Lumentum (LITE) Is Seeing Profit Estimates Surge as AI Optical Demand Expands

Stock (Symbol)

Lumentum (LITE)

Stock Price

$849

Sector

Data is as of

Expected to Report

Company Description

Lumentum Holdings Inc. is an optical and photonic technology that powers the networks and infrastructure behind artificial intelligence (AI), cloud computing, and next-generation communications.

Its segments include Cloud & Networking and Industrial Tech.

The Cloud & Networking segment products include a comprehensive portfolio of optical and photonic components, modules, and subsystems supplied to cloud and communications network operators and network equipment manufacturers building cloud data center infrastructure, including products for AI and machine learning and data center interconnect (DCI) applications, and communications service provider networks, including products for access (local), metro (intracity), long-haul (city-to-city and worldwide), and submarine (undersea) network infrastructure.

The Industrial Tech segment’s products include short-pulse solid-state lasers, kilowatt-class fiber lasers, diode lasers, and gas lasers, serving a range of end-market applications. Source: Refinitiv

Sharek’s Take

Lumentum makes the optical technology that helps AI data centers and telecommunications networks move data using light. Its products include optical transceivers, which convert electrical signals into light for transmission through fiber optic cables, then convert them back into electrical signals at the other end. Lumentum manufactures advanced laser chips as well as complete optical networking equipment. Its key technologies include Electro-Absorption Modulated Laser (EML) and continuous-wave (CW) lasers, which generate light for high-speed data transmission.

The company is also developing laser technology for two emerging networking designs: Near-Packaged Optics (NPO) and Co-Packaged Optics (CPO). Both bring optical connections closer to AI processors to handle increasing data demands and improve power efficiency. NPO offers another growth opportunity as customers explore optical connections for future AI systems. Management expects demand for its high-power laser chips for CPO to ramp in the second half of 2027, ahead of customer deployments in 2028.

LITE reports revenue across two product categories:

• Components:
  • Revenue increased 103% year-over-year and accounted for 65% of total revenue.
  • Includes EML and CW laser chips, pump lasers, narrow-linewidth laser assemblies and 3D sensing products.
  • Demand is driven by AI data-center connectivity, telecommunications networks and sensing applications.
• Systems:
  • Revenue increased 123% year-over-year and accounted for 35% of total revenue.
  • Includes 800G and 1.6T cloud transceivers, optical circuit switches, industrial lasers and cable access products.
  • Growth was driven mainly by cloud transceivers and optical circuit switches, with industrial lasers also strengthening during the quarter.

Lumentum is one of the standout AI infrastructure stocks as demand for optical networking drives rapid revenue growth. The stock has a plump Estimated Long-Term Growth Rate of 109%. Yet the P/E is just 39 when I look ahead to 2027 profit estimates. LITE will be purchased for the Growth Portfolio and Focus List.

One Year Chart

LITE stock has climbed sharply over the past year, rising from around $200 to above $1,000, and back down to around $800. 

The Est. LTG is 122%. That’s extremely high!

The P/E is 39 this qtr, which I think is low for a fast growing company such as this. My Fair Value is a P/E of 47.

Notice in Annual Profits the company is expected to grow profits from $8.67 last year to $21.66 this year.

Quarterly profit growth has been in the triple-digits, a key characteristic of a top stock.

Earnings Table

Last qtr, LITE reported 267% profit growth. Revenue increased 109% year-on-year.

• LITE achieved record shipments of 800G transceivers.
• The company began shipping its newer 1.6T products to support faster AI data center connections.
• Pump laser shipments grew more than 80% year-over-year, and management expects shipments to increase fourfold over the next several quarters.
• In laser chips, LITE delivered another record-breaking quarter for EMLs, primarily driven by strong demand for 100-gig per lane devices. Momentum for its 200-gig EMLs is also accelerating rapidly, now accounting for over 25% of total EML revenue.
• Management stated that customers are prioritizing near-packaged optics (NPO), which places optics close to processors, as an intermediate step toward co-packaged optics (CPO), which integrates optics directly onto the package substrate or interposer.
• Lumentum expects demand for ultra-high-power laser chips to ramp in the second half of 2027 ahead of larger CPO scale-up deployments in 2028, creating an additional growth opportunity beyond its current products.

Annual Profit Estimates increased this qtr. 2027’s profit estimate has risen from $6.71 5QtrsAgo to $21.66 this quarter. Note profits are expected to hit $48 in Fiscal 2029.

Qtrly Profit Estimates for the next 4 qtrs are 281%, 201%, 144%, and 109 %. Analysts think revenue will grow 134% next qtr.

Fair Value

I think the stock is worthy of a 47 P/E.

That gives the stock 20% upside for 2027, and 92% upside for 2028 (in my opinion).

Note LITE has a Fiscal Year ending June 30th. So the company is now in Fiscal 2027, we are in LITE’s Fiscal Q1.

Bottom Line

Lumentum Holdings (LITE) has been a volatile stock since becoming an independent public company in 2015.

Lumentum is sold out for years to come while profits are coming in hot. I think this is a great time to accumulate shares in what has been one of the hottest stocks in the stock market.

LITE will be added to the Growth Portfolio and rank 10th in the Power Rankings.

I will also add the stock to the Focus List where it will rank 9th in the Power Rankings.

Power Rankings

10 of 29

Focus List

9 of 16

Conservative Stock Portfolio

N/A