 |
 |
04 Feb 2026
Key supplier of photonics for AI infrastructure predicts 'game-changing' shift to optical scale-up from late 2027.
Michael Hurlston, the CEO of photonics technology company Lumentum, has predicted a major shift away from the use of copper for ultra-short links within data centers, as the industry pivots towards further adoption of optical connections.
Discussing the California-headquartered company’s latest financial quarter - in which Lumentum posted another record-breaking sales figure - Hurlston told investors that, following the adoption of optical transceivers, optical circuit switches (OCS), and co-packaged optics (CPO), another shift was becoming evident:
“Now, a fourth growth driver is taking shape, one poised to be a generational game-changer for the industry: optical scale-up,” he said.
“Today, data center architectures have a clear divide. Optical links handle scale-out networking, connecting relatively longer links within the data center. Conversely, copper links dominate scale-up connectivity, referring to the ultra-short reach high-speed paths within a single rack or a cluster.
“While copper has long been the gold standard for scale-up for simplicity and cost, it is hitting a physical wall. An industry pivot is underway to bypass the scaling limits of copper. By late calendar 2027, we would expect our first scale-up CPO shipments replacing longer copper connections.”
Capacity planning
If Hurlston’s outlook is accurate, the anticipated scale of demand would require much higher volumes of photonic component production, with Lumentum already starting to explore its options to meet that demand, including possible acquisitions.
“As we look into the not-so-distant future, it is only right to assume that optics begins to capture more and more of the connectivity, eventually subsuming copper. In response to these demand projections, we have initiated proactive capacity planning,” he said.
“Given the sheer magnitude of the scale-up optics market, we are carefully assessing our projected wafer output plans. We are in active negotiations with leading customers to offset our capital requirements in exchange for long-term supply assurances.”
Regarding the latest accounting period, Hurlston revealed that Lumentum’s sales soared 65 per cent year-over-year, to reach $666 million in the three months ending December 27 as the company cemented its position as a critical part of the AI infrastructure build-out.
“We are now recognized as a foundational engine of the AI revolution,” commented Hurlston. “Virtually every AI network is powered by Lumentum technology, either through our direct hyperscaler partnerships or as the critical component supplier that enables our network equipment manufacturer customers.”
The CEO added that Lumentum had established itself as a market leader in transformative optical technologies, describing its capabilities across OCS, optical scale-out, and optical scale-up as “the envy of the industry”, on top of rapidly growing sales of optical transceivers.
“The headline for this quarter is that the vast majority of this growth is still ahead of us, and we have increased confidence as to the timing and magnitude of the ramps,” Hurlston told investors. “We are only just beginning to unlock the massive potential of OCS and CPO.”
OCS and CPO momentum
While the OCS element is only just emerging, Hurlston suggested that it was now exceeding internal expectations. The firm’s target of an initial $10 million sales in the current quarter was cleared three months ahead of schedule and the OCS backlog has surged to some $400 million, with the majority of that expected to ship later this year.
For CPO, he said that Lumentum had secured an additional “multi-$100 million purchase order” for ultra-high-power lasers to support optical scale-out applications, with shipments set to begin in 2027.
.Such is the current momentum that Hurlston and his executive team have pencilled in even more rapid growth for the current quarter, with sales now expected to rise to between $780 million and $830 million. The mid-point of that guidance is equivalent to an 85 per cent year-on-year rise.
The sales boom is also translating to Lumentum’s bottom line, with pre-tax income of $96.5 million in the December quarter comparing with a loss of $42.3 million a year earlier.
• Following the latest update, Lumentum’s stock price continued its recent meteoric rise, surging by 10 per cent in pre-market trading after the results announcement to reach $480 on the Nasdaq.
Now equivalent to a market capitalization in excess of $30 billion, that stock price is up by a factor of five over the past 12 months, and represents an all-time high since Lumentum was carved out of the JDSU lasers division back in 2015.
 |  |  |  |  |  |  |
| © 2026 SPIE Europe |
|
