Lumentum Surges 600 in a Year as Optical Demand Lifts Revenue 83

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Rising.Stars identifying stocks that finish the trading day with impressive gains. With a focus on market dynamics and late-day trading patterns.
 

•  07 Oct 2026
 

$LITE Lumentum has climbed about 600% within a year, and investors keep coming. The story is simple: AI data centers are filling with more and more processors, and all of those processors need to move enormous amounts of information between them. The chips do the computing, but someone has to connect them, and as the number of processors grows, the connection becomes a bottleneck. That is exactly the domain of Lumentum, which makes lasers, optical components and products that move information using light at high speeds.

What was a few years ago a communications business with moderate growth has become one of the places where AI budgets are flowing, and the stock is responding accordingly. In the latest quarter Lumentum recorded revenue of about $1.01 billion, more than double the comparable period. Annual revenue reached about $3 billion, an increase of about 83%. Profitability also improved, with adjusted gross margin reaching about 46%. The pace continues, as the company expects next quarter revenue of $1.225 billion to $1.275 billion, which means that even after the jump already recorded, orders keep arriving at a high rate.

The main reason sits inside the data centers. Copper once connected servers across a large part of the system, but today, with thousands of AI accelerators working together, the amount of data passing between them is enormous. Distances grow, speeds rise and power consumption becomes critical. Optical connection offers a more efficient solution, so a larger share of the budget is moving to fibers, lasers and optical modules.

Marvell estimates that the data center connectivity market could grow at a rate of 60% to 70% per year. The same wave is already felt at Ciena, Corning and Fabrinet. Investors are beginning to understand that every billion dollars that goes to more AI processors also requires investment in networks and communications around it. Nvidia itself invested $2 billion in Lumentum and another $2 billion in Coherent, a signal of how important this area is to it.

At Lumentum the shift arrives at exactly the right time. Products at 1.6 terabit are beginning to take a larger place in sales, and customers are already moving to the next generations. More speed on each connection allows a data center to move more information between processors without increasing the number of cables and components at the same rate. In previous reports Lumentum already showed almost a doubling of revenue, and investors began pricing it as an AI infrastructure company rather than an established optics company. The move in the stock has gained further momentum since then, and earnings momentum is now the driver behind it.

A price of around $1,100 per share already brings a lot of expectations forward, and that multiple expansion leaves little room for error. The market expects cloud giant investment in data centers to keep growing, the move to optics to accelerate and Lumentum profitability to keep improving. A slowdown in any one of these components could quickly change the pricing. On the other hand, the business direction is clear for now: chips receive most of the attention, but networks and optics are becoming a larger part of the AI budget. When a data center includes more processors, it also needs more equipment to make them work together, and Lumentum sits in exactly that part of the chain.

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