AI infrastructure is becoming increasingly constrained by networking.

Lumentum builds the optical components that allow massive AI clusters to move data fast enough to keep those systems working efficiently.

A modern AI cluster can contain tens of thousands of GPUs. Those GPUs constantly exchange enormous amounts of data with each other. As clusters get larger and bandwidth requirements rise, electrical connections become less practical over distance because they consume more power and lose signal quality.

Lumentum makes high-speed optical transceivers, laser transmitters, photonic integrated circuits, photodiodes, coherent components, and high-power laser sources used inside data centers and between data centers. These products convert electrical signals into light, transmit that data over fiber, and then convert it back again.

Basically, Lumentum provides the optical technology that allows those networks to move enormous amounts of data at extremely high speeds. And the amount of optics required per AI cluster keeps increasing.

Lumentum is already moving from 800G products toward 1.6T optical modules, with 3.2T becoming the next step. Its current 1.6T DR4 design uses 4 x 400G EML lasers and is specifically targeted at hyperscale AI data centers.

Every time hyperscalers add more GPUs, they also need more switches, more fiber, more transceivers, and more lasers.

Today, optical transceivers generally sit at the front of a switch and connect back to the switch chip electrically. As bandwidth moves toward 3.2T and beyond, those electrical connections become increasingly inefficient. Co-packaged optics moves the optical engine much closer to the switch or accelerator itself. That reduces electrical distance and can lower power consumption, which is becoming extremely important as AI clusters consume more power.

But those optical engines still need lasers.

Lumentum is developing external laser source modules for these architectures, including ultra-high-power lasers designed specifically for CPO and near-packaged optics. The company recently demonstrated an 8-wavelength external laser module aimed at next-generation AI scale-up infrastructure, with initial availability expected in the first half of 2027.

The financial acceleration already shows how powerful that demand has become.

• Fiscal 2026 revenue reached $3.0 billion, up 83% from $1.65 billion the year before.

• In Q4 alone, revenue reached $1.01 billion, up 109% year over year and 25% sequentially.

• Non-GAAP gross margin expanded from 37.8% to 50.4% year over year.

• Non-GAAP operating margin went from 15.0% to 36.6%.

For fiscal 2026, Lumentum reported a GAAP net loss of $6.94B, but that was driven by a $7.76B non-cash loss on debt extinguishment related to convertible notes. So that does not reflect the underlying operating performance of the business.

The better number is non-GAAP net income.

Lumentum generated $782.3M of non-GAAP net income in FY2026, up from $146.4M in FY2025. That is more than a 5x increase in 1 year. Non-GAAP EPS increased from $2.06 to $8.67.

For the next quarter, management guided to $1.225 billion to $1.275 billion of revenue and roughly 40% non-GAAP operating margins.

And the current numbers are still relatively early in the product cycle.

Capacity is just starting to expand. Lumentum is building out a new 240,000-square-foot manufacturing facility in North Carolina for advanced indium phosphide optical products, including CW and ultra-high-power lasers used in large AI data centers.

You don’t add major manufacturing capacity for a temporary 1 or 2 quarter spike.

It’s been consolidating since March and now just broke out to new all-time highs. It’s still light on volume but if the general market is supportive this could be an incredible setup.