Lumentum (LITE) 6 May 242024 Q3 Earnings call transcript

Good day, everyone, and welcome to the Lumentum Holdings Third Quarter Fiscal Year 2024 Earnings Call. Please also note today's event is being recorded for replay purposes. At this time, I would now like to turn the conference call over to Kathy Ta, Vice President of Investor Relations. Ms. Ta, please go ahead.

to Third welcome Call. XXXX and you, Lumentum's Quarter Fiscal Earnings Thank is President Vice Ta, Investor This Lumentum's of Kathy Relations.

Financial Vice Joining President me Chief and Strategy Executive Development President and Lowe, Chris Chief President Chief Executive and Senior today Officer; Wajid and are Vice Officer; and Alan Officer. Coldren, Corporate Ali,

end include trends including recent our model statements will well and Cloud margin Light, market and future including and our acquisitions, for markets, NeoPhotonics, our products expectations revenues, call guidance statements as customers expected Today's trends, and regarding forward-looking statements, macroeconomic expectations our financial regarding performance, as regarding and and and financial opportunities beliefs including technologies, our our targets. operating

cause particularly to our current filings particularly applicable reasonable most Lumentum's We soon. most statements described from our obligation these this with risk as on materially the encourage actual our SEC, results our based our undertakes will recent These to today. you that as subject call are SEC are Lumentum by expectations, provided differ statements, that recent in the described risks in factors in and review filings. factors to could those forward-looking of update statements The required no XX-Q and during law. expectations and beliefs to be filed except uncertainties XX-Q

our results considered www.lumentum.com section. supplemental not financials Lumentum's be fiscal and are in to, quarter under and this discussed with to GAAP. Investors projections a call or unless at on results Non-GAAP slides with note, press financial also the non-GAAP. financials all accompanying the accordance available Please are stated, otherwise substitute third website prepared are release superior as for

to I'll the turn With over Alan. that, call

and a good everyone. Thank Lumentum. for exciting very you, is time This Kathy, afternoon,

photonics advanced essentially to are opportunities demands. artificial High-performance and huge keep for pace machine intelligence, We enabling to networks these driven the learning center absolutely and by for long both beyond the demand making with excellent progress ] data compute data there increasing requirements photonics within on creates that centers. us are critical of [

drive cloud Lumentum center to strategy is pursuing revenue. a growth three-pronged data in significant our

are opportunities. we executing our our new market offerings expands product road and First, map on compelling that

also components waves releases XXXX. have not includes optical terabit expansion calendar portfolio XXXG intra range new spending or coherent and only pluggables year result Center into terabit at XXXG that We center leverage transceivers high-speed optical these center and Interconnect product later but continuing DCI. beginning X.X components our of is and a switching XXXG data this XXXG This data of multiple optical Data transceivers, for both of offerings, and calendar speed customers. lane leading This a products per across X.X

reach fabric. transceiver reach from long optic of multiple lines These market-leading customers to requirements their product center short data a from address range within

Our circuit and ZR+ XXX differentiated utilized power GR center delivered ] for [ coherent applications. technology transmission and transceivers our consumption, data photonic and factors critical integrated performance

demos We have the customers at sampling well. product trade and recent show our customer very with and already begun key OFC went discussions

expect we our over years. to coming accelerate the centers, DCI Given data growth challenges in powering of products

high-volume ] I are ago, on pleased plans expansion prong and report to strategy, that Thailand. facility demand track. strong expanding center now address our products to customers' into fabs very and wafer in future. well in to In visited this manufacturing of [ our a manufacturing cloud back-end our I'm our we capacity state-of-the-art are ensure significantly proven secure differentiated the of data and our X factories our weeks progressing remain our supply

meaningful accelerate time on this into start facility this production year a X.XT we calendar including to way. summer, and customers later expect current customer provide to in volume modules We with lines, and this based units, expect calendar qualification XXXX from

winning Further, with our of for and our beyond. expansion success customer new to XXXX plans since in in and based call, prepare sockets progress have continued up we on magnitude the new last opportunities customers ratcheted calendar

partnering focuses center data infrastructure on technologies. and to new AI customers cloud prong and with our photonics third innovative portfolio solutions on our infrastructure The manufacturing which of extensive in-house strategy scale is of

processor this, optical replace be power energy-efficient new enabling optical limiter electronic example, focused in transceiver will to packet data is a certain removal more photonic center well include the tremendous cloud switches photonics rely architectures, future. For and which and link consumption capitalize photonics positioned photonics in the scaling and center was needed By power closer To on chips. data power growth this networks. continue the These even of innovative switching on to further key to in compute increasingly approaches to as potential on compute supporting infrastructures amount switch data are and and to three-pronged implementing address scale. to center Lumentum the of strategy, the we

Technology Investor made leading opportunity current to our view dollars of in could photonics we've revenue on we ahead. that calendar with XXXX event, cloud our In billion year approximately be we multibillions can believe $XX we and cloud in our our OFC progress the highlighted the Lumentum customers based years recent this expand

network market. technology continue Outside we important have in ] of good leadership [ the on and helping positions infrastructure. this share be customers Over cloud, many we scale focused solidified optical to Internet years,

ROADMs components, are physical higher to networks enable for by with challenges Further, our create We to capacity increasing more more and speed amplifiers such more opportunities scale transmission advanced Lumentum and parallelism are scaling. utilize ability but bandwidth the Shannon's growing to high-speed and are required bands fiber and further will need with the network needs components data. alone. more leading-edge as carrying optical complex and wavelength capacity fibers limit, as coherent volumes of channels addressing increased These impacting growth constraints the

L-band maximize bandwidth design enabling a and our example, are channels, available latest end-by-end capability, C+ single of count to our growing the of fiber. integrates wavelength degrees better For fibers addressing ROADMs in and number port high customers and connectivity ROADM the

our product to move revenue quarter and me let third fiscal highlights. Now

Our Cloud the Light the revenue X% center year-over-year, driven cloud strong grew demand data sequentially contribution acquisition. networking from X% and by and

EML XXXG revenue Our of wafer in Japanese by our tripled the to compared fiscal QX fab. at QX, driven output laser nearly capacity expansion from chips

Our right earlier fab decision. this investments to been proven have in the have

product production XXXG XXXG in we a of with both XXXG ramp EMLs As to in for on key excellent customers, feedback also our Early EML contributor market-leading in terabit up we to are lower-powered customer EMLs calendar be XXXG our and use qualifying XXXX. is growth this line X.X transceivers.

XXXGR DCI. Data for and modules center increasing is demand ZR+ for also

with [ ZR ] the used are in modules, In tunable laser these addition leader providing to line we in modules. a market narrow

a in encouraged our inventory of by are to demand appears We normalizing. customer QX tunable as notable be products uptick for lasers in these

cloud to reductions robust continue strong these for We coming from 'XX operators. trends based the expect double-digit center on calendar cloud demand CapEx data

recovery few to anticipated. customer said, be telecom demand, burdened quarters, inventory pace in challenges. next end below Because customer has to is revenue by that shift we products spending of the will of The than inventory Network carrier more continue We previously market telco continue All slowed in decreasing telecom lower that our our end continues position additions. phase in [ unabated, of are growth bandwidth this demand we creating our closer the to business. highly market and capacity remain confident requiring future industry. and getting our the of network growth ]

enable the proposition value transmission network providers reinforces increasingly our of network which for scaling. approaches recognize optimism this our physical its fiber continued technologies, opportunities market. As our limits, in This long-term

our products In correction, of by growth and contrast our to inventory and telecom potential the extended the adoption newest pleased with customers. very I'm early ramp-up

For the example, we are coherent our ramping of These new transmission generation enable next of high-performance per up second. XXX X.X systems X.X and at XXX components. shipments and coherent gigabaud terabits

high also in have ROADMs. extended extended customer We and integrated and L-band count C seen increased next-generation activity port

not are needs will burdened products with and end highlight shipments of increasing growing these Customers [indiscernible]. excess that drive inventory market

like sequentially was and industrial and Fiscal expected customer. business Tech. success driven our XX% as largest decline experienced lasers, improved QX. than inventory competition lasers platform Industrial our tech as for to down in profile industrial we and by a on quarters solar XX% the revenue particularly industrial consumption growth ultrafast increased industries This to masks an having seasonality new at PCBs QX sensing platforms laser cell laser applications, year-over-year, sequential the Turning key revenue XD We EV displays, XX% come. emerging are serve for in the semiconductor, manufacturing. more These micromachining in anticipate applications which in well batteries, down

early profile. This a after our the size will experienced is inventory about and new due demand demand, smaller capacity makes of we growth combination fiber overall cloud in data me impact calendar data products two, one, expect QX. shipments our and center and on strong the And our the to laser factors: in customer bullish during an industrial business X To telecom revenue summarize, our new explosive less XXXX. for confident additions traction sensing products correction XD significant center and for uptick AI-driven severe have of

significant and expect in calendar year year new center revenues. capacity as next We products new manufacturing investments data into our translates growth significant this

industry telecom very outlook inventory XXXX the makes correcting the promising. with calendar combined beyond, This, for and

will revenue exiting exceed company cloud $XXX to quarterly calendar multiple have We million revenue XXXX. and drive customer engagements, meaningful which growth total drive

will growth that expect into XXXX. we continue Additionally, and XXXX significant

today rate We multibillion-dollar will business the coming we business cloud are run expect that several in working our significant annual a into opportunities on propel years.

the that this, Lumentum. Given future all for it's clear of bright is

our Wajid, dedication customers like Wajid. partner and to the Lumentum. to Before turning I that, With they and around over with world for to it as focus employees thank continue our collaborate and their would

Thank you, Alan.

address quarter of part EPS very AI contribution center and [ We ranges Cloud on of of of Third excited contribution. Cloud were record Light business midpoint the our fueled recognized Light revenue quarter had growing the quarter acquisition EPS by our of a the our revenue have a about non-GAAP revenue photonics market. the in full with We're companies in technology will and non-GAAP in above $X.XX. and combined the the the quarter given revenue future guidance $XXX.X that to and million rapidly and cloud ML capability data results

line revenue our as and progress quarter while continuing cost saw a expenses operating synergy market to We manufacturing across confident served opportunities in operating improvement lower included a the on to product in our fixed acquisition, were margin recovers. full To and focused margin from Cloud the continue due quarter base compelling lower significant execute earlier, actions. accelerate transceiver are the expectations this, as overall with we discussed modest on revenue on Light we've achieve mix operating expansion to that growth synergies. to remain margins Alan gross in made we our position QX as markets of

infrastructure China the closure our Following X last of those transferred factories December, products have Thailand. in in to

fiscal execution QX will both of fiscal synergies consolidation half are fab first the manufacturing This wafer Japan in in XXXX. Our expenses 'XX. and operating plans significant in track on starting for unlock

addition, have expenses. In our capture opportunities operating and within initiatives to we efficiency implemented synergy

Our tax discipline the a employee strong quarter decrease operating $X.X sequential being annual expenses reset. financial drove and non-GAAP fringe payroll rates where despite million QX the company-wide and

expenses non-GAAP already taken. in actions Our will we have operating down step the QX further with

As these continue to I inventory to $XX China reduction increase our have mentioned in inventory levels, turns factories had X sequential during several achieved QX, prebuilt in In we overall next the and million we from we a earnings product inventory in calls, previous to these Lumentum's quarters. facilitate transitions. plan

margins way that revenue are and cloud inventory efficiency, pave grows. and recovers cost the operating gross telecom on confident improvement our manufacturing in for control management combined We focus revenue will and as

secured acquisition. plan. track capture the actions $XXX of million as To to achieve run NeoPhotonics the $XX the $XX on million and balance approximately synergy million our in expect remaining of savings target have to our are We date, annual the execute we annualized rate we from

milestones. to will provide We reach updates key as continue we

third amortization intangibles. the acquired loss which year-on-year. for flat the charges million, revenue and margin structuring $XXX.X third was sequentially quarter XX.X%, down gross -- GAAP was Net for and was quarter X.X% approximately GAAP operating of

quarter gross year-on-year, flat which margin sequentially was and non-GAAP mix. was driven XX.X%, by product down Third

Third was was operating and quarter basis XX which margin down up non-GAAP X.X%, year-on-year. points sequentially

$XX million million. income was Third $XX was quarter adjusted and EBITDA operating non-GAAP

expenses quarter despite quarter [ from Third million tight the and additional $X.X operating year from synergy from due expense and acquisition the to expenses the ago QX Cloud Light operating continued ] down controls non-GAAP attainment.

was expense was on expense our non-GAAP earned cash interest SG&A $XX.X basis, non-GAAP and million. non-GAAP investments. QX income was million, R&D million other on driven and $XX.X a $X Interest by

income was and million share non-GAAP net per was $X.XX. Third quarter net income diluted non-GAAP $XX.X

diluted fully third non-GAAP on quarter the count was Our million a shares XX.X share basis. for

in decreased by investments our was to the March. to Our cash quarter matured short-term million. in and cash the convertible $XXX million This the due during XXXX primarily used which $XXX.X million repayment $XX.X notes, for of

and integration manufacturing million addition, In charges approximately in in consolidation CapEx. incurred in $XX.X as $XX quarter as we well restructuring, the million

details. Turning to segment

increased segment operating cloud X.X% profit year-on-year. revenue at and segment increased Networking year-on-year. at million sequentially and $XXX.X Cloud and sequentially XX.X% Third X.X% and networking increased quarter non-GAAP decreased

segment at sequentially tech industrial quarter million $XX.X third revenue XX.X% down Our XX.X% was year-on-year. down and

loss Industrial fiber a driven business quarter our non-GAAP by was expected. laser customer our correction in Tech declines Third at and largest industrial X.X%, reporting laser was sensing XD as which inventory

'XX, of Now basis let me a for as move guidance assumptions on the which based is to non-GAAP fiscal and fourth our on quarter is of today. our

expect with tech net We and the of industrial due typical This XD seasonality. and sequentially following forecast be be reduction of million approximate This recent an quarter shipments, for [ by QX million. networking slightly the laser $XXX fiscal $XX down defensing in offset partially industrial to midpoint $XXX revenue be range includes telecom demand the to includes to increased million up fourth revenue to at broad-based in assumptions: 'XX the the softness to ] decline cloud incremental sequentially.

be we the on margin $X.XX operating to diluted share this, income fourth of range to quarter $X.XX. to range per in net Based to project negative X% of in and non-GAAP positive positive negative and X% be the

the for assume rate a million quarter also share guidance based on EPS XX.X%. projections tax shares. non-GAAP These XX.X approximate effective of non-GAAP count is fourth Our an annual of

third also acquisitions pandemic. unusual synergy and under projections factory due These attainment transitions, COVID-XX restructuring, exclude activities to expenses, related and and activities prior reduction including the to integration absorption consolidations inventory and factory certain and found other our will, general, these to in events, we our non-GAAP in tables. quarter These coming the related expect expenses These quarters. over for decline to fiscal onetime can expenses reconciliation are be GAAP

back Kathy Kathy? call the With that, Q&A the session. start turn to to I'll

Thank you, Wajid.

This Before possible to end Q&A X to as we I'd question start get us as to allotted participants should keep ask before to follow-up. help the session, X of everyone our many and time. the like

session. the Q&A Now let's begin

Of course.

[Operator Instructions]. begin now will session. the We question-and-answer

Our first of question with Leopold James. comes Simon Raymond from the line

that I on reduction I've see Light was little And $XX $XX incremental decline of thing prior you and clarify the commentary part today? because want million $XX a a business. talked occurring to help that wanted roughly that follow-up. $XX networking Cloud a in bit. First transition due you about product you is million And unpack number the I cited million if the to to could cloud the in the understand then got Just new us quarter, million

Sure, about incremental we Simon. datacom This to the is transition module talked call. on the last

a the what so spending spending the is outlook we this over happened our last change inventory last channel that carrier in incremental about telecom and off to our months the this burn to that in -- impacting at customers ability time. X So for talked are is

the really like of terms I your business, of that's sense And it then good but gotten sounds what we in think don't VR better, baseline a have is.

sales, as see well and going selling you your generating ZR that related say, own help next, X products? do could to much So the X to quarters? VR lasers as you revenue understand you where are And us over how let's through others

last about several quarter, picked we the The was we tunable Yes. prerecorded that in rather, really been with our in the up off has VR quarters inventory. the believe line up narrow last in lasers over inventory the burned as as depleted has in dramatically customers of that script, and many strength or that talked

XXX meaningful overall of we on digits But way. kind were should traction lasers, those ZR we a ZR+ lot with that, single gig it's start expect and ZR+, narrow as a that where deploying tunable in to as getting the the back -- ZR we're So in we are of still the and grow revenue. on the we on prepandemic line then of

Thank you for your question.

from comes question next of Our JPMorgan. the with line Samik Chatterjee

Yes.

something I think, right the take question, we can next says Victoria, Samik now. unless

next line Our Notter the comes of Jefferies. from question with George

me? Guys, hear can you

Yes, we can.

Thailand? manufacturing expansions better a your Can the months, understanding Great. last All increased talk just you guys interested the the about what operation. in X here, How expectation more more have you there? think manufacturing lot Can what's of right. to Cloud win driving think much down capacity for me, requirement element than hear looking obviously, in of outlook I you size are business. opportunity an bit guys hello? you you little Alan, that doing said am the a you're are manufacturing Look, I that cloud Okay. expand to adding, what's Is I you the previously additional in incremental for thought? incremental that folks customers the with the Light driving of

qualification to up progressing. And China. make interested I today, setting capacity in And absolutely. customers we're China. was line today in said, up things transceivers of building were how But see the most of outside I our very in in Thailand Thailand. we And Yes, as are

have Qualification that's we is going done there. So in. line what

X of building other products facilitized. our our had yet that used first of The is existing been not being for some

this And new customers, and quarter, we're the a based construction the we interest from and in the building getting traction then time. infrastructure phase over can that started through pull AI cloud we and on that on

will the basically, and X and for the capability a can floor that fit. as So we have have third stories, -- see first building facilitizing planning and we on second size to the we're

change demand infrastructure customer that confidence that building for us traction really and of in has given the we're it's them. So right a level

incremental Got it. it And customer What's the investment? spec? adding are Or new are you floor you on wins? adding based on that then space driving

mean clarify, do that do what mean. you to spec? you by Is mean? What I George? Well, you Speculation. want

on incrementally the additional of to space, business? adding the that you've wins the building. contracts side on Is you're the provider cloud if know based I'd adding got Specifically, new like that floor or comp

No.

I for and incremental up in on really of new that cloud a said, customers some we is orders the lot with mean, Thailand. bringing as capacity as the space well is -- and some think AI capacity have diversified both That today we're customers, customers in space. really certainly working I this infrastructure

the challenge the the space you don't space, the be you're And it's floor and and so going if chicken to have the not to don't capacity, the able egg get and you orders, not you the thing have going orders. perform. have that is, you orders, if don't to have if in you're And floor

to to right confidence hand-in-hand growth behalf working making not capacity, much we're same them we're trigger at time, XXXX and too build we're the make pulling calendar our to with customers investments time in the have see that our -- sure So the the that but at and of the that they beyond. on

Yes. Yes, doing. we're just visit customers to for we -- see what and having themselves are

And been with the level feedback far, extremely automation. of the so to positive setup, facilitization, the has respect line

happy and pretty we're there. expectations our So future confident in

for George. you your Thank question,

Let back me in. dial

be next line our will from So of Samik question JPMorgan. with the Chatterjee

Can you me, hear no?

you. We can hear

Okay. Great.

that. about Sorry

with start million So you question, about I with Cloud on know had the going I'll revenues to with product mind. datacom, you've of about June. talked customer sort a million more near-term in I in March a primary Light $XX couple the $XX if and for quarter don't its transition

you new Just magnitude your the want any rebound And to holding quarter? clarify come of with longer-term September after customers as thoughts of the the of if terms in a that's ramp And there? with in terms I deal that. have the your product in question true still engagement

last that call. I'd any on expected out the playing in customer, we as the comment say but is to going not I'm Yes. transition specific had

Okay.

[indiscernible] know I being... Okay.

answer to Yes. part of going second was I question about your the Now September.

on expect be in seen quarter, the some to yet still December We increase but that's datacom. incremental

know does few 'XX, a the expect business talked business the your thoughts much medium-term that you track in calendar if we or company milestones more can this wondering you to longer-term ramp? million 'XX for when business how milestones And more that should of example, milestones Any being aggregate question, us when us even you double mix? my the give I to a that about think fiscal in in to just on give 'XX, $XXX by, of business I'm Okay. size datacom or medium-term multibillion reference for about datacom the you like revenue exiting future. and for

give chime hands Chris about I my and qualification really that talked the earlier, samples say them. into you on in test I'd our thoughts I'll ask and I'll customers' milestones Yes. that having it to in. them the are

So components. control third-party relying But on time, we're and suppliers that. the in other still of of a lot at of DSPs same we're

And bit little our of so out that's a control.

quarter summertime qualification And XXXX. really qualification samples, say and ramp December and quarter so sometime December calendar I'd the starting in in into the

As QX we say million on then don't far be if or as more $XXX your certainly today's run would we by calendar our by end disappointed next datacom than from that double of would the rate. year, I question the business from

would so double opportunities Yes, each are of the the we're thing or only one I chasing individual highlight essentially or just I think customer revenue. add [ two to customer very that with is can sockets the that ] significant

what X confidence or that's lot or that in X so And X as customers There's we more a win. socket X than there.

as opposed we ability of our is revenue new delaying where ample for So hundreds upwards move and application or of market example. materially type win need to the customers, to

the next comes question Morgan Meta Stanley. Our of Marshall with line from

building Great. on earlier. question Maybe Simon's from

sense come quarter? sense the then for And some sense you that a of or Light have it where specific like was could -- you back? down there Just they me. of headwind customers? do kind than where are others? inventory Like And levels a worked a areas telco. That's get a Cloud just are that getting just to what with on more outline trying of greater their conversation to specific the the do you $XX from is of -- question when business million inventory did what clarity Just of maybe on contribution have more

Yes.

the the the is quite will in the So not which carrier that off of combination as one duration it's of really, spending a headwind, million burn $XX things, and longer they're spending on slowdown X take -- inventory the since much. of

And at least but the say September -- before take to our we've our of it's down still pockets inventory So consumed. are March into of and coming cloud the do at going still we all by burning quarter, to saw than customers product are carriers. certainly product the that and the going that say are the quarter cloud again, would for to this it that customers to. faster selling off that's the in they're that inventory products which I'd quarter in with probably destined I seen ones as has

So I'd only of kind say telco that's ago. thought the are what the slower dynamic we months different X than carriers

And specific whether was as part contribution, Light datacom? Cloud there a you guys were of calling out

not We're so prior Certainly, No,. the was out quarter. full products. specific Yes. production it of than the going to break a quarter more and partial

Our next the Rolland question comes from SIG. of Christopher line with

get a when gig remind DC, capable laser supplying gig I the us you so seems be that down might bunch Can XXX of around Mind would you there's like lasers, slowing market, it now. that be things XXX at of lane of then a XXX-gig I'm EML chain might timetable trying sense when And others realistic true assume a launch. for able you to to be? just ramp what ramp. in be think might this the supply

qualification We're Last from Yes. units. feedback customers extremely and strong. quarter, positive. very was shipping

take lasers into they DSPs and them in to and put need they on rely most So cases. then again, third-party those transceivers

to couple a of take going that's quarters. So

in that should EML be say and up those place would I chips then those way fiscal calendar by 'XX. really the begin a meaningful in should so QX and in quarter, December And ramp all our into of

-- a digit, color meaningful? you you increase on there put any And calendar your a -- you meaningful would great. digits? said double finer point what Alan, we could in revenue Are And talking then, why be maybe single Excellent. XXXX have

calendar of greater revenue. million think I what $XXX mean we've at expect XXXX exit we I -- is Yes. company year said than the to

still couple today, you telecom to now to that's in qualification work $XXX datacom. million we because I look of the for new a has are exit increase, that midpoint of then quarters and burn off happen be between won't and of inventory have sockets if where think in over So it rate at meaningful linear of 'XX just million, $XXX calendar of we a and

And of as per Nava lane first XXX per to products going our be [ on of you're question gig gig are lot from lane, your facility. going out XXX the a we're launch to ] the

'XX late and So really calendar a calendar into that's XXXX.

So and we big quarter, not a the up volume answer meaningful June qualified ramp lot quarter more December Christopher? Does as that the March products. in in but your of those question?

much. so That you, you Alan. does. Thank Thank

The Vogt next about David line question UBS. with of next from the The question that. comes sorry --

me? Can guys Great. you hear

Yes, we can.

going gross telecom the growth does to strength question, laid that second Are consistent given forward. in you're manufacturing how just get steep to a to margin you needs recovery digest, And given you come are we and business to going ] what obviously thinking a as the see longer the with this the So in where X well. of run clearly the growth? orders $XXX the -- this out, -- that the the of side? your just out Obviously, customers just that rate, this datacom kind trying capacity laid sense I'm in about to is One, datacom that trying are -- towards Wajid thinking [ strength, still you questions. the about the thinking sense taking telco it back longer term I have at adding customers affect pencil given core trajectory datacom numbers. to are about And given I'm potential a to it just for telco you're trying get for million skewed we're that. how like looks terms in get OFC? the to Or way how

products, That spend. XXX exacerbated at I'll slower telco Yes, minimum the the of have integrated and speed, like the take XXX the quarters a a is telecom of question let margins. and gigabaud, on we I'll burn-off couple think inventory by Wajid and really telecom as there said, on inventory. the no comment Yes, gross ROADMs, new highly gigabaud of I I higher said,

the China instance, X underway of that networks, those carriers have are inventory. next-generation for well as, sort burden deploy So their don't and of today

I'd base strength there's of new today, do to the telecom all us -- of taken then and a say in business, are that comment that? are X ramping confidence by in year, of But burned probably those calendar care the really Wajid, end the aspects you small the channel products off. of is our but that other in products still and those that as are XXXX, say, telecom then those fast. want on and inventory I'd So that growing gives that calendar from

to Yes. longer-term No. as we what as get gross well much mix contemplated we margin expecting a model model. type a at a OFC pretty laid the were product of From standpoint, out to near-term

I think that a that quarter next under $XXX year. pretty with Alan So hold rate for million laid margins spoke about exiting run we out those the gross well what

So Just in trying doesn't out telco have impact? that. a to the bit think through little shift an

I the think return as the that step together. increases, expecting the well -- telco to of function up we're see as we'll datacom on timing it's Well, the side, line

before products. a where probably cycle revenue are because bit between come just Now we will chip the EML tailwind qualification will a we'll transceiver of have the given before in of the XXXG in XXXG little will X come some revenues revenues in

for that. at back will we on But margins of start there those or model presented the see end model be of of that X do when products, a higher quarter because the the revenues normalization the a kick to might in So where we're we to OFC. transceiver

Yes.

X certainly help I think first said fabs Wajid, you consolidation 'XX fiscal in half will of of margins earlier, wafer gross well. to the as Japanese what the our echo just

question of Baruah with Ananda from the Capital. Loop next line The comes

anecdotally, thinking what of your can if X on you to quick inventory I I share you this years have with any couple Japan capacity you of datacom in year were think guess, -- yes, -- then ultimately at expansion ago? follow-up. to the fab, least with expansion the context And can to I prior digesting a relative a regards go business where that quickly

still per plan a units, We're Yes. growing we will certainly without grow record XXX as do capacity. quarter. We adding then growing EML the ramp shipment lane further. revenue that the although on And product necessarily had last units gig we

EMLs given as VCSELs be that well be type we'll I couldn't that, as mode it a rate $XXX VCSELs, datacom year both the lasers So CW most million there's transceivers. no and and think more that run providing for that a reason

telco with appreciate in had the the -- Tier many you million might qualifications even of guide, Alan. conservative million. of December are assumptions way necessary. I That's pairings -- kind how it more X, follow-up the to 'XX it. gauge your on trying I'm would Tier through be than there's how kind all qualification is useful at just think X many hoped be guidelines. that business, for so ] whichever is [ about things to guess, for least And $XXX I think context I being How $XXX

Are about telecom? datacom you or talking

for datacom. Yes, how hypescalers Tier X... many incremental

than I it mean we very X, very, be doesn't we're If land take more many. working that. with and happy, I'd

to have engagements customer that respect think And I quite better we're from of perspective, positioned to the needed pull we bit a desire a to I in. capacity being we're [ given [ my aggressive with think that's manufacturing the on company we're outside and U.K. ] have these So headquartered bet place the than why XXX do customers. the putting that to for in China, ] with

line question Tom comes next Barclays. with of O'Malley from the The

I ramp wanted been just to side. what's the to datacom on focus the on here

could year. into understand you want of I million that what next some to So have you But potentially visibility run year about have $XXX win to you rate gets big right through opportunities the that talked this to you that now. guys end and

a at is the downtick weakness on call seeing your a you're I visibility out how growth profile get talked to good with you're know laying in the return you is such that you around telecom. that comfortable customer? the datacom You further last growth customer, And your the But existing existing are with baking related And already? customers that and to saying that about you transition there? are

XXXX Tom. as September new say, calendar late then December products year as I the Yes, going XXXX. at datacom into comment a revenues in slight start our in and calendar the not this uptick I'd [ increase on very into ] and a We're specific mentioned ramping earlier, rapid in expectations into X.XT customers, are really to but and quarter more

with I [ our customers to that wafer do have certainly, if and in Sage we they partner visits customers and to interest fab ], taking our don't wouldn't time indications to us. of locked say engineering not spending with that not intending Thailand to they're everything Mahar But up. Japan, teams, and intending

me we confidence, gives what where orders, that's lot today. I so when I'll a more are And confidence. that's purchase have And have but

my then And Helpful. second lane just per on one of is and question a of broader kind the evolution X.XT. XXXG

been in the of what like systems, in can can that that coming really XX. only maybe the we've talking So from there's seems it terms kind first, of And frame. you're But even it's XX, you like hearing. broader time lasers customers more middle aligns do which of have X that with about

half can to kind of just you I maybe volume the actual of seeing understand XXXG of Do be see the to of that of just really QX quarter? Or you you get shipments 'XX? shipments talk kind QX are of able in XXXG ship you production token in So in 'XX? your timing the way of want would lane. to per in second December view per about why

either calendar Tom, confusion out we manufacturers to Certainly, qualification calendar AI we and components, we've highlighted, later with those try continue, components a here are other me be expect as qualifications customers let other that fiscal in laser year providers. position or year. the transceiver that year maybe today, Yes, infrastructure and here. in in have will this Those optical help will

fiscal a ramping the will other our of start 'XX, are all the able in of they beginning i.e., up. ecosystem to position So if parts be

do the volumes. predominant they start overnight it if doesn't up of Even in set become ramping frame, time that Obviously,

'XX, is X we components of the expect for transceivers transceivers. in components ramp a in One lead supply The the reasons. general. so both calendar through earlier your chains do continual may and And

of shipping build are, customers ahead the components. adopters a themselves of leading maybe ultimately early So X transceivers But when be the quarter the folks most may need nature or secondly, that you're and transceivers shipping. who are

time be on it are monitoring. whether that dependent beyond things think all closely clearly these Alan alluded as our And we're control, lines I are to, silicon, DSPs, switching processor silicon,

this that beginning 'XX. elements the late time We are calendar unaware calendar the year outlining of available becoming that those or on based this of here either we're lines anything impacts other

the comes from The of Karl line Ackerman with next BNP question Paribas.

clarification I follow-up. and question a have a

from clarification the reflect band products telco the For supply telecom broadening beyond initial impact chip does you from the question, million any outlined the headwind $XX last quarter?

China. Chip supply. in Are restriction customers you the to -- referring

That is correct.

Somewhat.

of meaningfully but customer, large As shipping to quarter-to-quarter. we're impact that in impact, not and there were has some that today, not quarter shipments March a relative large the some to

restrictions impact ability that the U.S. major year-over-year, on our to sell Now to of customer.

Yes.

Okay. timing VCSELs. on timing the you And then Understood. of Would of shipments. EML views of about some XXX-gig the spoke the any on have update you

there's I just think half you if last second quarter, indicated would that in of update I'm on that. the start curious production XXXX. you any

continued Yes. our XXX VCSEL. on gig We're progress making

of an VCSELs Now hopefully with we of getting the having the team, multi-mode in transceivers Cloud have Light the year, second be Lumentum way in-house part you these transceivers. in our as tested calendar qualified in, in half and said, of

just calendar Karl. VCSEL for really -- I the we year half but [ end VCSELs second time progress, Victoria, for continued of for more I'd think question. . the So Thanks, say still on X XXX-gig and track rays] have we're

Of course.

Northland from the Our Savageaux next comes Tim of Capital Markets. line question with

in there. I Great. snuck

opportunity market least and rack maybe be ] seem X.X terabit So developed the switch-to-switch short for kind XXX developing inside for I the appears connectivity now. market about at your data to compare we have transceivers then reach first or want very a seen broader within the [ gig, a to to ask question of

targeting look comparing in But interested transceivers you seen I is It be your true just at X.X contrasting short-reach expect cables there opportunity, seems and like that terabit? the versus what are you're what we've or what most XXX and any at have what would points on reason guess develop you As at differently? of I'd you. perspective

In, nuance, There's shared. point the distance as say in that rapidly. at go highlighted that it's would we you detail key investors. speeds, had point presentation but the that to of and decrease we more little the deck higher OFC can very go little something a bit I you that And a is slide

seen the anticipate DR-type than EMLs. beyond see that move these you've are So and to whether or simple or silicon photonics transceivers, using ], as the we mix mode more we maybe X.XX in mode they're spec historically, single [ you'll single

out see the going so of a multi have mode maybe we historically. gate. lot there it will just where modes sockets And and more away, single would in single perhaps mode right Doesn't multi-mode mean more been that therefore, means therefore,

follow-up. a have you Do

get was say to to to you of that XX% X.X I targeting around Sure, terabit comment did where something this I do. of Or And you don't XX% need Alan, kind want be? you're this, misinterpret else? share market

going around a sockets. all get to XXX% No, don't we comment hit we on need don't to And that need was of. we're any hit to -- given of the -- socket, not

that million talked have So at I'm just -- successful of to $XXX don't those and need I we slots we lot what customer be work order interaction in we're calendar to all was exiting that today XXXX, we qualification indicating in engaged of about achieve today. a on going with

it us will of revenue and think And execute then I our from more that Now more customers than buy for than having than them, value it if that. proposition come compelling competitors that down makes half will be to we're our a more to successful us.

no to questions you question. I back conference Thank the at any Alan now for are to your waiting Lowe There time. this additional closing for would like pass remarks.

as Great. to you Victoria. like thoughts Thank call. up with wrap a I you, this would leave few we

leadership capacity ensures and architectures. deploying we are help customers the customers. compelling To confidence advancements partnerships capitalize photonics, and and Lumentum manufacturing automated hyperscale these manufacturing scale rapidly of both escalating we the to R&D in opportunities, data This positioned of in cloud agility AI chip position forefront stands market on pioneering navigating center the are Our current rate well with gives data the environment. at capabilities. cloud us demands revolution, meet

Light acquisition resounding Cloud been a has The success.

a teams which enabling us combined will surging cloud meet dollar drive market has production coming in years. run rate the forward to demand, the Our we revenue propelled multibillion transceiver our our expect into plans high-speed

you quarter. Thank this We today. conferences you again look to later investor and call upcoming our for meetings joining at forward seeing

the enjoy rest participation, your call. and today's Thank you your concludes day. of for That