Lumentum Holdings Inc.
Loading chart...
ITEM 1. BUSINESS
General
Overview
Lumentum Holdings Inc. (“we,” “us,” “our”, “Lumentum” or the “Company”) is a leading provider of optical and photonic products and is recognized as an industry leader based on revenue and market share. Our products are essential to a range of cloud, artificial intelligence and machine learning (“AI/ML”), telecommunications, consumer, and industrial end-market applications. We operate in two end-market focused reportable segments, Cloud & Networking and Industrial Tech.
Our Cloud & Networking products comprise a comprehensive portfolio of optical and photonic chips, components, modules, and subsystems supplied to cloud data center operators, AI/ML infrastructure providers, and network equipment manufacturer customers who are building cloud data center and network infrastructures. Our products enable high-capacity optical links for cloud computing, AI/ML workloads, and data center interconnect (“DCI”) applications, as well as for communications service provider networks. Our offerings support access (local), metro (intracity), long-haul (intercity and global), and submarine (undersea) network infrastructure. Additionally, our Cloud & Networking products serve enterprise network infrastructure needs, including storage area networks (“SANs”), local area networks (“LANs”), and wide area networks (“WANs”). Demand for our products is fueled by the ongoing expansion of network capacity required to support cloud and services, AI/ML processing, streaming video, video conferencing, wireless and mobile connectivity, and the internet of things (“IoT”).
Our Industrial Tech products include short-pulse solid-state lasers, kilowatt-class fiber lasers, diode lasers, and gas lasers, serving a wide range of end-markets applications. In the consumer market, our laser light sources are integrated into customers’ 3D sensing cameras, primarily used in mobile devices. In the industrial manufacturing market, our lasers are embedded in machine tools used for precision material processing across diverse industries, including semiconductor and microelectronics fabrication, electric vehicle and battery production, metal cutting and welding, and advanced manufacturing. Adoption of our Industrial Tech products is driven by the need to advance semiconductor and microelectronics technology roadmaps and by Industry 4.0 and 5.0 trends that emphasize greater manufacturing precision, flexibility, and sustainability.
We have a global footprint that enables us to address global market opportunities for our products with employees engaged in research and development (“R&D”), administration, manufacturing, support and sales and marketing activities in various locations worldwide. We have manufacturing capabilities and facilities in North America, Asia-Pacific and Europe. Our headquarters are located in San Jose, California, and we employed approximately 10,562 full-time employees around the world as of June 28, 2025.
2
Lumentum was incorporated in Delaware as a wholly owned subsidiary of JDS Uniphase Corporation (“JDSU”) on February 10, 2015. In August 2015, the Company was spun-off from JDSU and became an independent publicly traded company through the distribution of our common stock by JDSU to its stockholders. In 2015, the remaining parent company, JDSU, was renamed Viavi Solutions Inc. (“Viavi”). Our business traces its origins to Uniphase Corporation, which was formed in 1979 and became publicly traded in 1992. Uniphase was originally a supplier of commercial lasers, and later became a leading supplier of optical transmission products. In 1999, JDS Fitel Inc., a pioneer in products for fiber optic networking which was formed in 1981, merged with Uniphase to become JDSU, a global leader in optical networking. Subsequent acquisitions by JDSU broadened the depth and breadth of what is now Lumentum’s businesses, as well as the intellectual property, technology and product offerings of the company. The fundamental laser and photonic component technologies which we acquired through various acquisitions form the basis of cloud and communications optical network infrastructure today. These technologies will continue to enable us to develop highly integrated products to satisfy our customers’ ever-increasing needs for smaller, lower power and lower cost optical and photonic products.
In December 2018, we completed the acquisition of Oclaro, Inc. (“Oclaro”), which enhanced our product portfolio by adding Oclaro’s indium phosphide laser and photonic integrated circuit technologies, as well as its coherent component and module capabilities. These additions broadened our revenue mix and strengthened our position to meet the evolving needs of our customers.
In August 2022, we completed the acquisition of NeoPhotonics Corporation (“NeoPhotonics”), which expanded our opportunities in optical components used in cloud and telecom network infrastructure.
In August 2022, we completed a transaction to acquire IPG Photonics’ telecom transmission product lines (“IPG telecom transmission product lines”) that develop and market products for use in telecommunications and datacenter infrastructure, including coherent Digital Signal Processors (“DSPs”), application-specific integrated circuits (“ASICs”) and optical transceivers.
In November 2023, we completed the acquisition of Cloud Light Technology Limited (“Cloud Light”). Our Cloud Light business designs, markets, and manufactures advanced optical modules for data center interconnect applications. The acquisition has enabled us to be well-positioned to serve the growing needs of cloud and networking customers, particularly those customers focused on optimizing their data center infrastructure for the demands of AI/ML.
Industry Trends and Business Risks
Our business is driven by end-market applications leveraging the performance advantages of advanced optical and photonic solutions. We operate within global markets characterized by robust, long-term growth trends that are increasing demand for our products and technologies.
The convergence of factors including the growing reliance on data transmission, the rapid adoption of AI/ML, and the increasing digitalization of society is driving expansion in cloud data centers and the demand for higher-bandwidth network solutions. Lumentum's products and technologies are at the forefront of these trends, engineered to support increased data volumes and computational loads while meeting the industry's need for advanced network capabilities.
Additionally, the manufacturing industry's pursuit of higher precision, innovative materials, and improved efficiency fuels demand for industrial laser-based solutions. Lumentum is well-positioned to capitalize on this trend through the provision of ultrafast lasers for micromachining and advanced material processing, as well as laser emitters for 3D sensing applications.
While we maintain a positive outlook on the long-term prospects for our products and technologies, we acknowledge the presence of industry and market risks and uncertainties, including fluctuations in supply and demand, that have led to volatility in our business and financial performance.
3
Supply Chain and Inventory Management
Our supply chain is complex, and we need to manage supply of certain components required to build our products while confronted with fluctuating demand from our customers. Our business and our customers’ businesses were negatively impacted by worldwide logistics and supply chain issues during and following the COVID-19 pandemic, including constraints on available cargo capabilities and limited availability of once broadly available supplies of both raw materials and finished components. From time to time, we experience shortages of the types of components we and our customers require in our products, and we have had to incur incremental supply and procurement costs in order to increase our ability to fulfill demands from our customers.
In addition, through fiscal year 2024, we experienced significant fluctuations in demand as customers delayed projected shipments or built up inventory in response to supply shortages and then brought down inventories as supply chain constraints eased. Our revenue fluctuated in response to these changes in demand and our margins were adversely impacted as we were not been able to fully recover costs, such as underutilized manufacturing capacity. However, during fiscal year 2025, network equipment manufacturers continued to normalize inventory levels and we saw increasing demand from AI and cloud customers as they continue to expand their data centers.
Due to worldwide operations, we and our customers are also subject to risks relating to the global trade environment. The Company is actively monitoring and assessing the global trade environment, particularly with respect to recent changes and proposed changes in tariff regulations and trade restrictions. The ongoing uncertainty surrounding trading policies, including the potential for additional tariffs, restrictions related to our customers and retaliatory measures by non-U.S. governments, continues to create a volatile environment that could disrupt our operations. The imposition of tariffs on certain imported goods and materials and export controls on critical components may increase our costs and place upward pressure on the cost of goods sold, which, in turn, may reduce our gross margins if we are unable to pass these costs onto customers through price increases.
If these tariff-related cost increases persist or escalate, our financial results could be adversely affected, including lower profitability. Additionally, changes in the global trade landscape could result in reduced market competitiveness and a slowdown in consumer demand as well as disruptions to our supply chain, including longer lead times, higher shipping costs, or limited availability of key inputs. This may constrain our ability to meet customer demand in a timely manner, potentially affecting our revenue growth and operational efficiency. The impact of tariffs on our business is hard to predict, as it is dependent on negotiations with customers and suppliers and other mitigation efforts and potential further changes in global trade policies, including higher tariffs or trade restrictions in the U.S. or other countries.
For more information on risks associated with supply chain constraints and customer inventory, refer to Item 1A “Risk Factors” of this Annual Report.
Geopolitical Developments
As a global business with operations spanning diverse geographic regions, we are exposed to geopolitical risks. Fluctuations in the geopolitical landscape, including war, military conflicts, changes in export regulations, the effects of heightened, scheduled, or proposed tariffs, and shifts in national priorities and foreign relations policies, can significantly impact our business. For instance, modifications to trade restrictions and export regulations can adversely affect both product demand and our ability to supply customers, which would harm revenue and profit margins. Moreover, disruptions in our customers' supply chains due to geopolitical events could reduce or delay their demand for our products, ultimately impacting our revenue and operating results.
For more information on risks associated with the change in geopolitical landscape and regulatory actions, refer to Item 1A “Risk Factors” of this Annual Report.
4
Reportable Segments
We have two reportable segments, Cloud & Networking and Industrial Tech. The two operating segments were primarily determined based on how our Chief Operating Decision Maker (“CODM”) views and evaluates our operations. The CODM regularly reviews operating results to make decisions about resources to be allocated to the segments and to assess their performance. Our CODM allocates resources to the segments based on their business prospects, competitive factors, segment net revenue and segment profit. Segment profit includes operating expenses directly managed by operating segments, including research and development, and direct sales and marketing expenses. Segment profit does not include stock-based compensation, acquisition or integration related costs, amortization and impairment of acquisition-related intangible assets, restructuring and related charges, and certain other charges. Additionally, we do not allocate certain marketing and general and administrative expenses, as these expenses are not directly attributable to our operating segments.
We do not track all of our property, plant and equipment by operating segments. For the geographic identification of these assets and for further information regarding our operating segments, refer to “Note 17. Operating Segments and Geographic Information” to the consolidated financial statements.
Cloud & Networking
Markets
We maintain leading market positions in the fast-growing Cloud & Networking markets through our extensive product and technology portfolio and close relationships with a wide range of market leading customers. We provide a wide range of optical and photonic components, modules, and subsystems to support the high-speed transmission of data over high-capacity fiber optic links in cloud data center, AI/ML, enterprise and communications services networking applications. Customers include cloud and network service providers, AI infrastructure providers, and network equipment manufacturers (“NEMs”). Within cloud data center, AI/ML, and enterprise applications, our products are used in the high-speed interconnection of networked servers, AI accelerators, storage, and switches. Within communication service provider networking applications, our products are used in the infrastructure for high-capacity access (local), metro (intracity), long-haul (city-to-city and worldwide) and submarine (undersea) optical networks.
Trends
The convergence of cloud computing and AI is driving rapid innovation and expansion in optical hardware for hyperscale cloud operators. The immense computational demands of training and running AI models are driving a shift to high-speed photonics from traditional electrical interconnects. Additionally, the surging data traffic generated by video streaming, search engines, e-commerce, and other cloud services fuels the expansion of data center infrastructure.
Photonic solutions offer substantial advantages over electrical connections, including ultra-fast data transmission at higher volumes and reduced susceptibility to electromagnetic interference. As a result, high-speed photonics are increasingly deployed to alleviate data traffic bottlenecks, accelerating AI model training and enhancing high-performance computing (“HPC”) efficiency. To address these challenges, web-scale companies are investing heavily in optical hardware solutions, including high-speed optical transceivers.
A key innovation within data center photonics is the adoption of 200G lane speed optical components, which double data transfer rates compared to traditional 100G lanes. This advancement can significantly accelerate AI and HPC applications, optimizes the utilization of compute cluster hardware, and positions data centers for future scaling as AI demands intensify.
In addition, optical circuit switches are increasingly deployed to meet escalating data transport requirements within data centers. These switches support high port counts and can dynamically connect any input fiber to any output fiber to form continuous optical paths.
To enable seamless data exchange between geographically dispersed data center units, high-speed data center interconnects (“DCIs”) are being constructed. DCI technology optimizes resource utilization by allowing cloud data centers to leverage computing power across multiple locations.
The exponential growth of data across industries is driving the expansion of long-haul, metro, and access networks. Dense wavelength-division multiplexing (“DWDM”) technologies are being leveraged to increase data speeds while reducing costs. High-end networking equipment must now handle both legacy and internet protocol traffic while meeting stringent requirements for bandwidth, scalability, speed, reliability, compactness, and cost-effectiveness.
5
The dynamic and unpredictable nature of network traffic demands agile optical networks capable of adapting to changing conditions. Technologies like Reconfigurable Optical Add-Drop Multiplexers (“ROADMs”), wavelength-selective switches, and tunable transmission products facilitate remote capacity adjustments, reducing the need for manual interventions.
Furthermore, the widespread deployment of 5G mobile networks and bandwidth-intensive applications is increasing data speeds at the network edge. This development further accelerates the need for capacity expansion across data center interconnects, metro regional networks, and long-haul networks.
Loading financial statements...
Financial statements
data from SEC XBRL filings. Values are as-reported; restatements supersede originals. Values reported in .
| Line item |
|---|
| Period ending |
Forward-Looking Statements
This Quarterly Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements relate to, among other things, our markets and industry, products and strategy, the impact of import and export regulation changes, the expected benefits of our acquisitions, macroeconomic conditions, including supply chain conditions and inventory management by our customers, instability and uncertainty in the banking and financial services markets, and tightening credit markets on our business and results of operations, sales, gross margins, operating expenses, capital expenditures and requirements, liquidity, product development and research and development efforts, manufacturing plans, litigation, effective tax rates and tax reserves, our corporate and financial reporting structure, our plans for growth and innovation, our expectations regarding U.S.-China relations, market and regulatory conditions, trends and uncertainties in our business and financial results, and are often identified by the use of words such as, but not limited to, “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “project,” “seek,” “should,” “target,” “will,” “would,” “contemplate,” “predict,” “potential” and similar expressions or variations intended to identify forward-looking statements. These statements are based on the beliefs and assumptions of our management, which are in turn based on information currently available to management. Such forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section entitled “Risk Factors” included under Part II, Item 1A of this Quarterly Report. Furthermore, such forward-looking statements speak only as of the date of this report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.
49
Overview
We are an industry-leading provider of optical and photonic products defined by revenue and market share. Our products are essential to a range of cloud, artificial intelligence and machine learning (“AI/ML”), telecommunications, consumer, and industrial end-market applications.
We believe the global markets in which Lumentum participates have fundamentally robust, long-term trends that will increase the need for our photonics products and technologies. We believe the world is becoming more reliant on ever-increasing amounts of data flowing through optical networks and data centers. Lumentum’s products and technology enable the scaling of these optical networks and data centers to higher capacities. AI/ML has caused a dramatic surge in the growing demands on data networking in cloud data centers and accelerated the usage of optical components and modules. We expect that the accelerating shift to digital and virtual approaches to many aspects of work and life will continue into the future. Virtual meetings, video calls, and hybrid in-person and virtual environments for work and other aspects of life will continue to drive strong needs for bandwidth growth and present dynamic new challenges that our technologies address. As manufacturers demand higher levels of precision, new materials, and factory and energy efficiency, suppliers of manufacturing tools globally are turning to laser-based approaches, including the types of lasers Lumentum supplies. Laser-based 3D sensing and LiDAR for security, industrial and automotive applications are rapidly developing markets. The technology enables computer vision applications that enhance security, safety, and new functionality in the electronic devices that people rely on every day. The use of LiDAR and in-cabin 3D sensing in automobile and delivery vehicles will over time significantly add to our long-term market opportunity.
To maintain and grow our market and technology leadership positions, we are continually investing in new and differentiated products and technologies and customer programs that address both nearer-term and longer-term growth opportunities, both organically and through acquisitions, as well as continually improving and optimizing our operations. Over many years, we have developed close relationships with market leading customers. We seek to use our core optical and photonic technology and our volume manufacturing capability to expand into attractive emerging markets that benefit from advantages that optical or photonics-based solutions provide.
We disaggregate revenue by type of product, which are Components and Systems, and by geography. A Components product is defined as one of the individual building blocks that goes into creating a larger solution. It is typically not a complete product on its own but rather a specialized element that enables system functionality. This includes semiconductor laser chips, laser sub-assemblies, line subsystems and wavelength management systems. These are supplied to customers who then integrate them into their own full system solutions. Components represent foundational parts that support or enable that system’s operation and include a comprehensive portfolio of optical and photonic chips, components, laser light sources that are integrated into smartphones, subsystems supplied to cloud data center operators, AI/ML infrastructure providers, and network equipment manufacturer customers who are building cloud data center and network infrastructures.
A Systems product is defined as a complete, stand-alone product that delivers full functionality to the end customer. It is typically self-contained and ready to operate within a customer’s network or application environment. This includes optical modules, optical circuit switches, and industrial lasers such as short-pulse solid-state lasers and kilowatt-class fiber lasers. These products integrate multiple technologies and subsystems into a finished solution that directly addresses a customer’s needs. A system represents the end-product that can be deployed and used independently.
Our products enable high-capacity optical links for cloud computing, AI/ML workloads, and data center interconnect (“DCI”) applications, as well as for communications service provider networks. Our offerings support access (local), metro (intracity), long-haul (intercity and global), and submarine (undersea) network infrastructure. Our products serve enterprise network infrastructure needs, including storage area networks (“SANs”), local area networks (“LANs”), and wide area networks (“WANs”). Demand for our products is fueled by the ongoing expansion of network capacity required to support cloud services, AI/ML processing, streaming video, video conferencing, wireless and mobile connectivity, and the internet of things (“IoT”). In addition, our industrial laser products are used for precision material processing across diverse industries, including semiconductor and microelectronics fabrication, electric vehicle and battery production, metal cutting and welding, and advanced manufacturing that emphasize greater manufacturing precision, flexibility, and sustainability.
50
Operating Segment Information
Prior to fiscal year 2026, we operated in two reportable segments consisting of Cloud & Networking and Industrial Tech. During the first quarter of fiscal year 2026, we implemented a re-organization, and we are now managed as a single, integrated enterprise, with a unified management team overseeing operations across the entire company, rather than through discrete operating segments. The chief operating decision maker (“CODM”) is the Company’s Chief Executive Officer, who reviews financial information presented as a single enterprise for purposes of allocating resources and evaluating financial performance.
The CODM assesses the performance of the single segment and allocates resources based on consolidated net income (loss) included in the Company’s condensed consolidated statements of operations. The CODM uses consolidated net income (loss) to set budgets, evaluate performance, review actual results and in deciding whether to reinvest profits into our business, pursue acquisitions, or make any other capital management decisions. The significant segment expenses are reflected in the Company’s condensed consolidated statements of operations and the condensed consolidated statements of cash flows. The measure of the single segment assets is the consolidated assets included in the condensed consolidated balance sheets. Accordingly, following the reorganization, we determined we operate in a single reporting segment. Comparative prior period segment information has been updated to reflect the new segment structure and measures. The changes in our operating segments had no impact on our previously reported consolidated results of operations, financial position or cash flows.
Industry Conditions
Through fiscal year 2024, we experienced significant fluctuations in demand as customers delayed projected shipments or built up inventory in response to supply shortages and then brought down inventories as supply chain constraints eased. Our revenue fluctuated in response to these changes in demand and our margins were adversely impacted as we were not able to fully recover costs, such as underutilized manufacturing capacity. However, beginning in the first quarter of fiscal year 2025, network equipment manufacturers normalized inventory levels and we have seen increasing demand from AI and cloud customers as they continue to expand their data centers. In fiscal year 2026, we have continued to experience increasing demand, driven in part by the continued advances in cloud and AI infrastructure. This demand is outpacing our current supply which has required us to make decisions on supply allocation. We are investing in manufacturing capacity, both internally and with contract manufacturers, to meet demand.
Our supply chain is complex, and we need to manage supply of certain components required to build our products while confronted with fluctuating demand from our customers. From time to time, we experience logistics and supply chain issues and shortages of the types of components we and our customers require in our products, and we have had to incur incremental supply and procurement costs in order to increase our ability to fulfill demands from our customers.
Due to worldwide operations, we and our customers are also subject to risks relating to the global trade environment. The Company is actively monitoring and assessing the global trade environment, particularly with respect to recent changes and proposed changes in tariff regulations and trade restrictions. The ongoing uncertainty surrounding trading policies, including the potential for additional tariffs, restrictions related to our customers and retaliatory measures by non-U.S. governments, continues to create a volatile environment that could disrupt our operations. The imposition of tariffs on certain imported goods and materials and export controls on critical components may increase our costs and place upward pressure on the cost of goods sold, which, in turn, may reduce our gross margins if we are unable to pass these costs on to customers through price increases or have them pay for the tariffs directly.
If these tariff-related and restriction-related cost increases persist or escalate, our financial results could be adversely affected, including lower profitability. Additionally, changes in the global trade landscape could result in reduced market competitiveness and a slowdown in consumer demand as well as disruptions to our supply chain, including longer lead times, higher shipping costs, or limited availability of key inputs. This may constrain our ability to meet customer demand in a timely manner, potentially affecting our revenue growth and operational efficiency. The impact of tariffs on our business is hard to predict, as it is dependent on negotiations with customers and suppliers and other mitigation efforts and potential further changes in global trade policies, including higher tariffs or trade restrictions in the U.S. or other countries.
For more information on risks associated with supply chain constraints and customer inventory management, see the section titled “Risk Factors” in Item 1A of Part II of this report.
51
Critical Accounting Policies and Estimates
Our condensed consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) as set forth in the Financial Accounting Standards Board’s Accounting Standards Codification (“ASC”). We also consider the various staff accounting bulletins and other applicable guidance issued by the United States Securities and Exchange Commission (“SEC”). GAAP, as set forth within the ASC, requires us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented. To the extent there are differences between these estimates, judgments or assumptions and actual results, our financial statements will be affected. The accounting policies that reflect our more significant estimates, judgments and assumptions and which we believe are the most critical to aid in fully understanding and evaluating our reported financial results include the following:
•Inventory Valuation
•Revenue Recognition
•Income Taxes
•Business Combinations
•Goodwill and Intangible Assets - Impairment Assessment
Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in Part II, Item 7 of our Annual Report on Form 10-K for our fiscal year ended June 28, 2025 provides a complete discussion of our critical accounting policies and estimates. There have been no changes to these policies during the three and nine months ended March 28, 2026, except as noted below:
Income Taxes
In accordance with the authoritative guidance on accounting for income taxes, we recognize income taxes using an asset and liability approach. This approach requires the recognition of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in our consolidated financial statements or tax returns. The measurement of current and deferred taxes is based on provisions of the enacted tax law, and the effects of future changes in tax laws or rates are not anticipated.
The authoritative guidance provides for recognition of deferred tax assets if the realization of such deferred tax assets is more likely than not to occur based on an evaluation of both positive and negative evidence and the relative weight of the evidence. We consider future growth, forecasted earnings, future taxable income, the mix of earnings in the jurisdictions in which we operate, historical earnings, taxable income in prior years, if carry-back is permitted under the law, and prudent and feasible tax planning strategies in determining the need for a valuation allowance.
In the event we determine that we would not be able to realize all or part of our net deferred tax assets in the future, an adjustment to the deferred tax assets valuation allowance would be charged to earnings in the period in which we make such a determination, or goodwill would be adjusted at our final determination of the valuation allowance related to an acquisition within the measurement period. Conversely, if we later determine that it is more likely than not that all or a portion of the net deferred tax assets will be realized, we would reverse the applicable portion of the previously established valuation allowance. A release of valuation allowance decreases income tax expense in the period of release, increases net income, and reduces our effective tax rate. Such releases may be material to our financial statements depending on the size of the deferred tax assets involved.
In the fourth quarter of fiscal year 2025, we released $153.1 million of valuation allowances on our UK deferred tax assets after we considered all available positive and negative evidence related to our UK subsidiary. We analyzed the UK subsidiary’s historical operating results, projected future taxable income, tax planning strategies, and reversals of deferred tax liabilities, and determined that the weight of available objectively verifiable positive evidence supported the realizability of the UK deferred tax assets. In weighing the available evidence, more weight was placed upon our forecasts of future taxable income than on the history of pre-tax losses as such losses were generated under our prior UK business operating model which will no longer be in effect beginning with fiscal year 2026, and the guarantee of a positive operating margin as we effectuated an internal restructuring at the end of fiscal year 2025. Further, the most significant deferred tax asset in the UK is the net operating loss carryforward. Under UK tax law, net operating losses may be carried forward indefinitely, and we have considered the indefinite carryforward period to be positive evidence.
52
We are subject to income tax audits by the respective tax authorities of the jurisdictions in which we operate. The determination of our income tax liabilities in each of these jurisdictions requires the interpretation and application of complex, and sometimes uncertain, tax laws and regulations. The authoritative guidance on accounting for income taxes prescribes both recognition and measurement criteria that must be met for the benefit of a tax position to be recognized in the financial statements. If a tax position taken, or expected to be taken, in a tax return does not meet such recognition or measurement criteria, an unrecognized tax benefit liability is recorded. If we ultimately determine that an unrecognized tax benefit liability is no longer necessary, we reverse the liability and recognize a tax benefit in the period in which it is determined that the unrecognized tax benefit liability is no longer necessary.
Our income tax provision is highly dependent on the geographic distribution of our worldwide earnings or losses, tax laws and regulations in various jurisdictions, tax incentives, the availability of tax credits and loss carryforwards, and the effectiveness of our tax planning strategies. The application of tax laws and regulations is subject to legal and factual interpretation, judgment and uncertainty. Tax laws themselves are subject to change as a result of changes in fiscal policy, changes in legislation, and the evolution of regulations and court rulings and tax audits.
The recognition and measurement of current taxes payable or refundable and deferred tax assets and liabilities requires that we make certain estimates and judgments. Changes to these estimates, including changes in judgment regarding the realizability of deferred tax assets and the need for or release of valuation allowances, may have a material impact on our tax provision, net income, and effective tax rate in a future period.
Recently Issued Accounting Pronouncements
Refer to “Note 2. Recently Issued Accounting Pronouncements” in the notes to condensed consolidated financial statements.
Results of Operations
The results of operations for the periods presented are not necessarily indicative of results to be expected for future periods. The following table summarizes selected unaudited condensed consolidated statements of operations items as a percentage of net revenue:
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||
| March 28, 2026 | March 29, 2025 | March 28, 2026 | March 29, 2025 | |||||||||||||||||||
| Net revenue by type of products: | ||||||||||||||||||||||
| Components | 66.0 | % | 70.7 | % | 67.5 | % | 68.4 | % | ||||||||||||||
| Systems | 34.0 | 29.3 | 32.5 | 31.6 | ||||||||||||||||||
| Net revenue | 100.0 | 100.0 | 100.0 | 100.0 | ||||||||||||||||||
| Cost of sales | 53.4 | 66.7 | 58.3 | 68.8 | ||||||||||||||||||
| Amortization of acquired developed intangibles | 2.4 | 4.5 | 2.9 | 5.4 | ||||||||||||||||||
| Gross profit | 44.2 | 28.8 | 38.8 | 25.8 | ||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||
| Research and development | 11.2 | 17.9 | 12.6 | 19.3 | ||||||||||||||||||
| Selling, general and administrative | 11.2 | 26.3 | 13.5 | 22.7 | ||||||||||||||||||
| Restructuring and related charges | 0.2 | 1.7 | 0.5 | 1.5 | ||||||||||||||||||
| Gain on sale of facility | — | (8.2) | — | (3.0) | ||||||||||||||||||
| Total operating expenses | 22.6 | 37.7 | 26.6 | 40.5 | ||||||||||||||||||
| Income (loss) from operations | 21.6 | (8.9) | 12.2 | (14.7) | ||||||||||||||||||
| Escrow settlement | — | — | 1.4 | — | ||||||||||||||||||
| Interest expense | (0.8) | (1.3) | (0.9) | (1.5) | ||||||||||||||||||
| Other income, net | 1.9 | 1.0 | 1.5 | 2.4 | ||||||||||||||||||
| Income (loss) before income taxes | 22.7 | (9.2) | 14.2 | (13.8) | ||||||||||||||||||
| Income tax provision | 4.9 | 1.2 | 2.9 | 2.3 | ||||||||||||||||||
| Net income (loss) | 17.8 | % | (10.4) | % | 11.3 | % | (16.1) | % | ||||||||||||||
53
Financial data for the three months ended March 28, 2026
The following table summarizes selected unaudited condensed consolidated statements of operations items for the periods presented (in millions, except for percentages):
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
| March 28, 2026 | March 29, 2025 | Change | Percentage Change | March 28, 2026 | March 29, 2025 | Change | Percentage Change | |||||||||||||||||||||||||||||||||||||||
| Net revenue by type of products: | ||||||||||||||||||||||||||||||||||||||||||||||
| Components | $ | 533.3 | $ | 300.8 | $ | 232.5 | 77.3 | % | $ | 1,356.2 | $ | 795.9 | $ | 560.3 | 70.4 | % | ||||||||||||||||||||||||||||||
| System | 275.1 | 124.4 | 150.7 | 121.1 | % | 651.5 | 368.4 | 283.1 | 76.8 | % | ||||||||||||||||||||||||||||||||||||
| Net revenue | $ | 808.4 | $ | 425.2 | $ | 383.2 | 90.1 | % | $ | 2,007.7 | $ | 1,164.3 | $ | 843.4 | 72.4 | % | ||||||||||||||||||||||||||||||
| Gross profit | $ | 357.0 | $ | 122.5 | $ | 234.5 | 191.4 | % | $ | 778.6 | $ | 300.0 | $ | 478.6 | 159.5 | % | ||||||||||||||||||||||||||||||
| Gross margin | 44.2 | % | 28.8 | % | 38.8 | % | 25.8 | % | ||||||||||||||||||||||||||||||||||||||
| Research and development | $ | 90.6 | $ | 75.9 | $ | 14.7 | 19.4 | % | $ | 252.1 | $ | 224.4 | $ | 27.7 | 12.3 | % | ||||||||||||||||||||||||||||||
| Percentage of net revenue | 11.2 | % | 17.9 | % | 12.6 | % | 19.3 | % | ||||||||||||||||||||||||||||||||||||||
| Selling, general and administrative | $ | 90.8 | $ | 112.0 | $ | (21.2) | (18.9) | % | $ | 272.0 | $ | 264.6 | $ | 7.4 | 2.8 | % | ||||||||||||||||||||||||||||||
| Percentage of net revenue | 11.2 | % | 26.3 | % | 13.5 | % | 22.7 | % | ||||||||||||||||||||||||||||||||||||||
| Restructuring and related charges (reversals) | $ | 1.1 | $ | 7.2 | $ | (6.1) | (84.7) | % | $ | 9.0 | $ | 17.6 | $ | (8.6) | (48.9) | % | ||||||||||||||||||||||||||||||
| Percentage of net revenue | 0.2 | % | 1.7 | % | 0.4 | % | 1.5 | % | ||||||||||||||||||||||||||||||||||||||
| Gain on sale of facility | $ | — | $ | (34.9) | $ | 34.9 | (100.0) | % | $ | — | $ | (34.9) | $ | 34.9 | (100.0) | % | ||||||||||||||||||||||||||||||
| Percentage of net revenue | — | % | (8.2) | % | — | % | (3.0) | % | ||||||||||||||||||||||||||||||||||||||
54
Net Revenue
Net revenue increased by $383.2 million, or 90.1%, during the three months ended March 28, 2026 compared to the three months ended March 29, 2025, driven by a $232.5 million increase in Components products and $150.7 million increase in Systems products.
The increase in Components products was primarily driven by the ramp of laser chip and laser assembly product shipments to support strong, broad-based demand across intra-data center, data center interconnect, and long-haul applications. Additionally, a slight increase in average selling prices of laser chip products contributed to the increase in Components revenue driven primarily by a shift to 200G lane speeds. The remaining approximately 12% of Components revenue growth was due to an increase in shipment volume of data transport products, encompassing line subsystems solutions for long-haul terrestrial networks and charge pump products used in sub-sea network installations.
The increase in our Systems products was primarily driven by our cloud transceiver product lines which increased by more than $137.0 million due to higher shipment volume, partially offset by lower average selling prices. We also continued the initial phase of optical circuit switch shipments, which contributed more than $25.0 million in revenue during the three months ended March 28, 2026, and we remain on track for manufacturing expansion over the coming quarters to support future growth.
Net revenue increased by $843.4 million, or 72.4%, during the nine months ended March 28, 2026 compared to the nine months ended March 29, 2025, driven by a $560.3 million increase in Components products and a $283.1 million increase in Systems products.
The increase in Components products was primarily driven by the ramp of laser chip and laser assembly product shipments to support strong, broad-based demand across intra-data center, data center interconnect, and long-haul applications. Additionally, a slight increase in average selling prices of laser chip products contributed to the increase in Components revenue driven primarily by a shift to 200G lane speeds. The remaining approximately 19% of Components revenue growth was due to an increase in shipment volume of data transport products, encompassing line subsystems solutions for long-haul terrestrial networks and charge pump products used in sub-sea network installations.
The increase in our System products was primarily driven by our cloud transceiver product lines which increased by more than $268.0 million due to an increase in shipment volume, partially offset by lower average selling prices. We also continued the initial phase of optical circuit switch shipments, which contributed more than $38.0 million of revenue during the nine months ended March 28, 2026.
During the three months ended March 28, 2026, two customers individually accounted for 26% and 12% of our total revenue, respectively. During the nine months ended March 28, 2026, two customers individually accounted for 24% and 16% of our total net revenue, respectively. We had no other customers that represented 10% or greater of our total net revenue.
55
Revenue by Region
We operate in three geographic regions: Americas, Asia-Pacific, and EMEA (Europe, Middle East, and Africa). Net revenue is assigned to the geographic region and country where our product is initially shipped. For example, certain customers may request shipment of our product to a contract manufacturer in one country, which may differ from the location of their end customers.
The following table presents net revenue by the three geographic regions we operate in and net revenue from countries that generally represented 10% or more of our total net revenue based on customer shipping locations (in millions, except percentage data):
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
| March 28, 2026 | March 29, 2025 | March 28, 2026 | March 29, 2025 | |||||||||||||||||||||||||||||||||||||||||||
| Amount | % of Total | Amount | % of Total | Amount | % of Total | Amount | % of Total | |||||||||||||||||||||||||||||||||||||||
| Net revenue: | ||||||||||||||||||||||||||||||||||||||||||||||
| Americas: | ||||||||||||||||||||||||||||||||||||||||||||||
| United States | $ | 185.9 | 23.0 | % | $ | 70.5 | 16.6 | % | $ | 424.3 | 21.1 | % | $ | 213.5 | 18.3 | % | ||||||||||||||||||||||||||||||
| Mexico | 103.4 | 12.8 | 38.8 | 9.1 | 279.6 | 13.9 | 110.1 | 9.5 | ||||||||||||||||||||||||||||||||||||||
| Other Americas | 1.6 | 0.2 | 6.4 | 1.5 | 12.2 | 0.7 | 13.5 | 1.2 | ||||||||||||||||||||||||||||||||||||||
| Total Americas | $ | 290.9 | 36.0 | % | $ | 115.7 | 27.2 | % | $ | 716.1 | 35.7 | % | $ | 337.1 | 29.0 | % | ||||||||||||||||||||||||||||||
| Asia-Pacific: | ||||||||||||||||||||||||||||||||||||||||||||||
| Hong Kong | $ | 136.0 | 16.8 | % | $ | 96.5 | 22.7 | % | $ | 347.8 | 17.3 | % | $ | 285.7 | 24.5 | % | ||||||||||||||||||||||||||||||
| Thailand | 176.8 | 21.9 | 79.1 | 18.6 | 408.9 | 20.4 | 206.3 | 17.7 | ||||||||||||||||||||||||||||||||||||||
| China | 70.2 | 8.7 | 31.4 | 7.4 | 174.1 | 8.7 | 64.1 | 5.5 | ||||||||||||||||||||||||||||||||||||||
| Japan | 29.2 | 3.6 | 20.8 | 4.9 | 74.0 | 3.7 | 56.1 | 4.8 | ||||||||||||||||||||||||||||||||||||||
| Other Asia-Pacific | 52.7 | 6.5 | 39.4 | 9.3 | 157.9 | 7.8 | 101.3 | 8.7 | ||||||||||||||||||||||||||||||||||||||
| Total Asia-Pacific | $ | 464.9 | 57.5 | % | $ | 267.2 | 62.9 | % | $ | 1,162.7 | 57.9 | % | ||||||||||||||||||||||||||||||||||
Recent insider activity
| Date | Insider | Role | Action | Shares | Price | Value |
|---|---|---|---|---|---|---|
| 2026-06-02 | Harris Isaac Hosojiro | Director | Sell | -1,416 | $1,000.08 | -$1,416,115 |
| 2026-05-29 | Harris Isaac Hosojiro | Director | Sell | -4,000 | $860.00 | -$3,440,000 |
| 2026-05-21 | Small Ian | Director | Sell | -4,954 | $868.07 | -$4,300,419 |
| 2026-05-18 | Wupen Yuen | PRESIDENT, GLOBAL BUS. UNITS | Sell | -3,210 | $953.95 | -$3,062,180 |
| 2026-05-18 | Retort Vincent | SEE REMARKS | Sell | -3,183 | $953.95 | -$3,036,423 |
| 2026-05-18 | Kim Jae | SVP, GENERAL COUNSEL | Sell | -1,422 | $953.95 | -$1,356,517 |
| 2026-05-18 | Ali Wajid | EVP & CHIEF FINANCIAL OFFICER | Sell | -2,487 | $953.95 | -$2,372,474 |
| 2026-05-15 | Fletcher Pamela | Director | Sell | -1,578 | $940.82 | -$1,484,614 |
| 2026-05-14 | Fletcher Pamela | Director | Sell | -1,577 | $1,003.38 | -$1,582,322 |
| 2026-05-11 | Lillie Brian | Director | Sell | -12,000 ×31 | $981.73 | -$11,780,774 |
| 2026-05-11 | Kim Jae | SVP, GENERAL COUNSEL | Sell | -1,933 | $950.99 | -$1,838,264 |
| 2026-05-08 | Small Ian | Director | Sell | -3,500 ×3 | $911.17 | -$3,189,108 |
Source: SEC Form 4 filings.
Next expected filings
- ~2026-08-18 10-K expected by 2026-08-25 (in 64 days)
- ~2026-11-04 10-Q expected by 2026-11-05 (in 142 days)
- ~2027-02-03 10-Q expected by 2027-02-04 (in 233 days)
- ~2027-05-05 10-Q expected by 2027-05-06 (in 324 days)
Predicted from historical filing cadence; not an SEC commitment.
Recent SEC filings
- 2026-06-01 8-K Unregistered Equity Sale
- 2026-05-06 10-Q Quarterly Report
- 2026-05-05 8-K Earnings Release; Financial Statements and Exhibits
- 2026-04-08 8-K Unregistered Equity Sale
- 2026-03-02 8-K Unregistered Equity Sale; Bylaws/Articles Amended; Regulation FD Disclosure; Financial Statements and Exhibits
- 2026-02-04 10-Q Quarterly Report
- 2026-02-03 8-K Earnings Release; Financial Statements and Exhibits
- 2026-01-05 8-K Officer/Director Change
- 2025-12-22 8-K Material Agreement Entered; Material Financial Obligation; Financial Statements and Exhibits
- 2025-12-15 8-K Officer/Director Change; Financial Statements and Exhibits
- 2025-11-24 8-K Officer/Director Change; Shareholder Vote Results; Financial Statements and Exhibits
- 2025-11-05 10-Q Quarterly Report
- 2025-11-04 8-K Earnings Release; Financial Statements and Exhibits
- 2025-09-08 8-K Material Agreement Entered; Material Financial Obligation; Unregistered Equity Sale; Other Events; Financial Statements and Exhibits
- 2025-08-19 10-K Annual Report