Lumentum Holdings (LITE, Financial) has witnessed a remarkable 84% stock surge over the past few months, driven by increased demand for its optical and photonic components used in high-speed data transmission. Despite a challenging fiscal year 2024, where revenue fell 23% to $1.36 billion and adjusted earnings per share dropped to $1.01, the company is rebounding. The first quarter of fiscal year 2025 saw a 6% year-over-year revenue increase to $337 million, surpassing expectations. This growth is fueled by a 23% rise in cloud and networking revenue, linked to the expanding deployment of AI infrastructure.
Lumentum's external modulated lasers (EML) are gaining traction among cloud and AI clients, with record shipments and strong order backlogs. The company anticipates a 30% to 40% increase in EML demand this fiscal year. Management projects the data center photonics market could grow from $4.5 billion in 2023 to $16 billion by 2028, driven by AI advancements. Analysts predict Lumentum's earnings could grow significantly, suggesting further stock price appreciation.
