LITE's AI Optics Push Boosts Growth Prospects Against MRVL & NVDA

Lumentum LITE is benefiting from accelerating artificial intelligence (AI) infrastructure spending as data-center architectures increasingly shift toward optical connectivity. The company is gaining traction across optical circuit switches (OCS), co-packaged optics (CPO) and near-packaged optics (NPO), broadening its exposure from scale-out networks into scale-across and optical scale-up architectures. These developments are expanding Lumentum’s optical total addressable market (TAM) and strengthening its position in AI connectivity, while increasing competitive prowess against the likes of Marvell Technology MRVL and NVIDIA NVDA.

OCS is emerging as one of Lumentum’s strongest near-term growth drivers. The company doubled OCS shipments sequentially in the fiscal fourth quarter and expects its first triple-digit OCS revenue quarter in the first quarter of fiscal 2027. The company is tracking toward more than $400 million in OCS revenues during the second half of calendar 2026. Management expects the company to become the #1 supplier to a major OCS customer in early 2027, despite the customer maintaining an internal source. LITE describes itself as the only merchant supplier currently shipping OCS at $100-million-plus quarterly levels. Specialized in-tray OCS products could provide another additive opportunity around 2028.

CPO represents another major opportunity as hyperscalers require more power-efficient connectivity for increasingly dense AI clusters. Lumentum expects ultra-high-power laser revenues to reach roughly $50 million by the end of calendar 2026 and expects its first triple-digit revenue quarter in the third quarter of fiscal 2027. The company has received its first external light source module order, which carries a meaningfully higher average selling price than the lasers it currently ships and could expand its revenue opportunity in optical scale-up applications.

NPO expands the opportunity by placing optical engines close to AI accelerators and providing a transitional path toward broader CPO adoption. Lumentum says NPO is completely additive to its existing TAM, with even its largest CPO customer evaluating NPO for additional use cases. Its portfolio includes mid-power lasers integrated into optical engines and high-power lasers for external light sources, spanning 120mW, 150mW and 400mW output levels. New GPUs, XPUs and TPUs arriving from mid-2027 through early 2028 are expected to offer SerDes speeds compatible with wider NPO/CPO adoption.

LITE Faces Tough Competition

Marvell presents a significant challenge because it can combine silicon photonics, switches, SerDes, custom XPUs and optical interconnects into end-to-end scale-up solutions. MRVL has shipped more than 1 million silicon-photonics DCI modules and accumulated more than 15 billion hours of field data. It is working with multiple Tier-1 customers on its third-generation 6.4T NPO/CPO light engine, while Celestial AI’s photonic-fabric technology has already been selected by a Tier-1 hyperscaler. Marvell expects scale-up optics revenues of roughly $300 million from true NPO and CPO-based solutions, marking the beginning of what it views as a major growth cycle. 

NVIDIA is collaborating with Marvell on silicon photonics and NVLink Fusion, allowing Marvell to develop networking semiconductors and custom chips that can interface with NVIDIA infrastructure. NVIDIA’s broader control across AI compute and networking could give it significant influence over future optical architectures, affecting the share of AI connectivity available to independent suppliers such as Lumentum.

LITE’s Share Price Performance, Valuation & Estimates

Shares of Lumentum have appreciated 143% year to date, outperforming the broader Zacks Computer and Technology sector’s 17.1% growth.

LITE Stock’s Price Performance

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LITE stock is trading at a premium, with a forward 12-month price-to-earnings ratio of 38.42X compared with the broader sector’s 20.76X. Lumentum has a Value Score of F.

LITE’s Valuation

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The Zacks Consensus Estimate for Lumentum’s earnings is currently pegged at $4.23 per share, up by 67 cents over the past 30 days, suggesting 284.55% year-over-year growth.

Lumentum Holdings Inc. Price and Consensus

Lumentum Holdings Inc. price-consensus-chart | Lumentum Holdings Inc. Quote

Lumentum currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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