Lumentum’s CEO says cloud is driving datacom growth

Lumentum is seeing the fruits of its labor, serving the data center interconnection market with its datacom revenues continuing to show positive signs of growth.

During an investor briefing during the OFC 2025 show in April, Lumentum noted that its customer and product mix shifted to cloud due to demands from cloud and AI customers.

At that time, the vendor noted that it was pacing to get to $500 million in revenues, with 45% of the mix being from datacom and telecom.

Speaking to investors during its fiscal fourth quarter earnings call, Michael Hurlston, CEO of Lumentum, said that its forecast has been taking hold, but datacom is currently outpacing telecom growth.

“We're tracking pretty well in line,” he said. “Datacom is probably running a little bit ahead of telecom, not demand-determined, more related to some of the supply constraints we have on the telecom side, where we are looking to close on.”

He added that from a “demand standpoint, the 45% and 45% were correct, but in terms of what we're actually shipping, we're a little bit more tuned to Datacom because some of the capacity improvements on the telecom side still need to happen for us.”

DCI ZR optics opportunities

As Lumentum ramps up its sales to data center and hyperscaler customers, it is finding opportunities for ZR and ZR+ optical modules, particularly for DCI.

ZR and ZR+ optics are pluggable coherent optical transceivers used for high-capacity to address data center interconnects (DCI) and metro networks, enabling up to 400 Gbps or higher data rates. The "ZR" standard, managed by the OIF, supports point-to-point connections up to 120km, while "ZR+" and the OpenZR+ MSA extend the reach and offer greater flexibility with features like channelization.

Wupen Yuen, president of cloud and networking for Lumentum, noted that the “ZR market is growing very rapidly.”

“There's a very, I would say, a general trend now for most of the hyperscalers to resort to the ZR kind of architecture, moving away from traditional transponder-based architectures,” he said.

Today, Lumentum is forecasting about 30% of annual growth, with 800 ZR gaining interest with hyperscaler customers.

“We think that as a market, the ZR closable modules are a long-term trend that will continue to go up,” Yuen said. “We're not so focused on the module side, but we're definitely looking for opportunities on the component side to participate continuously going forward in the ACR market as well.”

Positioning cloud, CPO and OCS

Besides ZR optics, Lumentum is positioning itself to pursue opportunities in what Hurlston says are three “significant” areas: cloud modules, optical circuit switching (OCS), and co-packaged optics (CPO).

In cloud modules, Lumentum surpassed its goal to increase revenue by 50% quarter-over-quarter.

“Cloud module growth contributed approximately half of the sequential revenue growth in the period,” Hurlston said. “With growth from three of our major hyperscale customers, we expect shipments to grow sequentially in the coming quarters.”

Lumentum is seeing similar momentum in optical circuit switches (OCS). The company recognized its first revenue in the quarter with shipments to two hyperscale customers.

Hurlston said that “not only is our order book expanding with these two customers, but we now have a third hyperscale customer committed to deploy our OCS product in calendar 2026.”

Finally, Lumentum is finding greater footing in CPO. The vendor just secured what it said was the largest single purchase commitment in the company’s history.

To support ultra-high-power lasers, Lumentum has announced an additional investment in our U.S.-based Indium phosphide wafer fab to support it.

Hurlston said, “Investments in this facility will position us for a significant revenue ramp in CPO by the second half of calendar 2026.”

Cloud drives revenue growth

The Cloud and Networking segment was the revenue star in Lumentum’s fourth-quarter earnings.

Fourth quarter Cloud & Networking segment revenue at $424.1 million increased 16% sequentially and 67% year-on-year. Cloud & Networking segment profit at 23.6%, increased 360 basis points sequentially and increased 1,350 basis points year-on-year on higher revenue and favorable product mix.

The performance of the Cloud & Networking segment was driven by its cloud-facing components and transceiver product lines. In components, Lumentum nearly doubled the revenue from EML shipments.

“Our inventory levels increased sequentially to support the expected growth and our Cloud & Networking revenue,” said Wajid Ali, CFO of Lumentum. “In Q4, we invested $59 million in CapEx, primarily focused on manufacturing capacity to support cloud customers.”

Overall, Lumentum’s net revenue was $480.7 million

Looking towards fiscal year 2026, Lumentum has forecasted net revenue to be in the range of $510 million to $540 million.

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