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10 Feb 2025
Photonics firm buoyed by data center demand, InP capacity expansion, and ultrafast laser applications.
Optics and photonics giant Lumentum has posted sales of $402 million for its latest financial quarter, up 10 per cent year-on-year and just beating earlier guidance on strong demand for its optical transceivers and externally modulated lasers (EMLs).
Retiring CEO Alan Lowe, who has just been succeeded by Michael Hurlston, told an investor conference call that the latest figures were largely boosted by the need for transceivers inside data centers, and for high-speed optical links between data centers over increasingly large distances.
“Photonics technology is essential to the AI era, today and into the future,” Lowe said, adding that data centers would be built in increasingly geographically dispersed locations where energy is readily available - driving the need for more long-distance optical interconnects.
DeepSeek and tariffs
With significant manufacturing capacity expansions already well under way and new customers lining up for its latest laser products, Lowe said that the company was well positioned to benefit from the AI trend under its new CEO.
He and his executive team also appeared to assuage any fears over the emergence of DeepSeek AI in China and the uncertainty surrounding US trade tariffs. On DeepSeek, he said:
“Discussions with cloud [computing] customers reinforce that advances in software efficiency are key to the long-term viability of the AI business model, just as efficiency gains in optical data transmission are essential for enabling AI in data centers.
“These reports of improved efficiencies highlight a positive trend that strengthens the AI market for both our customers and our business.”
Responding to an investor query on the likely effect of new tariffs on its business, Lumentum’s CFO Wajid Ali indicated that although the company still had some operations in China, the overall impact would be “quite minimal”.
He also pointed out that much of Lumentum’s growth at the moment related to shipments of lasers from its indium phosphide (InP) wafer fabrication facilities in Japan and the UK, meaning that unless there were some very unexpected changes to US policies under its new administration there should not be much of an impact on Lumentum directly, although some of the firm’s customers may be hit.
Ultrafast laser bounce
While optical applications in cloud computing and networking applications dominate Lumentum’s business - accounting for $339 million, or 84 per cent of sales in the latest quarter - Lowe did talk up a recent uptick in industrial demand for the company’s ultrafast lasers.
Although the firm’s industrial division, which includes sales of materials processing lasers and 3D sensing components, reported a 21 per cent year-on-year decline to $63 million, those figures largely reflect the cyclical nature of demand in the 3D sensing sector.
And Lowe said that although demand for industrial lasers remained subdued, Lumentum was committed to providing customers with greater precision on speed for materials processing.
Recent developments include a new 26 kW fiber laser, the most powerful that the company has ever developed, that is now sampling to a key customer. Lowe also cited a strong uptick in demand for the firm’s ultrafast lasers, with a leading tool supplier using the technology in high-volume solar cell production.
The positive momentum means that although Lowe and his team were unable to report a profit for the three months ending December 28, they did more than halve the firm’s pre-tax loss to $42.3 million, down from $102 million a year ago.
With capacity, yields, and shipments all set to increase under new CEO Hurlston, Lowe reiterated his confidence that quarterly sales would rise to the targeted level of $500 million by the end of this year.
Looking back on his ten years at the helm, he added: “We’ve transformed Lumentum, and the photonics industry, positioning the company for continued growth. Serving as Lumentum’s president and CEO has been the highlight of my career.”
• Immediately following the firm’s latest update, Lumentum’s stock price dropped in value by around 7 per cent. Now trading at around $83 on the Nasdaq, the stock is down from its pre-DeepSeek high of just over $100, but has still nearly doubled in value over the past 12 months.
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