we said in our prepared remarks, which is new
Uh there is an opportunity for us to participate. Now in something that looks like a module of this else, the external light source.
Michael Hurlston: Now that I guess you have more cells or you have more visibility, any change on how you are thinking about content for CPO versus the transceiver business? Yeah, I mean, it's exactly as you said. I mean, obviously, the dollars are lower for our lasers than they would be if we were able to sell a transceiver. But given the strength of our product in the laser product, we have quite high market share. So in general, and Kathy's run the numbers for us a number of times, the math works out very favorably for us as CPO comes online. What I'll say, and I want to highlight again what we said in our prepared remarks, which is new, there is an opportunity for us to participate now in something that looks like a module, this ELS, the external light source. And that is obviously a much higher ASP.
And uh that is obviously a much higher ASP Wu pain and team are looking at that. Now it looks like we can preserve very decent margins and attack that Market at another step up in terms of ASP. It's uh, you know, somewhere around 2 2 and a half times content gain from a revenue standpoint as compared to just
Our lasers. You want to give 2 seconds of color.
Type of question. But I just wanted to double down on the CPU opportunity, particularly if we contrast it with the opportunity you have on the EML transceiver front. I think previously you discussed, in terms of content per accelerator or content per AI server, that the two opportunities are mostly on par, and you really benefit from having a higher market share on the CPU side versus the transceiver front. Now that you have more sales, or you have more visibility, is there any change in how you are thinking about content or CPU versus the transceiver business?
Michael Hurlston: Yeah, I mean, it's exactly as you said. I mean, obviously, the dollars are lower for our lasers than they would be if we were able to sell a transceiver. But given the strength of our product in the laser product, we have quite high market share. So in general, and Kathy's run the numbers for us a number of times, the math works out very favorably for us as CPO comes online. What I'll say, and I want to highlight again what we said in our prepared remarks, which is new, there is an opportunity for us to participate now in something that looks like a module, this ELS, the external light source. And that is obviously a much higher ASP.
Yeah, I mean, it's exactly as you said. I mean, obviously, the dollars are lower for our lasers than they would be if we were able to sell a transceiver, but given the strength of our product in the laser products, we have quite high market share. So in general—and Kathy's run the numbers for us a number of times—the math works out very favorably for us as CPO comes online. What I'll say, and I want to highlight again what we said in our prepared remarks, which is new—
Uh, there is an opportunity for us to participate now in something that looks like a module of this, else, the external light source.
Michael Hurlston: Wupen Yuen and team are looking at that now. It looks like we can preserve very decent margins and attack that market at another step up in terms of ASP. It's somewhere around 2 to 2.5 times content gain from a revenue standpoint as compared to just our lasers. You want to give two seconds of color? Yeah. Certainly. Thanks, Michael. Yeah, not only the pluggable OSFP opportunity, but we talked about earlier, actually, the scale-up opportunity there, I think that's brand new, right? When we compare before, the module opportunities, pluggable module opportunity versus the CPO opportunity, it was a wash just from a scale-out kind of a comparison. But now, the scale-up opportunity here is a brand new market that didn't exist before.
Michael Hurlston: Wupen Yuen and team are looking at that now. It looks like we can preserve very decent margins and attack that market at another step up in terms of ASP. It's somewhere around 2 to 2.5 times content gain from a revenue standpoint as compared to just our lasers. You want to give two seconds of color? Yeah. Certainly. Thanks, Michael. Yeah, not only the pluggable OSFP opportunity, but we talked about earlier, actually, the scale-up opportunity there, I think that's brand new, right? When we compare before, the module opportunities, pluggable module opportunity versus the CPO opportunity, it was a wash just from a scale-out kind of a comparison. But now, the scale-up opportunity here is a brand new market that didn't exist before.
Uh, kind of a a comparison. But now, in the scale up opportunity, here is a brand new market that didn't exist before. So therefore, I would, I would say that, you know, our overall market share on the scale, our markets, uh, will be improving because our position in the laser front, and then by extension, the plausible, light source market. And then, on top of that, when the scale up actually happens, then that's another, uh, big chunk of time that didn't exist before. And therefore, overall, I think this uh, scale out and scale up with CPO uh, will benefit us meaningfully going forward.
Very helpful. Thank you so much.
Thank you, thank you. Thank you. Papa.
And your next question comes from Ruben, Roy of stifel. Your line is open. Please go ahead.
And uh, that is obviously a much higher ASP. Woopen and team are looking at that. Now it looks like we can preserve very decent margins and attack that market at another step up in terms of ASP. It's, uh, you know, somewhere around two, two and a half times content gain from a revenue standpoint as compared to just our lasers. You want to give two seconds of color?
Yeah. Hi uh, thank you Michael. Um, apologies. If you answered this already, but I just want to take you back to the OCS momentum. Uh, and and you thinking through the order, backlog improving, is that still? Um,
Michael Hurlston: So therefore, I would say that our overall market share in the scale-out market will be improving because of positioning the laser front and then by extension, the pluggable light source market. And then on top of that, when the scale-up actually happens, then that's another big chunk of TAM that didn't exist before. And therefore, overall, I think this scale-out and scale-up with CPO will benefit us meaningfully going forward. Very helpful. Thank you so much. Thank you. Thanks, Papa. Thank you, Papa. And your next question comes from Ruben Roy of Stifel. Your line is open. Please go ahead. Yeah, hi. Thank you. Michael, apologies if he answered this already, but I just wanted to go back to the OCS momentum. And just thinking through the order backlog improving, is that still sort of relegated to a single customer and just sort of momentum at that customer?
Michael Hurlston: So therefore, I would say that our overall market share in the scale-out market will be improving because of positioning the laser front and then by extension, the pluggable light source market. And then on top of that, when the scale-up actually happens, then that's another big chunk of TAM that didn't exist before. And therefore, overall, I think this scale-out and scale-up with CPO will benefit us meaningfully going forward.
Sort of relegated to a a single customer. Um, and and just, you know, sort of momentum at that. Customer are you seeing a broadening of, um, you know, orders from multiple customers? And I guess, you know, a follow-up for wooin on that topic is just in in, in terms of applications.
what are some of the new applications for OCS that are coming up and you know, have you seen actual orders uh for things outside of maybe spine switch replacement and some of the other um
applications that you've already been delivering to thank you.
Yeah. Uh, certainly. Thanks Michael. Um, yeah. Not only the, the plugable usfp opportunity but we talked about earlier actually the skill up opportunity there. I think that that's brand new, right? When we compare it before the module opportunity is double module opportunity versus the CPU opportunity. It was a wasp, just from a scale out, uh, kind of a, a comparison. But now, you know, scale up opportunity, here is a brand new market that didn't exist before. So therefore, I would, I would say that, you know, our overall market share on the scale all markets uh, will be improving because our position in the laser front and then by extension the plugable light source market and then on top of that, when the scale up actually happens, then that's another, uh, big chunk of time, that didn't exist before. And therefore, overall, I think this, uh, scale all
Papa Sylla [Vice President: Very helpful. Thank you so much.
Scale up with CPO will benefit us meaningfully going forward.
Yeah. Hey, Ruben. And and, you know, thanks again for your support over the quarter. Appreciate appreciate some of the things you've helped us with. Um, you know, number 1,
Kathy Ta: Thank you.
Michael Hurlston: Thanks, Papa.
Kathy Ta: Thank you, Papa.
Very helpful. Thank you so much.
Michael Hurlston: And your next question comes from Ruben Roy of Stifel. Your line is open. Please go ahead.
Thank you. Thank you. Papa.
The the strength in the backlog. We and we did answer this previously, it is coming from multiple customers, not just 1.
Ruben Roy [Managing Director: Yeah, hi. Thank you. Michael, apologies if he answered this already, but I just wanted to go back to the OCS momentum. And just thinking through the order backlog improving, is that still sort of relegated to a single customer and just sort of momentum at that customer? Are you seeing a broadening of orders from multiple customers? And I guess a follow-up for Wupen Yuen on that topic is just in terms of applications, what are some of the new applications for OCS that are coming up? And have you seen actual orders for things outside of maybe spine switch replacement and some of the other applications that you've already been delivering to? Thank you.
And your next question comes from Ruben Roy of Stifel. Your line is open. Please go ahead.
Uh, we feel very good about our volumes in the business.
Yeah, hi. Uh, thank you, Michael. Um, apologies if you answered this already, but I just wanted to go back to the OCS momentum.
And things through the order backlog, improving—is that still, um,
Michael Hurlston: Are you seeing a broadening of orders from multiple customers? And I guess a follow-up for Wupen Yuen on that topic is just in terms of applications, what are some of the new applications for OCS that are coming up? And have you seen actual orders for things outside of maybe spine switch replacement and some of the other applications that you've already been delivering to? Thank you. Yeah. Hey, Ruben. And thanks again for your support over the quarter. Appreciate some of the things you've helped us with. Number one, the strength in the backlog, and we did answer this previously, it is coming from multiple customers, not just one. We feel very good about our volumes in the business.
Sort of relegated to a single customer, um, and and just, you know, sort of momentum at that customer. Are you seeing a broadening of, um, you know, orders from multiple customers? And I guess, you know, a follow-up for Wuen on that topic is just in terms of applications.
What are some of the new applications for OCS that are coming up, and, you know, have you seen actual orders for things outside of maybe spine switch replacement and some of the other applications that you've already been delivering to? Thank you.
Michael Hurlston: Yeah. Hey, Ruben. And thanks again for your support over the quarter. Appreciate some of the things you've helped us with. Number one, the strength in the backlog, and we did answer this previously, it is coming from multiple customers, not just one. We feel very good about our volumes in the business.
You know, there's 400 million dollars that we're talking about primarily deliverable in the back half of the Year sets. This up. Well above, what we previously outlined which was sort of a hundred million dollars, exiting calendar Q4 so our run rate going into 20 2027 is quite a bit higher and we would expect, obviously in 2027 to do better again. So it is setting up for us tonight, at least it's broad-based, right? It's, it's 3. Customers are are making up that backlog and, um, you know, we are a definitely have stepped on the accelerator relative to deliveries, even this quarter to to all 3 of those customers who've had on the applications. Right again, fairly broad-based. But why don't you give some color to a roommate?
Yeah. Hey, Ruben. And, you know, thanks again for your support over the quarter. Appreciate some of the things you've helped us with. Um, you know, number one,
Michael Hurlston: This $400 million that we're talking about, primarily deliverable in the back half of the year, sets us up well above what we previously outlined, which was sort of $100 million exiting calendar Q4. So our run rate going into 2027 is quite a bit higher. And we would expect, obviously, in 2027 to do better again. So it is setting up for us, and I believe it's broad-based, right? It's three customers who are making up that backlog. And we definitely have stepped on the accelerator relative to deliveries, even this quarter, to all three of those customers. Wupen Yuen on the applications, right? Again, fairly broad-based, but why don't you give some color to Ruben? Yeah. I will say no changes to the applications. As you recall, I think we talked about before, there were primarily four different applications, right? One is the spine replacement, as you mentioned.
Michael Hurlston: This $400 million that we're talking about, primarily deliverable in the back half of the year, sets us up well above what we previously outlined, which was sort of $100 million exiting calendar Q4. So our run rate going into 2027 is quite a bit higher. And we would expect, obviously, in 2027 to do better again. So it is setting up for us, and I believe it's broad-based, right? It's three customers who are making up that backlog. And we definitely have stepped on the accelerator relative to deliveries, even this quarter, to all three of those customers. Wupen Yuen on the applications, right? Again, fairly broad-based, but why don't you give some color to Ruben?
Yeah. Um, I would say no changes uh, to the applications. I was recall, I think we talked about before they were primarily, you know, 4 to talk about and 2 more are really the optical scaled Up application and the, uh, for for protection or redundancy in the network. Actually, we see these applications in all the customers to, to different degrees. And therefore, I would say that these multiple customers are covering these 4 different use cases, uh, in the in, in the uh, in the applications. Um, I think there may be some other potential, uh, scenarios showing up. I would definitely watching very, very closely but these 4 uh, to us today, there they are of dominance in dominant. Uh, application scenarios.
Wupen Yuen [President: Yeah. I will say no changes to the applications. As you recall, I think we talked about before, there were primarily four different applications, right? One is the spine replacement, as you mentioned. One is the scale across applications we also talk about. Two more are really the optical scale-up application and the for protection or redundancy in the network. Actually, we see these applications in all the customers to different degrees. Therefore, I would say that these multiple customers are covering these four different use cases in the applications. I think there may be some other potential scenarios showing up. We're definitely watching very, very closely. But these four, to us today, they are dominant application scenarios.
We'll put on the applications right again, fairly broad-based. But why don't you give some color to Ruben?
Michael Hurlston: One is the scale across applications we also talk about. Two more are really the optical scale-up application and the for protection or redundancy in the network. Actually, we see these applications in all the customers to different degrees. Therefore, I would say that these multiple customers are covering these four different use cases in the applications. I think there may be some other potential scenarios showing up. We're definitely watching very, very closely. But these four, to us today, they are dominant application scenarios. Great. Thanks. Just a very quick follow-up. Has anything changed with the way you guys are thinking about 800G versus 1.6T module mix this year, one way or the other?
Great, thanks. Um, just a very quick follow-up and has anything changed with the way you guys are thinking about 800 gig versus 1.6 terabytes. Uh, module mix this year. Um, 1 way or the other, is it accelerating towards 1.60 for any reason in terms of volumes from a single customer, multi customers or is it relatively, uh, unchanged from how you're thinking about it 90 days ago? Thanks. Yeah, it's a 1.6 T is definitely stronger than we felt, uh, you know, then then we felt 90 days ago. So 1.6t is definitely accelerating.
Rating.
Yeah. Um I will say no changes uh to the applications, I would recall, I think we talked about before they were primarily you know, 4 different applications. Write 1 is the respond replacement. As you mentioned 1 is the uh, um, you know, the the scale across applications we also talked about and 2 more are really the optical scaled Up application and the, uh, for for protection or redundancy in the network. Actually, we see these applications in all the customers, uh, to to different degrees. And therefore, I would say that these multiple customers are covering these 4 different use cases, uh, in the in, in the uh, in the applications. Um, I think there may be some other potential uh, scenarios showing up. I would definitely watching very, very closely but these 4 uh, to us today. There they are dominant in dominant. Uh, application scenarios.
Ruben Roy [Managing Director: Great. Thanks. Just a very quick follow-up. Has anything changed with the way you guys are thinking about 800G versus 1.6T module mix this year, one way or the other? Is it accelerating towards 1.6T for any reason in terms of volumes from a single customer or multiple customers, or is it relatively unchanged from how you're thinking about it 90 days ago? Thanks.
Michael Hurlston: Is it accelerating towards 1.6T for any reason in terms of volumes from a single customer or multiple customers, or is it relatively unchanged from how you're thinking about it 90 days ago? Thanks. Yeah. 1.6T is definitely stronger than we felt than we felt 90 days ago. So 1.6T is definitely accelerating. Our 800G volume actually is doing better than we would have expected. So in 800G, what you're seeing right now from us is an acceleration in revenue on our 800G shipments. But in the market, to your question, Ruben, 1.6T is definitely going better. We have exposure to a couple of customers, a couple of large customers on 1.6T, and we've been surprised by how quickly they're trying to push us to deliver and their forecast to us relative to the different SKUs that we're being asked to deploy.
Great, thanks. Um, just a very quick follow-up: has anything changed with the way you guys are thinking about 800 gig versus 1.6T, that module mix this year? Um,
Michael Hurlston: Yeah. 1.6T is definitely stronger than we felt than we felt 90 days ago. So 1.6T is definitely accelerating. Our 800G volume actually is doing better than we would have expected. So in 800G, what you're seeing right now from us is an acceleration in revenue on our 800G shipments. But in the market, to your question, Ruben, 1.6T is definitely going better. We have exposure to a couple of customers, a couple of large customers on 1.6T, and we've been surprised by how quickly they're trying to push us to deliver and their forecast to us relative to the different SKUs that we're being asked to deploy.
One way or the other, is it accelerating towards $1.6T for any reason in terms of volumes—from a single customer, multiple customers—or is it relatively unchanged from how you're thinking about it 90 days ago? Thanks. Yeah. The $1.16 is definitely stronger than we felt, uh,
Relative to the different skus that were being asked to deploy. I mean, any different thoughts woopen? Yeah, definitely. I think the, uh, the 2 factors there, right? So 1 is the, uh, 800 is still very large market today. Um, however, you know, all market share at 1.60. How about earlier is actually higher. So, we, uh, kind of get all act together on development side. Uh, so we definitely are seeing for all business. 1.60 Trend growth, trend is lot stronger than 800 G even though 800 G continue to be going forward. Uh, but the the third 1.60 business is coming our way for this calendar year.
Very helpful. Thank you guys.
Thank you. Reuben. Thanks, Reuben.
Kevin, I think we have time for just 1 more question.
All right, your next question that comes from George nodder of wolf research. Your line is open, please go ahead.
Michael Hurlston: I mean, any different thoughts, Wupen Yuen? Yeah. Definitely. I think the two factors there, right? So one is the 800G is still a very large market today. However, our market share at 1.6T, as Michael talked about earlier, is actually higher as we kind of get our acts together on the development side. So we definitely are seeing for our business, 1.6T growth trend is a lot stronger than 800G, even though the 800G continue to be going forward. But the surge 1.6T business is coming our way for this calendar year. Very helpful. Thank you, guys. Thanks, Ruben. Thanks, Ruben. Kevin, I think we have time for just one more question. All right. Your next question comes from George Nader of Wolfe Research. Your line is open. Please go ahead. Hi, guys. Thanks very much.
Michael Hurlston: I mean, any different thoughts, Wupen Yuen?
Wupen Yuen [President: Yeah. Definitely. I think the two factors there, right? So one is the 800G is still a very large market today. However, our market share at 1.6T, as Michael talked about earlier, is actually higher as we kind of get our acts together on the development side. So we definitely are seeing for our business, 1.6T growth trend is a lot stronger than 800G, even though the 800G continue to be going forward. But the surge 1.6T business is coming our way for this calendar year.
Hi guys, thanks very much. Um, I just wanted to get kind of get in here and ask some questions about, um, Supply. You know, it just seems like um, obviously there's a tremendous amount of demand here. I know you guys have been trying to consolidate more and more of your manufacturing into the Neva facility down in Thailand. And, you know, I'm just curious about what that looks like right now in terms of, you know, capacity available capacity in, in Nava, you know, is it possible that you guys would look to to Outsource more, you know, given the demands you're seeing just walk us through kind of you know how you plan to ship.
All this product. Thanks.
You know, then then we felt 90 days ago. So 1.6t is definitely accelerating. Uh, our 800 gig volume actually is doing better than we would have expected. So, in 800 gig the, what you're seeing right now from us is an acceleration and revenue on on our 800 gig shipments, but in the market to your question room and 1.6t is definitely going better. You know, we have exposure to a couple customers, a couple large customers, not 1.6 C. And we've been surprised by how quickly, they're trying to push us to deliver and they're forecast to us relative to the different skus that we're being asked to deploy. I mean, any different thoughts woopen? Yeah, definitely. I think the, uh, the 2 factors there, right? So, what is the, uh, 800 is still very large market today. Um, however, you know, all market share at 1.60 or like, how about earlier is actually higher? So we, uh, kind of get all
Together, on the development side—uh, so we definitely are seeing, for our business, 1.6T trend growth is a lot stronger than 800G, even though 800G continues to be going forward.
Ruben Roy [Managing Director: Very helpful. Thank you, guys.
Uh, but the The Surge 1.60 business is coming our way, uh, for this calendar year.
Michael Hurlston: Thanks, Ruben.
Kathy Ta: Thanks, Ruben. Kevin, I think we have time for just one more question.
Very helpful. Thank you guys.
Thanks Ruben. Thanks Ruben.
Wupen Yuen [President: All right. Your next question comes from George Notter of Wolfe Research. Your line is open. Please go ahead.
Kevin, I think we have time for just one more question.
Yeah, George. That's that is the right question. I mean we have pivoted uh, from a manufacturing strategy to really look at more contract manufacturing. Uh, we have stepped on the gas at at at Neva. Uh, we're doing everything we can to clear out some of our Factory footprint actually in China to to help us with some of the most important skus that we're going to be able to deliver to
All right, your next question comes from George Nder of Wolf Research. Your line is open; please go ahead.
George Notter [Managing Director: Hi, guys. Thanks very much. I just wanted to kind of get in here and ask some questions about supply. It just seems like, obviously, there's a tremendous amount of demand here. I know you guys have been trying to consolidate more and more of your manufacturing into the Nava facility down in Thailand. I'm just curious about what that looks like right now in terms of capacity, available capacity in Nava. Is it possible that you guys would look to outsource more given the demands you're seeing? Just walk us through kind of how you plan to ship all this product. Thanks.
Uh, so we've we've really tried to work to optimize our for Force Base that we have.
Michael Hurlston: I just wanted to kind of get in here and ask some questions about supply. It just seems like, obviously, there's a tremendous amount of demand here. I know you guys have been trying to consolidate more and more of your manufacturing into the Nava facility down in Thailand. I'm just curious about what that looks like right now in terms of capacity, available capacity in Nava. Is it possible that you guys would look to outsource more given the demands you're seeing? Just walk us through kind of how you plan to ship all this product. Thanks. Yeah, George, that is the right question. I mean, we have pivoted from a manufacturing strategy to really look at more contract manufacturing. We have stepped on the gas at Nava.
Michael Hurlston: Yeah, George, that is the right question. I mean, we have pivoted from a manufacturing strategy to really look at more contract manufacturing. We have stepped on the gas at Nava. We're doing everything we can to clear out some of our factory footprint, actually, in China to help us with some of the most important SKUs that we're going to be able to deliver to. So we've really tried to work to optimize our floor space that we have for the high-value products that we think we need to deliver. That being said, we simply don't have enough.
Hi guys, thanks very much. Um, I just wanted to kind of get in here and ask some questions about, um, supply. You know, it just seems like, um, obviously there's a tremendous amount of demand here. I know you guys have been trying to consolidate more and more of your manufacturing into the Neva facility down in Thailand. And, you know, I'm just curious about what that looks like right now in terms of, you know, capacity, available capacity in, in Neva. You know, is it possible that you guys would look to outsource more, you know, given the demands you're seeing? Just walk us through kind of, you know, how you plan to ship all this product. Thanks.
For the high value products that we think we need to deliver. That being said, we simply don't have enough. I mean, right now 1 of the significant challenges we're facing is, you know, in addition to Fat capacity, which is well documented is the is our Factory capacity and their we're we're starting to look a lot more to contract manufacturers that we have in the past. Uh, we we did hire a new leader for our back-end operations that came from jabel. He is very familiar with the contract manufacturing Community, he and Wuhan were actually meeting last week in Thailand, outlining a strategy by which we can move a lot more of our products to CM just to help us accelerate these various ramps. We're facing so many challenges right now. From a ramp perspective that to not rely on.
Michael Hurlston: We're doing everything we can to clear out some of our factory footprint, actually, in China to help us with some of the most important SKUs that we're going to be able to deliver to. So we've really tried to work to optimize our floor space that we have for the high-value products that we think we need to deliver. That being said, we simply don't have enough. I mean, right now, one of the significant challenges we're facing is, in addition to fab capacity, which is well-documented, is our factory capacity. And there, we're starting to look a lot more to contract manufacturers than we have in the past. We did hire a new leader for our backend operations that came from Jabil. He is very familiar with the contract manufacturing community.
Partnerships would be would be stupid.
Yeah, George. That's that is the right question. I mean we have pivoted uh, from a manufacturing strategy to really look at more contract manufacturing. Uh, we have stepped on the gas at at at Neva. Uh, we're doing everything we can to clear out some of our Factory footprint actually in China to to help us with some of the most important skus that we're going to be able to deliver to
Got it then just 1, quick follow-up. Um, you mentioned the uh, the LTA, I think more in the context of the EML Supply that you have. But, you know, as I look at the Telecom business, I look at um,
Uh, so we've really tried to work to optimize for the space that we have.
Michael Hurlston: I mean, right now, one of the significant challenges we're facing is, in addition to fab capacity, which is well-documented, is our factory capacity. And there, we're starting to look a lot more to contract manufacturers than we have in the past. We did hire a new leader for our backend operations that came from Jabil. He is very familiar with the contract manufacturing community.
Transceivers other components in the business that are really sort of asymmetric in terms of supply and demand are you also putting ltas into those product lines as well. And I'm just curious like, how much of the business is now covered with ltas? Thanks a lot guys.
For the high-value products that we think we need to deliver. That being said, we simply don't have enough. I mean, right now one of the significant challenges we're facing is, you know, in addition to fab capacity, which is well documented, is our factory capacity.
Michael Hurlston: He and Wupen Yuen were actually meeting last week in Thailand, outlining a strategy by which we can move a lot more of our products to CM just to help us accelerate these various ramps. We're facing so many challenges right now from a ramp perspective that to not rely on partnerships would be stupid. Got it. And then just one quick follow-up. You mentioned the LTAs, I think, more in the context of the EML supply that you have. But as I look at the telecom business, I look at transceivers, other components in the business that are really sort of asymmetric in terms of supply and demand, are you also putting LTAs into those product lines as well? And I'm just curious how much of the business is now covered with LTAs. Thanks a lot, guys. Yeah, we are.
Michael Hurlston: He and Wupen Yuen were actually meeting last week in Thailand, outlining a strategy by which we can move a lot more of our products to CM just to help us accelerate these various ramps. We're facing so many challenges right now from a ramp perspective that to not rely on partnerships would be stupid.
George Notter [Managing Director: Got it. And then just one quick follow-up. You mentioned the LTAs, I think, more in the context of the EML supply that you have. But as I look at the telecom business, I look at transceivers, other components in the business that are really sort of asymmetric in terms of supply and demand, are you also putting LTAs into those product lines as well? And I'm just curious how much of the business is now covered with LTAs. Thanks a lot, guys.
Thailand outlining a strategy by which we can move a lot more of our products to CM just to help us accelerate these various ramps. We're facing so many challenges right now from a ramp perspective that to not rely on partnerships would be, would be stupid.
Yeah, we are. I mean that is uh, that is definitely been a pain point because I think that there's been a lack of recognition from the historical Telecom customers as to, you know, right now it's it's a seller's market. And so a couple of a couple of our key customers have been uh, problematic around the ltas and we been, and I have been able to sort of get to to a reasonable compromise with those customers. But honestly, we'd like to do more there. I think there's more opportunity for us to increase price on the Telecom customers than we have in the past. And we're going to look at that. Uh, you know, and pick some partners that really are working with us, quite frankly, uh, better and those customers I think we're going to treat favorably and you know, we'll figure out how to how to service the rest with the volume that's left over.
Thank you.
Got it. Then just one quick follow-up. Um, you mentioned the, uh, the LTA—I think more in the context of the EML supply that you have. But you know, if I look at the Telecom business, I look at, um,
Thank you, George. And that is all the time. We have for questions. I will now turn the call back to miss Kathy to for closing remarks.
Thank you. Kevin.
Michael Hurlston: Yeah, we are. I mean, that has definitely been a pain point because I think that there's been a lack of recognition from the historical telecom customers as to right now, it's a seller's market. And so a couple of our key customers have been problematic around the LTAs. And Wupen Yuen and I have been able to sort of get to a reasonable compromise with those customers. But honestly, we'd like to do more there. I think there's more opportunity for us to increase price on the telecom customers than we have in the past. And we're going to look at that and pick some partners that really are working with us, quite frankly, better. And those customers, I think, we're going to treat favorably. And we'll figure out how to service the rest with the volume that's left over.
Transceivers—other components in the business that are really sort of asymmetric in terms of supply and demand—are you also putting LTAs into those product lines as well? And I'm just curious, how much of the business is now covered with LTAs? Thanks, podcast.
Michael Hurlston: I mean, that has definitely been a pain point because I think that there's been a lack of recognition from the historical telecom customers as to right now, it's a seller's market. And so a couple of our key customers have been problematic around the LTAs. And Wupen Yuen and I have been able to sort of get to a reasonable compromise with those customers. But honestly, we'd like to do more there. I think there's more opportunity for us to increase price on the telecom customers than we have in the past. And we're going to look at that and pick some partners that really are working with us, quite frankly, better. And those customers, I think, we're going to treat favorably. And we'll figure out how to service the rest with the volume that's left over. Thank you. Thank you, George.
Virtual webcast, we look forward to seeing you there.
And with that, I'd like to thank you for joining us today.
This concludes today's call, thank you for attending. You may now disconnect
Yeah, we are. I mean that that is uh, that is definitely been a pain point because I think that there's been a lack of recognition from the historical Telecom customers as to, you know, right now it's it's a seller's market. And so a couple of a couple of our key customers have been uh, problematic around the ltas and we been, and I have been able to sort of get to to a reasonable compromise with those customers. But honestly we'd like to do more there. I think there's more opportunity for us to increase price on the Telecom customers than we have in the past. And we're going to look at that. Uh, you know, and pick some partners that really are working with us, quite frankly, uh, better and those customers I think we're going to
George Notter [Managing Director: Thank you.
To treat favorably. And you know, we'll figure out how to service the rest of the volume that's left over.
Kathy Ta: Thank you, George.
Thank you.
Michael Hurlston: That is all the time we have for questions. I will now turn the call back to Ms. Kathryn Ta for closing remarks. Thank you, Kevin. We look forward to connecting with you at upcoming investor conferences and meetings this quarter. I would also like to invite all of you to please take a moment to register for our upcoming investor briefing at OFC, which is taking place in Los Angeles on 17 March. Whether you can join us in person or via our live virtual webcast, we look forward to seeing you there. And with that, I'd like to thank you for joining us today. This concludes today's call. Thank you for attending. You may now disconnect.
Operator: That is all the time we have for questions. I will now turn the call back to Ms. Kathryn Ta for closing remarks.
Kathy Ta: Thank you, Kevin. We look forward to connecting with you at upcoming investor conferences and meetings this quarter. I would also like to invite all of you to please take a moment to register for our upcoming investor briefing at OFC, which is taking place in Los Angeles on 17 March. Whether you can join us in person or via our live virtual webcast, we look forward to seeing you there. And with that, I'd like to thank you for joining us today.
Thank you, George. And that is all the time we have for questions. I will now turn the call back to Miss Kathy Ta for closing remarks.
Thank you, Kevin. We look forward to connecting with you at upcoming investor conferences and meetings this quarter. I would also like to invite all of you to please take a moment to register for our upcoming investor briefing at OSC, which is taking place in Los Angeles on March 17th. Whether you can join us in person or via our live virtual webcast, we look forward to seeing you there.
Operator: This concludes today's call. Thank you for attending. You may now disconnect.
And with that, I'd like to thank you for joining us today.
This concludes today's call. Thank you for attending. You may now disconnect.