10-QPeriod: Q2 FY2026

Lumentum Holdings Inc. Quarterly Report for Q2 Ended Dec 27, 2025

Filed February 4, 2026For Securities:LITE

Summary

Lumentum Holdings Inc. reported a significant rebound in financial performance for the six months ended December 27, 2025, demonstrating strong top-line growth and a substantial improvement in profitability. Net revenue surged by 62.3% to $1.2 billion, driven by robust demand in Components and Systems segments, particularly from AI and cloud customers expanding their data centers. This growth translated into a significant increase in gross profit, with gross margin expanding to 35.2% from 24.0% in the prior year period, attributed to higher factory utilization, increased average selling prices for laser chips, and lower amortization of acquired intangibles. The company also saw operating income turn positive, shifting from a loss of $134 million for the comparable prior period to an income of $71 million. This operational improvement was bolstered by an escrow settlement gain of $27.5 million. While operating expenses saw an increase in absolute terms due to higher incentive compensation and R&D programs, they decreased as a percentage of revenue, indicating improved operational leverage. The company ended the period with a stronger balance sheet, characterized by increased cash and cash equivalents, despite reclassifying a significant portion of its convertible notes as current liabilities due to their convertibility triggers being met.

Financial Highlights

46 data points
Beta

Revenue

$665.50M

36.1% Gross Margin

Net Income

$78.20M

11.8% Net Margin

EPS (Diluted)

$0.89

Total Assets

$4.81B

Cash & Equivalents

$657.70M

Free Cash Flow

$43.10M

Financial Statements
Beta
Revenue$665.50M
Gross Profit$240.10M
R&D Expenses$80.10M
SG&A Expenses$96.10M
Operating Expenses$175.80M
Operating Income$64.30M
Net Income$78.20M
EPS (Basic)$1.10
EPS (Diluted)$0.89
Shares Outstanding (Basic)71.10M
Shares Outstanding (Diluted)87.80M

Key Highlights

  • 1Net revenue for the six months ended December 27, 2025, increased by 62.3% to $1,199.3 million compared to $739.1 million in the prior year period.
  • 2Gross profit more than doubled, increasing by 137.5% to $421.6 million, with gross margin expanding to 35.2% from 24.0% year-over-year.
  • 3Income from operations improved dramatically, turning from a loss of $134.0 million in the prior year period to a profit of $71.0 million.
  • 4The company benefited from a $27.5 million escrow settlement gain, contributing to a pre-tax income of $101.7 million, a significant turnaround from a loss of $121.5 million.
  • 5All outstanding convertible notes (2032, 2029, 2028, and 2026) are now classified as current liabilities due to meeting conversion price thresholds, totaling $3,182.5 million.
  • 6Cash and cash equivalents increased by $137.0 million to $657.7 million, with strong operating cash flow of $184.6 million supporting the increase.
  • 7The company refinanced its debt structure significantly, issuing $1.265 billion in 0.375% Convertible Senior Notes due 2032 and using a portion of the proceeds to repurchase $581.1 million of its 2026 Convertible Senior Notes.

Frequently Asked Questions

Lumentum's revenue growth was primarily driven by strong demand for its Components and Systems products, particularly from AI and cloud customers expanding their data centers. The company saw increased shipments of laser chips and assemblies for intra-data center, data center interconnect, and long-haul applications. Growth in Systems revenue was largely due to higher shipment volumes of cloud transceivers and initial shipments of optical circuit switches.

Profitability has significantly improved. Gross margin expanded from 24.0% to 35.2%, driven by better factory utilization, higher average selling prices on key products, and reduced amortization expenses. The company also achieved positive operating income ($71.0 million) compared to a substantial operating loss ($134.0 million) in the prior year period, supported by revenue growth and improved operational leverage. Net income also turned positive, reaching $82.4 million for the six months ended December 27, 2025.

The classification of all convertible notes as current liabilities (totaling $3,182.5 million) is due to the fact that the closing price of Lumentum's common stock met the required thresholds (130% of the conversion price for at least 20 out of 30 trading days) for all note series in the preceding quarter. This means holders can now convert their notes into shares of common stock, and the company is required to settle these obligations in cash or a combination of cash and stock. This shift to current liabilities indicates a higher near-term potential demand on the company's liquidity should conversions occur.

Lumentum significantly restructured its debt. It issued $1.265 billion in new 0.375% Convertible Senior Notes due 2032, using a portion of the proceeds to repurchase $581.1 million of its 2026 Convertible Senior Notes. The company also entered into a new $400 million senior secured revolving credit facility. These actions suggest a strategic move to extend debt maturities and manage liquidity, although the convertibility of existing notes now represents a near-term potential cash outflow.