Lumentum Holdings Inc. Q3 FY2025 earnings call

Michael Hurlston reflected on his first 90 days as CEO, noting confidence in Lumentum's position in cloud and AI. Cloud & Networking segment grew due to strong cloud customer demand, with record EML chip shipments and progress in CPO and OCS. Industrial Tech segment saw revenue decline but actions taken to rationalize the portfolio. Wajid Ali discussed non-GAAP financial results, including margins and expenses, and CapEx investments in Cloud & Networking.

Cloud & Networking segment revenue was $365.2 million in Q3, increasing 8% sequentially and 16% year-over-year. Industrial Tech segment revenue was $60 million in Q3, down 5% sequentially but up 14% year-over-year.

For Q4 2025, net revenue is expected to be in the range of $440 million to $470 million. Non-GAAP operating margin is projected to be in the range of 13% to 14%, and non-GAAP diluted net income per share is expected to be between $0.70 and $0.80 per share. There's a 100-basis-point reduction in overall company gross margin primarily due to higher material costs and tariffs.

Macro uncertainty, tariff dynamics, and export controls present near-term challenges. The impact of tariffs on the supply chain and broader geopolitical dynamics remain highly uncertain.

Q: About achieving the $500 million revenue target by end of calendar year and Datacom chip business tracking.

A: Michael Hurlston said on track for $500 million, tracking well on EMLs with demand outstripping supply. Wupen Yuen added on CW laser ramp.

Q: Unpacking tariff assumptions and CPO role.

A: Wajid Ali discussed tariff headwind from component costs and production move to Thailand. Wupen Yuen talked about CPO being multiyear prospect with ramp volume in 2026.

Q: Transceiver business, EML vs CW lasers, and insourcing.

A: Michael Hurlston said near-term transceivers use externally sourced CW lasers, plan to insource early 2026.

Q: Margin improvement on Cloud & Networking and tariffs on Thailand.

A: Wajid Ali discussed margin improvement from production move and tariff impact. Michael Hurlston talked about manufacturing shift to Thailand.

Q: Transceiver growth, 200-gig EML ramp, and telecom shifts.

A: Michael Hurlston and Wupen Yuen talked about transceiver growth drivers, 200-gig EML ramp not cannibalizing 100-gig, and telecom shifts to DCI driving growth.

Q: Telecom performance, production move from contract manufacturers.

A: Michael Hurlston and Wajid Ali discussed telecom performance and production move to in-house for Cloud & Networking.

Q: Transceiver guidance caution and telecom business.

A: Wajid Ali and Michael Hurlston talked about guidance prudence and telecom business growth.

Q: Co-packaged optics traction and economic difference from transceivers.

A: Wupen Yuen discussed co-packaged optics taking time to gain traction and explained economic difference from transceivers.