Lumentum’s CEO expects co-packaged optics (CPO) interest to accelerate

Lumentum sees a bright future for co-packaged optics (CPO) as hyperscalers build AI clusters and cite these solutions as key to maintaining steady growth.

The company noted that it expects continued growth in ultra-high-power lasers for the CPO solution, with a broader ramp scheduled for the second half of Calendar Year 2026 (2H CY26).

In August, Lumentum announced an expansion of its U.S.-based semiconductor facility to support AI-Driven CPO. CPO’s potential lies in its integration of optical connectivity in the same package as the host, supporting very high-bandwidth-density links (e.g., multiple Terabits per second per fiber) with very low power consumption over extended distances, enabling larger AI compute clusters spanning multiple equipment racks.

Speaking to investors during its fiscal first quarter 2026 earnings call, Michael Hurlston, CEO of Lumentum, said CPO is one of three growth drivers, alongside cloud transceivers and optical circuit switches.

“Within our Q2 outlook, we are not yet expecting meaningful contributions from optical circuit switches and co-packaged optics,” he said. “In cloud transceivers, we are set to resume sustained growth in fiscal Q2, and this upward trajectory should accelerate over the next 4 to 5 quarters.”

While he did not identify any specific customer, Hurlston noted that the company is having more conversations with other potential customers interested in CPO, with the demand being “stronger than we initially forecast.”

“We're getting engaged now not only with the priority customer that's launching our Switch product, really taking advantage of CPO, but other customers as well,” he said. “So, we feel good about the demand signal, no change in timing signal, and the number of customer engagements has gone up.”

Components and systems drive revenues

Gains in components and systems revenues drove Lumentum’s fiscal year 2026 earnings, driven by AI demand for the company’s laser chips and optical transceivers in data centers, as well as in interconnect and long-haul networks.

First-quarter components revenue was $379.2 million, up 18% sequentially and 64% year-on-year.

Likewise, first-quarter systems revenue of $154.6 million was down 4% sequentially and up 47% year over year.

Lumentum’s fiscal first-quarter 2026 revenue of $533.8 million and non-GAAP EPS of $1.10 were at the high end of its guidance ranges.

“Our growth is powered by AI demand spanning our laser chips and optical transceivers inside data centers as well as the interconnect and long-haul networks that link them,” Hurlston said. “In fact, we estimate that over 60% of our total company revenue now comes from cloud and AI infrastructure, driven both directly by hyperscale customers and indirectly through network equipment and optical transceiver manufacturers that embed Lumentum components in their solutions.”

Looking ahead to its second-quarter fiscal results, Lumentum has forecast gains in components and systems.

While Lumentum forecasts $600 million in quarterly revenue by the June 2026 quarter or earlier, Hurlston said the company’s second quarter outlook indicates it expects to surpass this milestone well ahead of schedule, with about $650 million, two quarters earlier than it previously targeted.

“We have identified three major drivers of future growth: cloud transceivers, optical circuit switches, and co-packaged optics,” he said. “Of these, within our Q2 outlook, we are not yet expecting meaningful contributions from optical circuit switches and co-packaged optics. In cloud transceivers, we are set to resume sustained growth in fiscal Q2, and this upward trajectory should accelerate over the next 4 to 5 quarters.”

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