AI interpretation based on checked source excerpts. Issuer assertions and evidence limitations remain explicit.
Policy quality-scores-2: six equally weighted categories. The overall score requires full coverage. Missing inputs are not zero. Qualitative grades are sourced interpretations, not probabilities. 5/6 · 18/10/2026
Moat31
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
structural advantage · 1/4 · Commercial optical products and specialized manufacturing demonstrate capabilities, but increasing commoditization and competitive pricing pressure prevent establishing a durable structural advantage.
durability · 1/4 · Maintaining differentiation requires repeated investment and product renewal. Initial next-generation production and management's first-mover claims do not demonstrate persistence across technology cycles.
customer dependency · 1/4 · Recurring major customers demonstrate relationships, but most customers lack contractual purchase commitments and no switching barriers are established. Concentration demonstrates Lumentum's dependence more clearly than customers' dependence.
erosion resilience · 2/4 · Strong shipment growth and improved operating profitability demonstrate an effective recent response to competition. Realized price declines and commoditization leave resilience across cycles unproven.
Pricing power38
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
realized pricing · 1/4 · Cloud-transceiver selling prices declined. Slight laser-chip price improvement primarily reflected migration to faster products, while some other increases followed supplier cost increases; this demonstrates weak pricing power despite mixed outcomes.
retention · 2/4 · Major end customers remained material across three fiscal years and product shipments expanded strongly, providing indirect evidence of repeat demand. Concentration and absent purchase commitments weaken its protection; no retention rate is inferred.
margin resilience · 2/4 · GAAP gross margin increased from 28.0% to 41.7% and operating results turned profitable in fiscal 2026 despite transceiver price declines. Prior write-downs, penalties and impairments make this a strong recovery rather than demonstrated through-cycle pricing resilience.
contractual freedom · 1/4 · Most customers provide no contractual purchase commitments, while concentrated demand and realized price reductions indicate fragile commercial bargaining power. No enforceable price escalators or protected repricing rights are supplied.
Predictability48
Five consecutive annual periods. Equal weights: nondeclining revenue frequency; revenue-growth volatility (5–40pp); positive FCF frequency; FCF-margin volatility (3–20pp). Stability indicator, not a growth forecast.
- Nondeclining revenue years (%)
- 75.00
- Revenue growth volatility (pp)
- 39.15
- Positive FCF years (%)
- 60.00
- FCF margin volatility (pp)
- 10.89
Financial strength57
Equal-weight grades: debt/FCF (1–8x), net debt/earnings before interest and tax (0–5x), interest service (1–12x), current ratio (0.75–2x). Earnings use reported operating income, or reported pretax profit plus reported interest expense when operating income is unavailable. Interest service uses earnings/interest expense; if unavailable, it uses reported operating cash flow/cash interest paid, without relabeling cash paid as accrued expense. Nonpositive cash flow/earnings score 0 for their service component; reported zero interest with a positive numerator scores 100. Net cash scores 100 for net leverage. Missing disclosures remain unavailable. General nonfinancial-company rubric, not a credit rating; exceptional and nonoperating gains are not normalized out. IFRS finance-cost and cash-flow classifications retain their reported scope.
- debtFcfGrade
- 0.00
- netDebtEbitGrade
- 54.62
- interestCoverageGrade
- 100.00
- currentRatioGrade
- 74.23
- Debt / FCF (x)
- 10.78
- Net debt / operating income (x)
- 2.27
- Interest coverage (x)
- 24.07
- Current ratio (x)
- 1.68
Capital allocation—
Missing required inputs: operatingReturn. Three-year equal-weight indicators: pretax return on average invested capital (0–25%; equity + debt − cash, each year and its prior year), share-count growth (0–5%, lower better), share-based cost/revenue (2–20%, lower better), consolidated FCF/net income (0–1x). Return uses reported operating income or, if unavailable, EBIT calculated from reported pretax profit plus reported interest expense; exceptional/nonoperating gains are not normalized out. Share-based cost uses the reported cash-flow add-back or, if absent, separately reported recognized compensation expense; the latter never becomes an FCF adjustment. Nonpositive net income scores 0 for cash conversion; absent income/FCF stays unavailable. Nonpositive invested capital has no defined return and remains unavailable. Does not establish acquisition quality or buyback timing.
- 3-year average dilution (%)
- 3.06
- 3-year average SBC / revenue (%)
- 8.63
- cashConversionGrade
- 0.00
Management63
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
capital discipline · 2/4 · Operating profit improved substantially and liquidity increased, but financing supplied much of the cash increase. Note equitization, a large debt-extinguishment loss, unpaid capital expenditure and historical inventory and impairment charges create a mixed record. The accounting loss is not treated as an equivalent cash outflow.
incentive alignment · 2/4 · Actual equity awards combine EPS, relative shareholder returns and multiyear vesting. One-year EPS measurement and retrospective changes to outstanding strategic objectives weaken long-term alignment. Ownership compliance is not established.
execution · 3/4 · Shipment ramps, commercial optical circuit switch revenue and substantially higher GAAP operating profit provide strong demonstrated recent execution. This assessment uses operating outcomes indirectly; legacy-product warranty expense and a short observation period limit conclusions about consistency.
governance · 3/4 · Disclosed annual elections, majority voting, an independent chair and committees, high attendance and management exclusion from individual compensation decisions support strong governance processes. These disclosures do not establish exceptional oversight effectiveness.
Evidence
The Components products net revenue growth was primarily driven by the ramp of laser chip and laser assembly product shipment, which represent 78% of the total growth to support strong, broad-based demand across intra-data center, data center interconnect, and long-haul applications, complemented by a slight increase in average selling prices of laser chip products driven primarily by a shift to 200G lane speeds.
Fiscal 2026 Components revenue growth and laser-chip selling-price discussion · Filed 17/08/2026
We also continued the initial phase of optical circuit switch shipments, which contributed more than $90.0 million of revenue during fiscal year 2026.
Fiscal 2026 optical circuit switch revenue discussion · Filed 17/08/2026
Our manufacturing execution is also best in class, marked by expanded wafer capacity across our global indium phosphide fab footprint and the qualification of both CW and EML process flows on our newest production tools.
Management letter: wafer capacity and process qualification achievements · Filed 06/10/2026
We started production of our next-generation 1.6T modules, where our signal integrity engineering team has established an early market advantage.
Management letter: next-generation module production and claimed early advantage · Filed 06/10/2026
The market for optical communications products in particular has matured over time and these products have increasingly become subject to commoditization.
Risk factors: increasing optical communications product commoditization · Filed 06/05/2026
Both legacy competitors as well as new entrants, predominantly Asia-based competitors, have intensified market competition in recent years leading to pricing pressure.
Risk factors: intensified competition and pricing pressure · Filed 06/05/2026
The System products net revenue growth was primarily driven by our cloud transceiver product lines which increased by more than 173% due to an increase in shipment volume, partially offset by lower average selling prices.
Fiscal 2026 cloud-transceiver volume growth and lower selling prices · Filed 17/08/2026
77 We rely on a limited number of customers for a significant portion of our sales; and the majority of our customers do not have contractual purchase commitments.
Risk factors: customer concentration and absence of purchase commitments · Filed 06/05/2026
The introduction of new products also often requires significant investment to ramp up production capacity, the benefit of which may not be realized if we are not successful in the production of such products or if customer demand does not develop as expected.
Risk factors: investment required for new-product capacity · Filed 17/08/2026
During our fiscal years 2026, 2025 and 2024, net revenue from a single end customer which represented 10% or greater of total net revenue is summarized as follows: Years Ended June 27, 2026 June 28, 2025 June 29, 2024 Customer A 26.6 % 15.4 % 18.9 % Customer B 15.0 % 16.0 % 11.4 % 50 Revenue by Region We operate in three geographic regions: Americas, Asia-Pacific, and EMEA (Europe, Middle East, and Africa).
Fiscal 2024–2026 major end-customer revenue concentration · Filed 17/08/2026
A quantitative reconciliation between GAAP and non-GAAP financial data with respect to historical periods is included in the table below ($ in millions, except per share data): FY 2025 FY 2026 Net revenue $1,645.0 $3,014.0 Gross profit on GAAP basis 459.9 1,255.9 Stock-based compensation and related payroll taxes 36.9 44.0 Other charges, net (10.4) (0.8) Integration related costs 2.9 0.2 Amortization of acquired intangibles 82.2 77.6 Acquisition-related warranty provision - 9.8 Gross profit on non-GAAP basis $571.5 $1,386.7 Gross margin* on GAAP basis 28.0% 41.7% Gross margin* on non-GAAP basis 34.7% 46.0% * gross margin is calculated as gross profit divided by net revenue Income (loss) from operations on GAAP basis $(180.1) $524.8 Stock-based compensation and related payroll taxes 177.2 191.3 Intangible assets write-off 2.7 2.5 Acquisition related costs, net 1.2 2.1 Integration related costs 9.2 2.4 Other charges, net 12.3 17.0 Amortization of acquired intangibles 149.7 135.7 Acquisition-related warranty provision - 9.8 A-1 2026 Proxy Statement Back to Contents FY 2025 FY 2026 Restructuring and related charges 22.8 11.4 Gain on sale of facility (34.9) - Income from operations on non-GAAP basis $160.1 $897.0 Operating margin* on a GAAP basis (10.9)% 17.4% Operating margin* on a non-GAAP basis 9.7% 29.8% * operating margin is calculated as income (loss) from operations divided by net revenue Net income (loss) on GAAP basis $25.9 ($6,935.1) Stock-based compensation and related payroll taxes 177.2 191.3 Intangible assets write-off 2.7 2.5 Acquisition related costs, net 1.2 0.3 Integration related costs 9.2 2.4 Acquisition-related warranty provision - $9.8 Escrow settlement - (27.5) Other charges, net 12.3 17.0 Amortization of acquired intangibles 149.7 135.7 Restructuring and related charges 22.8 11.4 Foreign exchange losses, net 4.2 0.5 Loss on debt extinguishment - 7,756.6 Inducement expense - 5.9 Non-cash interest expense 3.0 3.8 Gain on sale of facility (34.9) - Non-GAAP income tax reconciling adjustments (226.9) (392.3) Net income on non-GAAP basis $146.4 $782.3 Net income (loss) per share on a GAAP basis $0.37 $(92.96) Net income per share on non-GAAP basis (diluted) $2.06 $8.67 Shares used in per share calculation - diluted on GAAP basis 69.6 74.6 Non-GAAP adjustment 1.6 15.6 Shares used in per share calculation - diluted on non-GAAP basis 71.2 90.2 A-2 Back to Contents Back to Contents LUMENTUM HOLDINGS INC.
Appendix A: fiscal 2025–2026 GAAP and non-GAAP financial reconciliation · Filed 06/10/2026
We have had to reduce average selling prices, increase prices for certain of our products as a result of our suppliers’ increase in prices, write down our inventory, incur cancellation penalties, and record impairments, and may have to do so in the future.
Risk factors: realized selling-price changes, inventory write-downs, cancellation penalties and impairments · Filed 06/05/2026
CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) Payment for 2032 capped call options (102.0) — — Principal payments on term loans (14.0) (8.1) — Payment of withholding taxes related to net share settlement of restricted stock units (281.0) (41.7) (24.0) Payment of acquisition related holdback — (1.0) — Payment for financing costs related to revolving credit facility (2.4) — — Net cash provided by (used in) financing activities 1,556.9 41.8 (332.7) Increase (decrease) in cash and cash equivalents 1,522.8 84.0 (422.3) Cash and cash equivalents at beginning of period 520.7 436.7 859.0 Cash and cash equivalents at end of period $ 2,043.5 $ 520.7 $ 436.7 Supplemental disclosure of cash flow information: Cash paid for taxes, net $ 46.7 $ 20.6 $ 61.2 Cash paid for interest 15.7 19.1 19.7 Supplemental disclosure of non-cash transactions: Unpaid property, plant and equipment in accounts payable and accrued expenses $ 181.4 $ 43.4 $ 11.8 Right-of-use assets obtained in exchange for new operating lease liabilities 12.0 6.4 16.0 Net transfer of assets from property, plant, and equipment to assets-held-for-sale 4.2 — — Holdback receivable from sale of property, plant, and equipment 3.0 — — Unpaid intangible assets in accrued expense — — 1.0 Share-based purchase price consideration in connection with the Cloud Light acquisition — — 23.5 Aggregate principal amount of the convertible notes settled through issuance of common stock (equitization) 1,124.9 — — See accompanying Notes to Consolidated Financial Statements.
Consolidated cash-flow statement excerpt: financing, cash balances, unpaid capital expenditure and note equitization · Filed 17/08/2026
• 34% of annual LTIP equity awards were made in RSUs for our CEO and 50% of annual LTIP equity awards were made in RSUs for our other NEOs • Awards vest over 3 years - 1/3 on the first anniversary of grant and quarterly thereafter for two additional years Long-Term Incentive Plan PSUs Performance stock units are intended to reward our NEOs for long-term performance through aggressive financial and relative total stockholder return objectives that we believe will create long-term stockholder value • 66% of annual LTIP awards were made in PSUs for our CEO and 50% of annual LTIP equity awards were made in PSUs for our other NEOs • For our fiscal year 2026 PSUs, based on stockholder feedback and evolving corporate priorities, we changed the performance metric from revenue to EPS, and we changed the weighting from 67% on revenue and 33% on rTSR to 50% for each of EPS and rTSR • Given the rapid evolution occurring in our industry and markets, we set 1-year EPS performance goals with 3-year cliff vesting, allowing us to set more aggressive and rigorous targets than could be projected over a longer performance period while ensuring focus on retention • We continue to set rTSR goals as 3-year performance goals 43 Back to Contents Mix of Pay Elements A significant portion of our CEO and NEO compensation is variable and based on multi-year performance.
Executive compensation: granted equity mix, EPS and relative-return performance periods and vesting · Filed 06/10/2026
As described in our 2025 Proxy Statement, in August 2025, in connection with an action removing Strategic Progress Objective goals from our LTIP program, the Compensation Committee approved changes to remove all Human Capital/Leadership goals and to measure the Strategic Progress Objectives for our 2024 LTIP PSUs based on performance through the end of fiscal year 2025.
Executive compensation: changes to outstanding fiscal 2024 performance objectives · Filed 06/10/2026
Corporate Governance Highlights • Majority voting for directors • Annual election of all directors • Independent Chair of the board of directors • Independent directors meet regularly without management present • Audit, Compensation and Governance committees composed entirely of independent directors • Engaged board; each director attended at least 94% of the aggregate of all meetings of the board of directors and any standing committees on which he or she served during fiscal year 2026 • Significant share ownership guidelines for all executive officers and directors 5 Back to Contents Proposal No.
Corporate governance highlights: elections, independent oversight and meeting attendance · Filed 06/10/2026
No member of the management team is present for the discussion or approval of his or her individual compensation, and our Compensation Committee meets in executive session with Semler Brossy with no members of management present as part of its process in considering the data and recommendations.
Compensation decision processes: exclusion of management from individual pay decisions · Filed 06/10/2026
The following table presents the changes in our warranty reserve for the periods presented (in millions): Three Months Ended Nine Months Ended March 28, 2026 March 29, 2025 March 28, 2026 March 29, 2025 Balance as of beginning of period $ 22.7 $ 12.8 $ 14.4 $ 13.2 Warranties assumed in Cloud Light acquisition — — — 0.8 Provision for warranty (1) 4.4 1.8 20.7 6.2 Utilization of reserve, net (2.1) (1.6) (10.1) (7.2) Balance as of end of period $ 25.0 $ 13.0 $ 25.0 $ 13.0 (1) During the nine months ended March 28, 2026, we recorded $9.8 million of warranty expense associated with Cloud Light’s legacy products in our condensed consolidated statements of operations.
Warranty reserve note: realized legacy-product warranty expense · Filed 06/05/2026
Given our significant technological differentiation and first-mover advantage, we expect this product line to generate revenue in the billions in upcoming years.
Management letter: claimed differentiation, first-mover advantage and future revenue expectation · Filed 06/10/2026
Fiscal Year 2025 and Fiscal Year 2026 Peer Group ADTRAN MaxLinear Advanced Energy MKS Instruments Calix OSI Systems Ciena Semtech Cirrus Skyworks Solutions Coherent Synaptics Diodes Universal Display Entegris Viasat Extreme Networks Viavi Solutions IPG Photonics Wolfspeed Based on the Company’s substantially higher revenue in fiscal year 2026, along with substantially higher growth rates and market capitalization, shareholders should expect that the peer group for fiscal year 2027 has been reset significantly.
Executive compensation benchmarking peer group · Filed 06/10/2026
