/AI%20(artificial%20intelligence)/Businessman%20touching%20the%20brain%20working%20of%20Artificial%20Intelligence%20(AI)%20Automation%20by%20Suttiphong%20Chandaeng%20via%20Shutterstock.jpg)
Valued at a market cap of $5.95 billion, Lumentum Holdings (LITE) manufactures and sells optical and photonic products in the U.S. and other international markets. It has two primary business segments: Optical Communications and Commercial Lasers.
Optical Communications offers products that enable the transmission of video, audio, and data over fiber optic cables. These products include transponders, transceivers, and transmitter modules, among others, serving customers in end markets such as telecom, data communications, and industrial. Commercial Lasers offers products, such as diode-pumped fiber, direct-diode, and gas lasers, which are used in original equipment manufacturer applications. It serves customers in verticals such as manufacturing, sheet metal processing, biotechnology, remote sensing, and precision machining.
Founded in 2015, Lumentum’s sales have fallen from $1.74 billion in fiscal 2021 (ended in June) to $1.36 billion in 2024. In the last 12 months, LITE's revenue has declined by 12.76% year over year.
In step with its falling top-line numbers, the tech stock is down 22% from all-time highs. However, analysts now expect revenue growth to accelerate over the next two years. So, let’s see if you should own Lumentum stock at the current valuation.
How Did Lumentum Perform in Fiscal Q1?
Lumentum recently announced its fiscal Q1 2025 results, and reported revenue of $337 million, up 6.1% year over year. However, its adjusted earnings fell 25% year over year to $0.18 per share, while its GAAP (generally accepted accounting principles) operating loss margin was 24.5%.
The company serves multiple markets and is part of diverse growth segments, such as cloud data centers and artificial intelligence (AI) infrastructure. In recent quarters, LITE has focused on expanding its cloud and AI customer base by introducing products such as Datacom laser chips.
Its cloud and networking sales grew by 23% year over year in Q1, due to strong demand from cloud hyperscale customers as they invest in AI data centers. Conversely, LITE's Industrial Tech business reported a 38% decline in sales due to weak demand. Notably, its GAAP net loss narrowed to $82.4 million, compared to $252.5 million last year.
What's Next for LITE Stock?
Lumentum explained that its pipeline of customer engagements and improving trends in the legacy network market should help it end 2025 with $500 million in quarterly sales. According to management, “We anticipate continued significant growth into 2026 and 2027 as we capitalize on new cloud and AI opportunities, positioning our cloud business for a multibillion-dollar annual run rate in the coming years.”
In fiscal Q2 of 2025, Lumentum forecasts net revenue to rise between $380 million and $400 million. It expects adjusted operating margin to expand to 6.5%, up from 3.3% last quarter.
In the year-ago period, Lumentum reported sales of $366.8 million. With over $900 million in cash, Lumentum invested $74 million in capital expenditures in Q1, which should drive future cash flow and earnings higher.
Analysts expect sales to rise from $1.36 billion in fiscal 2024 to $2.03 billion in 2026. In this period, LITE's adjusted earnings are forecast to expand from $1.01 per share to $3.69 per share.
Out of the 14 analysts covering LITE stock, seven recommend “strong buy,” one recommends “moderate buy,” four recommend “hold,” one recommends “moderate sell,” and one recommends “strong sell.” The average target price for LITE stock is $71.38, a discount of 17% to the stock's Monday closing price.
