Lumentum (LITE) Deutsche Bank 2026 Technology Conference summary

Industry transformation and optical connectivity trends

• Data center connectivity bottleneck has shifted from chips to interconnects, with optics now essential as copper's reach is limited at higher speeds like 1.6T and beyond.

• Optics are increasingly deployed inside racks and clusters, not just for long-distance scale-out, driving significant growth in demand.

• The transition from electrical to optical is seen as inevitable due to physical limitations of copper, with no electrical roadmap beyond 448G.

• New markets are emerging for optics inside trays, connecting high-bandwidth components like GPUs and memory.

• The total addressable market (TAM) for optical circuit switches (OCS) is expected to exceed previous $8 billion estimates, with rapid adoption and power/loss advantages over electrical switches.

Product and technology developments

• OCS shipments have doubled sequentially, with revenue expected to surpass $100 million next quarter; largest customers have significantly increased orders.

• Guidance for $40 of earnings power by fiscal 2028 is driven by OCS growth and margin profile.

• CPO (co-packaged optics) and NPO (near-packaged optics) are viewed as additive, not competitive, with both expected to drive near-term growth.

• EML (electro-absorption modulated laser) ASPs double from 100G to 200G, with 200G EMLs facing little competition; at 3.2T, EML share is expected to rise again as silicon photonics loses some advantages.

• NPO is seen as a larger near-term opportunity than CPO, with high adoption rates and new packaging forms enabling broader customer participation.

Supply chain, manufacturing, and capacity expansion

• Greensboro fab will see first revenue in 2028 and full production in 2029, with multibillion-dollar LTAs and customer investments underwriting capacity.

• NPO demand is accelerating, potentially requiring additional capacity sooner than expected, with late 2027 to early 2028 now seen as an inflection point.

• Time is the main constraint in scaling capacity, with long cycles for equipment deployment, product qualification, and customer validation.

• Substrate supply remains a challenge, with multiple deals secured but ongoing risk due to high demand.

• Manufacturing and design are tightly integrated, providing a competitive moat and enabling high-quality, reliable lasers.