The optical networking stock is up 1,444% in a year and reports Q3 earnings after the bell
A stock that was trading around $60 twelve months ago touched a new intraday high of $1,018 today. Lumentum Holdings, the San Jose-based maker of optical networking components for artificial intelligence data centers, has produced one of the most dramatic runs in the AI infrastructure trade. Today, with fiscal third-quarter earnings due after the closing bell, two Wall Street analysts decided the stock still has further to travel.
2 analysts pushing their targets higher
- Stifel, through analyst Ruben Roy, raised its price target on Lumentum shares from $800 to $1,100 while reiterating a Buy rating. Roy cited accelerating spending from major cloud companies and noted that optical networking suppliers now have a clear view of demand running 12 to 18 months out, an unusually long planning horizon for the sector. Stifel’s estimate for combined capital expenditure from the five largest hyperscalers in 2026 stands at approximately $705.2 billion, a 67.3% jump from the prior year.
- Loop Capital moved further, raising its price target from $900 to $1,400 while also maintaining its Buy rating. That target implies substantial additional upside from current levels and reflects a broader conviction that the AI data center build-out is far from complete.
Both upgrades arrived as shares climbed toward their new intraday record, with the stock trading near $1,017 ahead of the after-hours earnings release.
What Lumentum actually builds
The enthusiasm around Lumentum traces back to what the company makes. Its core products, optical circuit switches and co-packaged optics, solve two of the most pressing problems in modern AI data centers: moving data between servers at speed and doing so without excessive power loss. Both products are now deeply embedded in infrastructure projects happening across the industry.
Fiscal second-quarter results set the baseline. Revenue rose 65.5% year over year to $665.5 million, with non-GAAP earnings per share coming in at $1.67, above the $1.41 estimate and extending the company’s earnings beat streak to eight consecutive quarters.
The optical circuit switch backlog has grown well beyond $400 million, with the majority of those shipments targeted for the second half of 2026. A separate multi-hundred-million-dollar purchase order for ultra-high-power lasers has been secured for 2027 delivery.
The Nvidia investment and a new factory
Nvidia sits at the center of Lumentum’s forward story. In March 2026, the chipmaker committed $2 billion to Lumentum through a nonexclusive deal that locks in future supply of high-end laser components while cementing a buying relationship as Nvidia scales its next-generation hardware. Nvidia made a separate $2 billion commitment to competitor Coherent, deliberately keeping its supply chain from relying on a single source.
To meet the demand those partnerships are generating, Lumentum is building a 240,000-square-foot manufacturing facility in Greensboro, North Carolina, focused on indium phosphide-based optical devices. Production is expected to ramp up in mid-2028, and Nvidia is already listed as a customer for the new site.
What the earnings report needs to show
Lumentum guided for fiscal third-quarter revenue of $780 million to $830 million, with non-GAAP earnings per share of $2.15 to $2.35 and an operating margin of 30% to 31%. The company is reportedly still undershipping demand by roughly 30%, with all laser capacity of a key product type spoken for through the end of 2027, a scarcity dynamic that has kept pricing stable or moving upward.
The risk is baked into the current valuation. Shares carry a price-to-earnings ratio above 300, leaving almost no margin for a miss on revenue, margins or forward guidance. Any indication that the AI infrastructure cycle is moderating or that customers are pulling back on order commitments would test a stock that has already priced in an extraordinary amount of continued growth.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. The author and publication are not registered investment advisors and do not provide personalized investment recommendations.