• Revenue: $402.2 million for the second quarter.
• Non-GAAP EPS: $0.42, above the high end of guidance ranges.
• GAAP Gross Margin: 24.8% for the second quarter.
• Non-GAAP Gross Margin: 32.3%, slightly down sequentially but up year-on-year.
• Non-GAAP Operating Margin: 7.9%, up 490 basis points sequentially and 600 basis points year-on-year.
• Non-GAAP Operating Profit: $31.7 million.
• Adjusted EBITDA: $57.6 million.
• Non-GAAP Operating Expenses: $98.3 million, a decrease from the previous quarter and year ago quarter.
• Cloud & Networking Segment Revenue: $339.2 million, up 20% sequentially and 18% year-on-year.
• Industrial Tech Segment Revenue: $63 million, up 15% sequentially but down 21% year-on-year.
• Cash and Short-term Investments: Decreased by $19 million to $897 million.
• CapEx Investment: $65 million, primarily for expanding clean room capacity and increasing equipment capacity for indium phosphide wafer production.
• Q3 Revenue Guidance: Expected to be in the range of $410 million to $425 million.
• Q3 Non-GAAP Operating Margin Guidance: 9.5% to 10.5%.
• Q3 Non-GAAP EPS Guidance: $0.47 to $0.53.

• Warning! GuruFocus has detected 7 Warning Signs with LITE.

Release Date: February 06, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Lumentum Holdings Inc (NASDAQ:LITE) exceeded the high end of their guidance range for both revenue and earnings per share in the second quarter.
• The company is experiencing robust demand from cloud customers, particularly in data center interconnects and networking markets.
• Lumentum is making significant progress in expanding its cloud business through a three-pronged strategy, including expanding its customer base and scaling production capacity.
• The company achieved a record for EML unit shipments in Q2 and began delivering 200G Lane speed EMLs to multiple customers.
• Lumentum's second quarter Cloud & Networking segment revenue grew 20% sequentially and 18% year-over-year, driven by strong demand from cloud hyperscale customers.

Negative Points

• Lumentum is facing supply chain shortages on some critical components, which is limiting their ability to meet demand fully.
• The Industrial Tech segment revenue decreased 21% year-over-year due to weak industrial end market demand.
• The company is experiencing yield issues related to new product ramps, impacting gross margins negatively.
• Lumentum's GAAP operating loss was 12.8%, and GAAP net loss per share was $0.88, indicating financial challenges.
• The company anticipates a sequential decline in Industrial Tech revenue due to the challenging macroeconomic environment and seasonal declines in 3D sensing revenue.

Q & A Highlights

Q: Can you outline the drivers for the sequential revenue increase in the Cloud & Networking segment? A: Wajid Ali, CFO, explained that the Datacom business, including chips and transceivers, is driving the growth. There are new products ramping up, and while there are some supply chain shortages, demand is strong. The telecom business is also seeing some inventory drawdowns, contributing to growth.

Q: What is the expected capacity for 200-gig EML by the end of calendar 2026? A: Alan Lowe, CEO, stated that they are on track for 40% growth from June 2024 to June 2025, with another 40% by the end of 2025. They are overall supply constrained, not just for 200-gig, and are expediting tool deliveries to increase capacity.

Q: Can you provide more details on the proprietary interconnect customer mentioned in Q2? A: Alan Lowe, CEO, mentioned that they are shipping ultra-high-power lasers to an AI infrastructure customer. The product is a chip on carrier with unique technology, and they expect meaningful volume in 2025 and high volume in 2026.

Q: What are your thoughts on the prospects for co-packaged optics (CPO)? A: Wajid Ali, CFO, explained that CPO is a solution for scaling short-distance electrical links beyond 200 gig per link. It enables overcoming electrical speed scaling challenges, and Lumentum sees it as an opportunity due to their high-power lasers.

Q: Can you provide more details on the supply chain constraints affecting your business? A: Alan Lowe, CEO, stated that the constraints are mainly in telecom products due to worldwide shortages of hermetic packages. This is impacting their ability to meet demand, and they are working with suppliers and qualifying alternatives to mitigate the impact.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.