Release Date: November 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Lumentum Holdings Inc (LITE, Financial) exceeded the high end of their guidance for both revenue and earnings per share in the first quarter.
- The company set a new record for Datacom laser chip orders, reflecting strong demand from multiple customers, including an AI infrastructure customer.
- Lumentum Holdings Inc (LITE) secured an additional hyperscale transceiver customer with new qualifications and initial volume orders.
- The company is on track to increase EML production capacity by 40% in Q4 of fiscal 2025 compared to Q4 of fiscal 2024.
- Lumentum Holdings Inc (LITE) anticipates strong sequential growth in their cloud and networking revenue in fiscal Q2 due to rapid growth in products addressing cloud and AI applications.
Negative Points
- The industrial tech segment revenue was down 38% from the same quarter last year, indicating challenges in the industrial end market.
- Despite increased investment in expanding cloud opportunities, operating expenses were lower due to restructuring actions, which may indicate cost-cutting measures.
- The company expects to be on allocation for Indium Phosphide capacity throughout calendar year 2025, indicating supply constraints.
- Lumentum Holdings Inc (LITE) is experiencing a sequential decline in 3D sensing revenue, which could impact future growth in this segment.
- The company faces challenges in scaling production capacity for components and transceivers outside of China, which is essential for ensuring a secure and reliable supply chain.
Q & A Highlights
Q: Can you break down the expected quarter-over-quarter increase in cloud and networking revenue?
A: Alan Lowe, President and CEO, explained that the increase is a mix of factors. Datacom chip growth will be limited until more capacity is added in future quarters. Telecom growth is modest, primarily driven by DCI applications. The significant increase will come from Datacom modules, which are expected to continue growing through 2025.
Q: How do the new customer wins compare to the original cloud light customer in terms of opportunity magnitude?
A: Alan Lowe noted that the magnitude of opportunity depends on Lumentum's ability to execute and meet customer needs. The new customers will start ramping in the first half of next year, and Lumentum aims to earn a larger share of their business over time.
Q: What is the outlook for the 1.6 Terabit devices market, and what role will Lumentum play?
A: Alan Lowe stated that there is significant interest in 1.6 Terabit devices. Lumentum plans to participate at the component level with 200 G EMLs, which will ramp more towards the summer of next year. The company is also working on transceiver qualifications, with significant ramping expected by the end of next calendar year.
Q: Are there any changes to the timeline for vertical integration with Cloud Light?
A: Alan Lowe confirmed that there are no significant changes to the timeline. Products are being built with Lumentum's lasers and EMLs for qualification, with more product integration expected in calendar 2025, which should help margins later in the year and into 2026.
Q: How is Lumentum positioned regarding tariff risks and diversification out of China?
A: Alan Lowe emphasized that Lumentum's strategy is not changing based on potential tariff increases. The company is well-positioned with manufacturing outside of China, including a growing facility in Thailand, and laser chip production in the US, UK, and Japan, providing supply chain resilience.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
