Lumentum headquarters in San Jose, CA, USA. [Image: Lumentum]
Lumentum Holdings, a US-based optical telecommunications and networking equipment firm, in mid-August released its earnings report for the fiscal fourth quarter and full year ended June 2024. While Q4 net revenue and earnings per share exceeded the midpoint of the guidance management had provided to analysts, the firm nonetheless recorded significant losses for both the quarter and the full year on a GAAP (generally accepted accounting principles) basis.
In previous communications, Lumentum has stressed that the last few quarters of fiscal 2024 could be difficult ones, but that volume and profitability were poised to bounce back after that. On the company’s earnings call for the fourth quarter results, CEO Alan Lowe maintained that positive view. Lowe said the company is targeting a quarterly revenue run rate of US$500 million by the end of 2025, and that it foresees “continued significant growth into 2026 and 2027.”
On-target—but down sharply
Although Lumentum’s US$308.3 million in net revenue was within management’s guidance for the quarter, it was still down 16.9% from results in the 2023 fourth quarter, and the company recorded a GAAP net loss of US$252.5 million, or US$3.72 per share, for the period. Full-year net revenue for fiscal 2024, at US$1.36 billion, shrank 23.1% from fiscal 2023, with a net loss of US$546.5 million, or US$8.12 per share, on a GAAP basis.
Lumentum has stressed that the last few quarters of fiscal 2024 could be difficult ones, but that volume and profitability were poised to bounce back after that.
The GAAP results included a variety of nonrecurring factors, according to Lumentum’s CFO, Wajid Ali, including “restructuring charges, amortization of acquired intangibles and evaluation allowance related to certain tax assets.” Hence the company also presented non-GAAP results that netted out some of these factors. For the fourth fiscal quarter, non-GAAP diluted earnings, at US$0.06 per share, met expectations but were still down 89.8% from US$0.59 in the fiscal 2023 period.
Betting on cloud and AI
Lumentum has faced considerable challenges in recent years. Some of these are specific to the company, like US trade restrictions cutting off sales to Huawei, which accounted for 11% of Lumentum’s sales in fiscal 2021. Other difficulties are more general to the industry, including sluggish sales prompted by customers’ ongoing inventory correction and supply-chain shortfalls.
However, in spite of the overall drop in sales, in the fiscal 2024 fourth quarter Lumentum received record orders for the data communications chips used in data center applications and sees “emerging positive trends in the broader networking market,” according to Lowe. The company is looking to capitalize on its strengths in this segment, with a focus on cloud and AI opportunities (see “Lumentum Bets on the Future of Data Centers”).
Lumentum is also working on growing its customer base to include multiple data center operators and AI infrastructure providers.
To that end, the company is expanding its manufacturing capabilities in its established locations outside of China. This includes a significant expansion of its facility in Thailand intended to increase production of optical transceivers, which the company says is on track to start operations this quarter, and additional projects over the next 18 months. Lumentum is also working on growing its customer base to include multiple data center operators and AI infrastructure providers. On the call, Lowe noted that the firm has secured a “major transceiver award” with an unidentified new customer and is working on additional awards from other new clients.
“Lumentum is emerging as a leading provider of photonics solutions for cloud data center operators and AI infrastructure providers,” said Lowe. He closed the call with an optimistic outlook: “We are executing on new cloud and AI opportunities that we expect will elevate our cloud business to a multi-billion-dollar annual run rate in the coming years.”
Wall Street seemed to find Lumentum’s optimism persuasive. On the day of the announcement (15 August), notwithstanding the sizable reported losses, the company’s stock price popped up nearly 15%, from US$45.43 to US$52.26; it has since trended up to a recent price of US$56.09.