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08 Nov 2024
CEO Alan Lowe explained firm’s “three-pronged strategy” to grow cloud data center business.
Optical communications technology developer Lumentum has this week reported results for its fiscal first quarter (of 2025), which ended on September 28th. “In the first quarter, we exceeded the high end of our guidance for both revenue and earnings per share,” said Alan Lowe, President and CEO, addressing an analysts conference, Thursday.“We set a new record for datacom laser chip orders, including substantial 200G EML orders, reflecting strong demand from multiple customers, including an AI infrastructure customer. Based on expanding cloud demand and improving trends in the broader networking market, we expect double-digit sequential revenue growth in the second quarter,” he said.
Lowe added, “We advanced our strategy to expand and diversify our cloud and AI business. We secured an additional hyperscale transceiver customer with a new qualification and initial volume order. This is beyond the new award we highlighted last quarter. We expect to start shipping volume production against these new orders in the first half of calendar 2025, and they will ramp through the year, consistent with the revenue target we set out previously.”
He explained Lumentum’s “three-pronged strategy to grow its cloud data center business”, which he has been developing in the past year. “The first prong is to expand our cloud and AI customer opportunities at the component and transceiver levels as customers migrate to higher speeds. The second is to scale significant production capacity for components and transceivers outside of China. And the third is to advance our differentiated technology roadmaps, enabling customers to scale future generations of cloud and AI data center architectures to higher compute capacities in a more cost-effective and power-efficient manner.”
‘Tariff positioning’During the conference, which took place on the day of the announcement of the re-election of Donald Trump as U.S. President, analyst Ananda Baruah from Loop Capital asked, “I would love to get your thoughts, Alan, on how to think about tariff positioning, tariff risk, a hot topic these days, in the context of diversifying out of China?”
Lowe replied, “I don't think our strategy is changing based on who is going to be in the White House. We’ve been on a strategy to be a U.S. headquartered company with manufacturing outside of China. And that is not changing as a result of potentially increased tariffs.
“So, I would say that it positions us very well as we’ve had an established manufacturing facility that we're growing dramatically in Thailand. And our laser chips come out of the U.S. as well as the U.K. and Japan. So from that perspective, I think we're as tariff-free as you can get with respect to our future.”
“I don't think any strategy change is happening. But I’d say that, that resonates with a lot of our customers who want to have supply chain resilience, and we provide that for them, both with vertical integration as well as a limited footprint in China and a growing footprint outside of China.”
Business outlook
Lumentum expects the following for the fiscal second quarter 2025:
Considering the forthcoming quarter (Q2, 2205) Wajid Ali, EVP and CFO, told the analysts: “This Q2 revenue forecast includes the following assumptions; Cloud and Networking to be up sequentially with strong growth in products addressing cloud applications and improving networking customer demand and Industrial Tech to be approximately flat sequentially with increased industrial laser shipments offset by a decline in 3D sensing.
Ali added, “Based on this, we project second quarter non-GAAP operating margin to be in the range of 5.5% to 7.5% and diluted net income per share to be in the range of $0.30 to $0.40. Our non-GAAP EPS guidance for the second quarter is based on a non-GAAP annual effective tax rate of 16.5%. These projections also assume an approximate share count of 69.6 million shares.”
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