Lumentum (LITE) Q4 2026 earnings call transcript

At this time, I would like to turn the conference call over to Cathy Ta, Vice President of Investor Relations. Ms. Ta, please go ahead.

Thank you, Matthew, and welcome to Loomentum's Fiscal 4th Quarter and Full Year 2026 earnings call. This is Cathy Ta, the Moomentum's Vice President of Investor Relations. Joining me today are Michael Hurlston, President and Chief Executive Officer, Wajan Ali, Executive Vice President and Chief Financial Officer, and Wupen Yuan, President of Global Business Units. Today's call will include four living statements, including without limitation, statements regarding our future operating results, strategies, trends, and expectations for our products and technologies that are being made under the safe harbor of the Securities Litigation Reform Act of 1995.

These statements are subject to risks and uncertainties that could cause actual results to differ materially from our current expectations. We encourage you to view our most recent filings with the SEC, particularly the risks described under risk factors and elsewhere in our 10 Q for the fiscal quarter and in March 28th, 2026, and in our most recent 10 K for the fiscal year and in June 27th, 2026 to be filed by Loomentum with the FCC. The forward-looking statements provided during this call are based on Loomentum's reasonable beliefs and expectations as of today. Loomentum undertakes no obligation to update or revise these statements except as required by Avocabola. Please also note that unless otherwise stated, all financial results and projections discussed in this call are non-yacht.

Non-yacht financials have inherent limitations and are not to be considered an isolation from, or as a substitute for or superior to, financials prepared in accordance with GAP. You can find a reconciliation between non-yacht and GAP measures and information about our use of non-yacht measures and factors that could impact our financial results in our press release and our filings with the SEC. Loomentum's press release with the fiscal fourth quarter in full year 2026 results and accompanying supplemental slides are available on our website at investor. loomentum. com. We encourage you to review these materials carefully.

With that, I'll turn the call over to Michael.

Thank you, Kathy. And good afternoon, everyone. Loomentum is positioned at the heart of a secular industry shift. As I had compute workloads increase in both speed and bandwidth, data center architects are turning to optical links as a primary means of connectivity. Our fourth quarter results reflect the early stages of this transition. Driven by broad-based momentum across our scale out and scale across product lines, revenues surged 109% year-to-1.01 billion dollars, marking our eighth consecutive quarter of top line growth. Additionally, we are maintaining revenue velocity as we saw our third consecutive quarter of greater than 20% sequential growth, notice notable as the compare point is getting ever larger. While we experienced broad-based success, some of our previously highlighted growth drivers are just starting to layer in.

Notably, in cloud transceivers, we achieved record 800 gig shipments while initiating production of our next generation 1.6T modules. For NOCS, we successfully navigated supply chain commitments according to plan. In addition to strong top line performance, non-gap gross margin crossed 50%. We had originally targeted this threshold at a 2 billion quarterly run rate, so this milestone came quite a bit sooner than expectations. We expect gross margin expansion to continue driven by product mix and tight operational execution. Non-gap operating margins expanded by more than 21 2,150 basis points year-over-year. These results prove two things, our differentiated technology commands premium value and our operating model delivers outside leverage. Driven by shark acceleration and AI revenue, the midpoint of our Q1 revenue guidance reaches our $1.25 billion target more than one quarter ahead of schedule.

Additionally, our Q1 non-gap operating margin guidance exceeds the high end of our target model that we associated with this revenue level. I'd like to address some recent market noise around co-packaged and near-packaged optics.

First, our lead CPO customers' production plans remain very much on track, and their demand signal has increased since our last update. Our visibility into the timing of CPO's scale-up deployments is also sharpened. We remain confident in the demand ramp for ultra-high-power laser chips in the second half of calendar 2027 ahead of customer scale-up deployments in calendar 2028. Because the first phase of scale-up optical connections will span across compute racks within the cluster, this demand ramp applies to any topology larger than one rack.

Adding to our confidence, we were recently given our first external light source for ELS, module purchase for delivery by the second half of calendar 2027. Second, the rest of our customer base is currently prioritizing near-packaged architectures as an intermediate step to the eventual adoption of CPO. The NPO opportunity is completely additive for us, significantly increasing the optical TAM. We're seeing strong NPO momentum across multiple high-velocity engagements using our differential laser chips. Even our largest CPO customer is looking at NPO for specific new use cases further increasing the optical TAM at that account. These architectural shifts represent a major market inflection that plays directly to our core strengths as a premier laser chip manufacturer. Benefiting us as optics begin to penetrate the copper domain.

NPO offers a faster time-to-market option by placing optical engines on the board right next to the XBO accelerator, training power and cost for simplicity in optical scale-up applications. Customers are evaluating two types of laser chips for NPO. A mid-power laser integrated directly with the optical engine and a high-power laser used in an external light source module. Our mid-power lasers inherit the reliability and engineering of our flagship high-power platform. Our family of NPO and CPO lasers utilizes common design and process know-how to achieve industry-leading efficiency across 120 milliwatt, 150 milliwatt, and 400 milliwatt output levels.

Looking ahead, CPO continues to be viewed as the natural end state on the technology roadmap, placing optics directly on the substrate or interposer for maximum power efficiency through found-rate level advanced packaging.

Now let's look closer at the metrics to define our fourth quarter, starting with the components product category. Components revenue for the fourth quarter was 649 million dollars, reflecting 22 percent sequential and 103 percent year over year growth increases. Our laser portfolio continues to demonstrate strong momentum across every vector. Shipments of our narrow language laser assemblies grew sequentially for the 10th consecutive quarter and we were up over 130 percent year over year.

Pump laser shipments surged more than 80 percent year over year and will remain effectively sold out for the foreseeable future despite our rapid capacity expansion. Expanding inferencing and training applications are driving full-rate connectivity between data centers while political and regulatory constraints favor smaller more modular builds. These two factors, among others, are substantially increasing the demand for our pump laser solutions. To put this in perspective, for one major hyperscaler, the network capacity connecting just two AI data center sites double the total global backbone capacity they built over the entirety of the last decade.

To support the growth and scale across deployments, we have secured multiple long-term customer agreements that helped offset our planned capital expenditures. We continue to expect a four-fold increase in our pump laser shipments over the next several quarters to meet this escalating demand.

Turning to laser chips, we delivered another record-breaking quarter for EMLs, primarily driven by strong demand for 100 gig per lane devices. Momentum for our 200 gig EMLs is also accelerated rapidly, now accounting for over 25 percent of total EML revenue.

Simultaneously, we are expanding our laser chip strategy to capture broader market opportunities in a way that align with our financial model. A key example is our CW laser chip for 200 gig per lane applications, which delivers high yield, proven reliability, and industry-leading performance in a compact form factor to a multitude of customers. Internal deployment of these lasers reinforces what our customers regularly confirm. We have a distinctive ability to deliver at scale to a very tight set of specifications which enables superior yields in transceiver manufacturing. Importantly, these new CW laser products will deliver margins that are to our long-term financial targets.

Looking ahead, we expect demand for both EML and CW lasers to grow significantly through the second half of calendar 26 and into 2027. To capture the coming 200 gig and 300 gig lane speed opportunities, we are expanding capacity across our two Indian phosphide wafer fabs in Japan, qualifying both CW and EML process flows on our newest tools that they come online. Even as we allocate additional capacity to CW lasers, we remain on track to deliver over 50 percent EML unit growth by the December 2026 quarter compared to the year ago, quarter. Wrapping up our components commentary, we have visibility to an expanding set of 3D sensing applications. These new opportunities are expected to drive below growth in upcoming product cycles with our primary customer.

Now I will move to our systems product category. Systems' fourth quarter revenue reached $357 million, representing a 30 percent sequential and 123 percent year over year increase. Both cloud transceivers and OCS were major drivers of the revenue growth quarter over quarter. While pockets of supply chain tightness for certain components cap shipments below total market demand, our factories executed to our aggressive plan for both product lines.

The bulk of our cloud transceivers shipments in the quarter were at 800 gig speeds, and we began shipping 1.6 T transceivers' plant. Meanwhile, profitability across our transceiver lines continues to improve, driven by games in both yield and capacity utilization, as well as the initial rollout of higher ASP 1.6 T transceivers. Our visibility into future cloud transceiver demand is clearer than ever. In fact, we expect the 1.6 T transceiver uptake to intensify, starting in fiscal Q1, and sustained through calendar 2027. This momentum is anchored by our scale of customers whose strong rollouts of custom AI clusters are driving a rapid transition from 800 gig to 1.6 T technology. With the use of improved design engineering techniques, we appear to be first to market in many instances ahead of larger competitors, giving us a market shared advantage that we should be able to maintain through the cycle.

The degree of difficulty with 1.6 T designs again is playing to our strengths, as our signal integrity team is widely acknowledged as the best in a competitive field. Turning to OCS, our internal manufacturing expansion is progressing smoothly. After doubling shipments from fiscal Q3 to Q4, our guidance includes our first triple digit OCS revenue quarter. The demand signal for 2027 continues to be incredibly strong, and we have started the initial work to add capacity with contract manufacturers as well as continuing to increase output in our internal factories. Since our last call, the roadmap for OCS has also come into better view. We are now planning higher and lower poor account products, including specialized intray offerings. Rounding out our systems category, performance in industrial lasers and cable access strength and quarter over quarter.

Within industrial lasers, we are seeing increased adoption of our ultra-fast lasers, targeting high-density PCB via drilling that supports advanced AI XVU boards and 1.6 T optical modules. Looking ahead to Q1, we expect to set another quarterly record and, as stated earlier, reach our $1.25 billion revenue target more than one quarter ahead of the plan, outlined at the last OFC. We anticipate that approximately half of the sequential growth will stem for our components portfolio, driven by continued expansion and scale out and scale across applications. The other half will be powered by the ongoing ramp of our systems portfolio by 1.6 T transceivers and accelerating OCS deliveries.

Now I'll hand the call over to watch it. Mr. Ali. Thank you, Michael. Fourth quarter revenue of $1.01 billion was at the high end of our guidance range, and non-GAP BPS of $3.23 was well above our prior expected range, demonstrating the leverage of our business model. GAP gross margin for the fourth quarter was 47.4%, and GAP operating margin was 27.8%. Both metrics exemplify the company's exceptional performance.

As disclosed previously, in the fourth quarter, we proactively equitized a portion of our convertible notes, which were in the money following the appreciation of our stock over the past year. This action reduces our debt by $1.1 billion, or approximately 35% of our outstanding convertible debt. This transaction resulted in a one-time non-cash GAP charge of $7.8 billion, bringing our fourth quarter GAP net loss to $7.2 billion.

Turning to our non-GAP results, fourth quarter gross margin was 50.4%, which was up 250 basis points sequentially, and up 260 basis points a year on year, due to better manufacturing utilization, favorable mix, and increased pricing on select products. Fourth quarter non-GAP operating margin was 36.6%, which was up 440 basis points sequentially, and up 2,160 basis points a year on year. We continue to invest in critical R&D programs, serving cloud and AI customers while maintaining the rigorous cost controls necessary to optimize our business model. Fourth quarter non-GAP operating profit was $368.8 million, and adjusted even if it dug was $406.4 million. Fourth quarter non-GAP operating expenses totaled $138.1 million, or 13.7% of revenue, an increase of $11.9 million from the third quarter, and an increase of $28.8 million from the same quarter last year in support of expanding cloud and AI opportunities.

Q4 non-GAP SG&A expenses were $50.6 million, non-GAP R&D expenses were $87.5 million. Total interest and other income net was $22 million on a non-GAP basis. Fourth quarter non-GAP net income was $326.3 million, and non-GAP net income per share was $3.23. Our diluted weighted shares for the fourth quarter were $101.1 million on a non-GAP basis. I will now turn to the balance sheet. During the fourth quarter, our cash and short-term investments decreased by $0.43 billion to $2.74 billion, with the decrease primarily driven by convertible debt conversions. Our inventory levels increased by $59 million, sequentially, to support the expected growth in our cloud and AI-related revenue. In Q4, we spent $167 million in CAPEX, primarily focused on manufacturing capacity to support cloud and AI customers.

Turning to revenue details, components revenue of $649.4 million increased 22% sequentially in Q4 and 103% year on year. Systems revenue of $356.9 million increased 30% sequentially in Q4 and 123% year on year.

Now let me move to our guidance for the first quarter of fiscal year 27, which is on a non-GAP basis and is based on our assumptions as of today. We anticipate net revenue for the first quarter of fiscal year 27 to be in the range of $1.225 billion to $1.275 billion. The $1.25 billion midpoint reflects more than 130% year over year growth, setting yet another all-time quarterly revenue record for Lamento. We project first quarter non-GAP operating margin to be in the range of 39.5% to 40.5% and diluted net income per share to be in the range of $4.05 to $4.35. At the midpoint, this operating margin represents an expansion of more than 2100 basis points year over year.

Our non-GAP EPS guidance is based on a non-GAP and annual effective tax rate of 16.5%. These projections assume shares used for non-GAP diluted earnings of approximately $102 million. With that, I'll turn the call back to Kathy to start the Q&A session. Kathy?

Thank you, Watson. To allow as many people as possible an opportunity to ask questions, please keep to one question and one follow-up. Now, Matthew, let's begin the Q&A session.

Hey, Joe, this is Michael. You know, firstly, thanks for your continued support. You know, look, we'll come out with some new financial targets, probably at the next OFC. We're obviously running well ahead on almost every metric on revenue on margin, on operating margin. We see you doing quite a bit better. And you're right, look, I think there are some new things that we didn't factor into our discussion at OFC, NPO. We spend a bit of time on the prepared remarks on NPO, CW lasers. We think that that's an incremental opportunity for us. We probably not spent a lot of time on before. And you're right, OCS, I think is we've discussed, but it seems to be doing a bit better than expected.

So, you know, we feel like we're executing, we're trying to keep our head down and run and obviously, you know, adding nearly $250 million incrementally into the guy is pretty impressive. And, you know, we think we have the opportunity to do that more as we look out in future quarters.

Yeah, I'm going to say a couple of things and then actually ask them to comment a little bit on the differentiation and mid-power. You know, certainly the timing of these opportunities is plus or minus what we have talked about for our lead CPO customer. Our lead CPO customer, we just said in the prepared remarks, we'd expect to start shipping in high volume for scale up. We're already, of course, shipping for scale up. But for scale up, we expect to be shipping in the second half of calendar 27 for their deliveries in 28. Our leading customers on NPO plus or minus, is the same kind of ELS high-powered laser. And then maybe followed by a couple that are integrated where the optical engine of a mid-powered laser is integrated inside the optical engine.

And it's all one unit. So I would say that the ones that we have, the best line of sight on and that are sooner, are more of the high-powered laser type, very consistent with what we've been talking about for our largest CPO customer.

With that said, I wanted WUPAN maybe to give a few seconds of color because I think there's a little bit of a mischaracterization. We think that these mid-powered lasers that are going inside the OE, a lot of things going on there in terms of differentiation. Do you want to give two seconds on that?

Yeah, definitely. That's my quote. So to do the kind of the NPO optical engine, imagine each NPO at about 6.40 of bandwidth, which is really equivalent to four times that of work with the CPO module. The level of integration and the power density that's required and efficiency required to fit everything into a small optical engine is immense. Therefore, you need really the best laser technology and the best efficiencies in order to really fit everything in a small package. So, in terms of register, it really is to leverage our 400 milliwatt kind of design principle and leverage the higher efficiencies of the intrinsic design process and scale it to a application around 150 to 100 milliwatt range that enables application.

This is actually based on our auto-type power technology that we immediately position to address this market. And we believe that by late 20-7, you know, 20-28 timeframe that NPO will hit the market and enable people to scale up and this becomes an interesting opportunity for us to increase our laser business.

Thanks, Joe. Thank you, Michael. Thank you, Wooten. Thank you.

Yeah, thanks, Simon. Look, we did reprice a little bit. I think, you know, most of our sort of LTA's are more forward-looking in terms of the price impact. We saw some benefit, as Wojcett said, in his prepared remarks on the gross margin line, on pricing.

We, you know, think that that still has some room to play through. But I'd say the long poll this quarter was more on mix, right, where we were shipping a lot of more of our high-mixed components. And I think, as we said, we'd expect that to continue to play through as well. So we think we have some room to run on the gross margin line, Simon.

Yeah, look, I mean, I think we're hearing the same thing. We obviously haven't seen any impact on our numbers as yet. And I don't expect there to be any impact. We think we have differentiation, obviously, on EMLs. We're very strong there. And these high-end mid-power lasers that are necessary for NPO and CPO get very strong differentiation there. And then even in CW, we've been surprised at our ability to price up, given what we said in the prepared remarks, that customers are seeing far better yields, given our ability to deliver consistent performance on our lasers. They just simply don't deviate. The width of the spec is very narrow. And that results in far better transceiver yields for the customers that we've actually started shipping CW lasers to.

And so as a result, we are able to command a nice price premium that we would expect to sustain as these Chinese, if these Chinese guys come online. A caution, people also, I think people are some of these Chinese laser suppliers are not delivering in the market today. So there's no recourse when they throw out these big numbers. We have not seen anything like that today in terms of their output. Thanks very much. Thanks, Simon.

But also, the question is, any comment on when we could expect to see that happen for ultra high powered CW scale out lasers where we'd get a triple digit quarter?

Yeah, Mike. Again, first, I want to thank you for the support of the company and really following our details really well. Yeah, you got it right. So in the guide, which is the first quarter, we'd expect our first triple digit OCS revenue quarter. We'd expect to be meaningfully above the three-digit mark. We're executing well on OCS, as I said. And then for ultra high powered lasers, we have said, hey, we'd expect by the end of the year to be sort of in the $50 million mark. I think the third quarter is when you'd see the first triple digit quarter for ultra high powered lasers. So we are executing. We're shipping today. We had good shipments in this calendar and the reported quarter before.

We'd expect that to build somewhere in the $50 million range by the end of the calendar year and then to really meaningful impact in fiscal cuter.

Yeah, look, progressing super well. I'm actually very pleased that the team that we got in Greensboro is first rate. As you know, we inherited a fully functioning fat. So the switch that we need to throw is to convert it from gallium arsenide in the emplosite. That is well underway. Some of the long coal items, reactors and things like that our team has gotten out in front of. I think we continue to say, you know, revenue, first revenue out of that in early 2028 and ramping through calendar 2028 into kind of a full pitch by the end of 28 and into 29. So really no change in that, Mike. Thanks for taking a question. Thank you so much, Mike.

Yeah, Papa, look, you know, what I say is we're definitely tracking to the 400 million. I would not say tracking ahead. I mean, we've definitely, as you know, had some some problems early on in the ramp with supply chain. We're out of that now. I think we're executing, as I said to plan, we are plus or minus about where I would have expected to be for the guy, right? So that contributes, takes a dent out of the 400 million and that leaves us some room to run in the fourth quarter, fourth calendar quarter. You know, relative to one customer that apparently has an internal source of supply, we are, I think, executing extremely well. I don't think we, I think they'll continue to use an internal version, but I think as they ship more and more OCSes, we will absorb the vast majority of that.

So I would expect, you know, sometime in early 27 that we cross over and be the number one supplier and actually have momentum from there in terms of our OCS shipment. So we, you know, we're definitely, I think we surprise the customers. We are continuing to ship to a number of different customers or execution back on track, but most importantly, like on software and things like that, where I'd expect it to us to have more difficulty, Papa, we've done well. So I think our customers in general, if you talk to them, would say we've been an incredibly, incredibly strong supplier.

And Michael, for my follow up, just curious on the, any update on the supply demand kind of in balance, I believe last quarter, you mentioned 20% plus, where are we now and how do you see that improving or how do you see that going into fiscal 27 and beyond?

Yeah, so I would say on, on EML, probably no change, right? So I don't think that it's gone up, but it hasn't come down. We're still shipping behind customer demand on EML.

I think what surprised us is high-powered lasers, right? High-powered lasers, you know, again, there's been a lot of noise in the system on, on what's happening on various co-packages and your package opportunities. We are way behind our shipments, unfortunately, on, on high-powered lasers. So we, if, if one vector has really changed since the last time you and I talked, I'd say it's your high-powered lasers, and we are very much further behind. The demand signal is increased, and we are very much further behind relative to our ability to supply.

Yeah, I think just clarify, right?

Yeah, I'll just clarify all the execution of the demand is on the right, right? We're further behind because our, the demand has accelerated, that, as Michael said, in the prepared script.

Yeah, we, we've got our first ELS module order, right, which from an ASP standpoint is meaningfully higher than the set of lasers that we ship in. So we're very excited about the revenue opportunity, you know, small to start, right? And we said that we'd be shipping, you know, sometime mid-year, early second half of 27, to be honest. A little bit later, we felt like we'd see more opportunity on sort of scale out applications than we have to date. But we're very pleased to be participating in the early phases of scale up with both lasers and now with the ELS module. As I said a minute ago, the ELS module meaningfully higher from an ASP standpoint.

But the margins are not quite as good above corporate average, but not quite as good as the lasers. So we're trading a little bit of earlier in the call. We think we have enough drivers on the margin side that we can keep the margin vector moving, but, you know, help our revenue acceleration.

And also just a bit to add, right? You can recall that we've positioned our ELS module to be really enabling the customers. We don't know how to deal with the digital laser chips. So this is really a great first step for us to take to, you know, shoot to one customer and then go from there. We enable other end users to use the ELS. We enable their CPO and NPO systems.

We are commanding a significant price premium, as I said in a previous question, against what we view as the market price because of the performance of these lasers. And as such, the margin opportunity is still better on EMLs, but that gap has closed considerably, I think, since the last time we talked. We're glad you want to talk a little bit about the dynamic that you're seeing on CW and EML. Yeah, I think that's all we're accurate, right? Just a couple of things to add to that.

Number one, if you look at the application today, there's a lot of 200 gig per lane volume that's on 800 gig. And then in that, we actually seize a much higher EML share versus the other laser share. So, Michael, talk about dynamics. I think this will both continue. EML will remain a very important player in monetary per lane, but as one we see runs up, I think we will see more Seattle lasers. As Michael talked about, our new design of technology, Seattle laser is much more efficient there, but smaller, it gave us a much better gross margin profile. Another thing I also know, really dynamics here, is that in a constrained environment, we also see customers' behavior as wherever they can get a laser source, they will use that solution to support their build out.

So, the dynamics of EML laser is not only a technical one, but also a supply versus a demand situation.

And when you see there's 1.60 crossover, it looks like it's already greater than 25% revenue, but when do you see that crossing over with they can be, I guess, and I follow up? Yeah, Mr. Rakesh, good to hear from you, my friend. Look, no change really in the forecast on the crossover. What we said is, and I think you're referring to 200 gig per lane lasers, we have said that for us, we'd expect 200 gig EMLs to be the majority volume shipments by the middle of 2027. We just said in the remarks that now 200 gig per lane EMLs are 25% of our mix. We'd expect it to be 50% or more volume by mid-year of 2027.

So we seem to be tracking to that. No real change in that. I think, generally speaking, yeah, you're right. Lasers are one of our better businesses and the lasers are more than our corporate creative, whether it's CW or EML. As I said to Chris a minute ago, we've closed the margin gap quite considerably since our last call on EMLs versus CW by stringing the die size of the CW laser.

EMLs are still better, but we've closed the margin gap quite considerably.

And then on the operating leverage side, what it looks like started improvement there on your audio-care 40% target. How should we think about it as you go through fiscal 27? Thanks. Yeah, thanks, Vijay. So the guideline that we have given at $2 billion of revenue was 38 to 42%, like Michael said in his prepared remarks, we're already at the midpoint of that at much lower revenue levels. And so with gross margins improving, as we approach $2 billion, we'll see some improvement on the operating margin line as well that corresponds to those gross margin improvements. So think of the 42% outlier more as a midpoint with the range probably moving up 100 to 200 basis points versus what we showed at OFC.

I was really intrigued by the deal you guys signed in the quarter with AXT. Because I think a quarter ago, you actually said that you were doing pretty well on the impossified substrate. And so it feels like there's a bit of a change here. I guess I'm wondering what you guys are seeing longer term here in terms of your need for more Indian boss-wide substrate. And as I extrapolate that, can I look at Queensborough and are you making more progress towards filling the rest of that facility? I'm looking forward. Thanks a lot.

Hey, George. Yeah. Look, I would agree. I mean, I think what we tried to hint to in a previous question is the ultra high powered laser demand has surprised us. And that cuts across a couple of customers. So what we're trying to do, I think really in the last three months is secure even more substrate supply. We were doing well. We felt like we had given the baseline of demand that we were seeing from ultra high powered. And then, of course, the EMLs, CW lasers that go into our scale out products, we felt pretty good, right? As you said, but I think we've seen a pretty big surge in demand, as we said. And in order to respond to that, we went out and we found additional substrate help from AXT.

I think the great partner who pens work with them for a good number of years. And we think we're going to need their help just given the surge in demand. So that's a drove that deal. If this vector continues, we're probably going to need to look for more help on substrate. We feel we're good at this moment. We're probably pretty comfortable just given our lead arrangement with a Japanese supplier. And now the announced deal with AXTI. But given the rate of change in the demand vector that we're seeing, that may not be true a quarter or two from now either.

Thanks. Yeah, look, we're looking to do that. I think we've sort of reported consistently that we have capacity in Greensboro. We have room there, and Blue Pen has been out talking to a number of customers about helping them with their laser demands, which are again, changing minute by minute is that everybody starts to look to adopt near packaged or co-packaged solutions. And so I would expect that we have some things to talk about over the next couple of quarters relative to new arrangements to in Greensboro that speak to more of this capacity we have there.

Yeah, Tom, super to speak to you again. We really appreciate this chat as always, Tom, as always. Look, I think what we're seeing now is an inflection in the A6 and then the 30 speed, and that's driving the need for MPO and CPO. I don't know, and Wupen can comment a little bit on this. I don't think there are existing TPUs, XPUs, GPUs, they're shipping that have a fast enough 30 speed that we could suddenly plop in an MPO or CPO solution, which I think is what you're asking. But as these new generations come online, you know, really seeing silicon in mid-27 toward the end of 27 and early 28, all those new silicon solutions, again, GPUs, XPUs, TPUs, all seem to be driving 30 speeds that are consistent with the I think that's very accurate.

Really, I don't think how we're not seeing the retrofit of MPO onto the current XPUs.

We're seeing in real life, as Michael talked about, there is a broad momentum towards the 28, kind of the 28 ramp of MPO, NCPO, and re-driven by optical scale up. So this is beyond just the XPU itself. This is also goes into a rack-based multi-rack system that requires optical scale up. And therefore, we believe it's going to be a new processor, new racks, and it's a 20-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-h undred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred -hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred- hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-h undred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred We really always appreciate your questions.

I think, you know, this is an area of incredible strength for us, right, which really, I think, is underappreciated. We have a very large market share here, and what we've done is, you know, really worked hard with, for example, the NEPs, the Network Equipment Manufacturers, to form strategic partners, and we're super pleased with, you know, how people have come to work with us on helping offset some of the CAPEx, and it's considerable that we have to put out to ramp and rose orchard, you got it right, and to then bring that into our Thailand manufacturing for packaging and test. We formed a series of arrangements that, for the most part, are three-year arrangements, and those arrangements, you know, as our normal arrangements have pricing built into them.

There are pricing levers that we can exercise if certain conditions are met, so we think we have some room there on the, on the price line, but, you know, these are giving us a lot of surety in terms of that demand, not evaporating, and in most instances, I think they're going to take or pay your comments, since you've been at the middle of that, but we feel really, really good about where we're sitting, room, and on the pumps. Again, you know, rough order, we're somewhere between 70, 80% share, and we believe we have a technology roadmap that our customers want to engage in, that will afford us the opportunity to work on price, to further increase output, but John, this is a darn exciting area for us.

We've been any additional color?

Yeah, look, I'll have Lupen comment just in the interest of time. I mean, there are OCI, right, different standards that are coming out that are talking about the way the interface between the ASIC and the optical engine, for example, that's great for us because that opens up switch opportunities, for example, that may not be open to us before. So the standard-based approach is, opens up optical TAM, but we are engaged to be honest with you in both, right? There are a lot of custom, very specific types of implementations that our customers are driving to, and we are, that's really going to be our first wave of NPO engagement room in any color?

A little bit of the color, I think just to extend what Michael just talked about, right? There are actually two things. One is that today, right, the physical level, the optical level, they're all so-called fast and narrow. 200 gig per lane, massive lanes, and the next generation, right, as Michael talked about would be like OCI and SA based, right? So that's on the optical side. But on the full factor side is very much proprietary, right? Everybody has a different design. Again, we talked about already a mass to their rack design, their system design, and that actually is different from customer to customer, right? So again, optically, they are kind of standard-based, but then on the implementation side, they're different between different customers.

I will now turn the call back to Kathy for closing remarks. Thank you, Matthew. That is all the time we have for questions, and we look forward to connecting with you at upcoming investor conferences and meetings throughout the quarter.

With that, I'd like to thank you for joining us today. This concludes today's call. Thank you for attending. You may now.