Lumentum shares drop 18.7% despite Q1 profit beat, sales in line

Shares fell 18.7% in regular trading as of 3:59 p.m. ET on Nov. 2, to $683.83 from a previous close of $840.70.

Lumentum (LITE) said in a regulatory filing that adjusted earnings for its fiscal first quarter of 2027 were $4.57 per share, topping the $4.27 consensus estimate compiled by Finnhub. Revenue of $1.26 billion was in line with the $1.27 billion estimate compiled by Finnhub.

Lumentum sells lasers, modules and optical subsystems for data center connectivity, telecom networks, industrial manufacturing and sensing. It is based in San Jose, California.

The company reported results for the quarter ended Sept. 26.

Here's how the company did:

• Revenue: $1.26 billion vs. $1.27 billion expected, according to Finnhub
• Adjusted EPS: $4.57 per share vs. $4.27 expected, according to Finnhub
• GAAP net income: $360.3 million, or $3.54 per diluted share, vs. $4.2 million, or $0.05 per diluted share, a year earlier
• Non-GAAP operating margin: 42.3%, up from 18.7% a year earlier

Revenue rose 136.5% from a year earlier and 25.5% from the fourth quarter, when it was $1.01 billion.

Revenue has risen in each of the last three quarters, from $533.8 million to $1.01 billion, according to its SEC filings.

President and CEO Michael Hurlston said, “Lumentum built on its strong momentum in the first fiscal quarter of 2027, delivering growth across all our businesses, with pump lasers and optical circuit switches (OCS) being the leading contributors.”

Second-quarter guidance

Lumentum expects second-quarter net revenue of $1.575 billion to $1.625 billion, a non-GAAP operating margin of 45.0% to 46.0%, and non-GAAP diluted earnings per share of $5.90 to $6.20.

Hurlston said, “Looking ahead, we anticipate adding approximately $350 million in sequential growth in our second quarter, a figure greater than the quarterly revenue of the whole company just two years ago.”

In its previous results release on Aug. 11, the company guided first-quarter revenue to a midpoint of $1.25 billion. Revenue of $1.26 billion came in above that midpoint.

Segment results

Components revenue was $754.2 million, or 59.7% of the total, up 98.9% from a year earlier. Systems revenue was $508.4 million, or 40.3%, up 228.8% from a year earlier.

Hurlston also said, “our OCS demand visibility has expanded significantly in recent months, positioning optical switching to become a multi-billion-dollar annual revenue stream.”

Costs and charges

Stock-based compensation and related payroll taxes totaled $146.7 million, including $89.4 million of equity award modification associated with the retirement of certain executives announced during the quarter.

The company recorded a $6.9 million gain on the sale of a product line. The sale brought in $12.3 million in proceeds, and the assets sold had a total book value of $5.1 million.

Research and development expense rose to $191.8 million from $81.4 million a year earlier.

Cash

Total cash, cash equivalents and short-term investments were $2.0 billion at the end of the quarter, a decrease of $758.8 million from the end of the fourth quarter.