Lumentum Management Sees Optical Supply Gap Extending Through 2028

Lumentum management expects up to 70% of demand for some optical products to go unmet next year, with the supply gap potentially lasting through 2028 as AI data centers require faster connections.

The company produces optical and photonic hardware used to transmit data inside high-performance computing facilities. Its AI infrastructure products include advanced lasers and indium-phosphide technology for optical links.

The supply pressure comes as data-center connectivity shifts from traditional copper connections toward optical systems. Near-packaged optics and co-packaged optics are entering mainstream use as demand for optical connectivity rises.

Market estimates project that Lumentum’s related optical businesses will generate $3.3 billion in fiscal 2028 revenue, about 30% above the market’s average forecast. The market’s earlier estimate put fiscal 2028 operating margin near 44%, while operating margin could exceed 45% if supply tightness persists.

Lumentum is expanding U.S. manufacturing capacity for advanced indium-phosphide devices and lasers made with 6-inch wafers. The expansion is aimed at supporting optical component production for AI data centers.

The company reported fiscal fourth-quarter revenue of $1.0063 billion for the quarter ended June 27, 2026, up from $480.7 million a year earlier. Fiscal 2026 revenue reached $3.014 billion, compared with $1.645 billion in fiscal 2025.

Lumentum forecast fiscal first-quarter 2027 revenue of $1.225 billion to $1.275 billion. The company will need to expand production while large data-center customers determine the pace of future capital spending.