Zacks Investment Ideas feature highlights: Lumentum and HubSpot

Zacks Investment Ideas highlights Lumentum (LITE) and HubSpot (HUBS) as top tech stock opportunities for the second half of 2025, citing their strong positioning for AI-driven growth. Lumentum, a provider of optical and photonic technologies, is projected for significant revenue growth (20% in FY25, 33% in FY26) and a doubling of adjusted EPS in FY25/26, rebounding from past underperformance due to surging AI demand and trading at a 40% PEG discount to the tech sector. HubSpot, a CRM leader, is expected to expand revenue by approximately 16% in 2025/2026 and grow adjusted earnings through its AI integration, presenting a buying opportunity 30% below its 2021 highs. Both companies hold a Zacks Rank #1 (Strong Buy) and are seen as poised for substantial upside.

Analysis

Lumentum (LITE) and HubSpot (HUBS) are presented as distinct technology investment opportunities, both benefiting from the artificial intelligence secular trend but with different risk-reward profiles. Lumentum is positioned as a turnaround story. After five years of significant underperformance relative to the tech sector (+10% vs +110%) due to headwinds including the Huawei ban and inventory corrections, the company is now demonstrating a strong inflection. This is evidenced by a 60% stock price increase over the past year, a recent beat-and-raise quarter, and robust forward guidance projecting revenue growth of 20% in FY25 and 33% in FY26, with adjusted EPS expected to double in both years. The growth is fueled by demand for its optical components in AI data centers and is supported by a key technical indicator—a 'golden cross' in May—and a valuation at a 40% discount to the tech sector on a price/earnings to growth (PEG) basis. HubSpot, in contrast, is an established CRM leader whose stock is currently trading 30% below its 2021 peak despite a history of outperformance. The recent cooling is attributed to a deceleration from its previous 30-50% growth rates. However, the company is still projected to grow revenue by approximately 16% in both 2025 and 2026, with adjusted earnings growing 15% and 21% respectively, driven by its integrated AI platform 'Breeze'. The investment case is supported by a five-year streak of earnings beats, strong analyst backing with 26 of 33 recommendations being 'Strong Buys', and shareholder-friendly stock buybacks.

Key Decisions for Investors

• Investors should evaluate Lumentum as a potential turnaround play leveraged to the AI infrastructure buildout, given its strong forward earnings growth projections, recent technical breakout signals, and a valuation that remains at a significant discount to the broader tech sector on a PEG basis.
• For HubSpot, the 30% discount from its all-time highs may represent an attractive entry point into a high-quality software leader with consistent double-digit growth, a strong history of beating earnings estimates, and a new AI product cycle.
• Given that both stocks have high growth expectations priced in, upcoming quarterly earnings reports will be critical catalysts; investors must monitor for confirmation of their projected growth trajectories and management commentary on AI-driven demand to validate the investment theses.