Nomura said in an Aug. 12 global AI trend tracking report that Lumentum’s latest results and outlook send a clear message to the optical communications market: supply-demand imbalances in electro-absorption modulated lasers, or EML, and continuous-wave, or CW, lasers are unlikely to ease through FY26 and FY27. In Nomura’s view, that global optical chip shortage is creating a structural opening for Chinese suppliers.
Lumentum reported June-quarter revenue of $1.01 billion, up 109% from a year earlier, with demand rising across laser categories. The TechFlowPost article, written by Rita, framed those numbers as confirmation that upstream optical chip supply remains tight while bandwidth demand from AI data centers keeps moving deeper into the supply chain.
EML and CW laser tightness is expected to last
Lumentum’s component revenue in 4QFY26 rose 103% year over year to $649 million, with strong momentum across laser product lines.
Narrow-linewidth laser component shipments increased by more than 130%. Pump laser shipments rose 80%, and management said volumes are expected to grow another 4x over the next few quarters. Even with rapid capacity expansion, most of that capacity is still essentially sold out. The company holds an estimated 70% to 80% market share in pump lasers, giving it room on both technology and pricing.
In laser chips, EML set another quarterly record, driven mainly by demand for 100G devices. Momentum in 200G EML is also building. That product now accounts for more than 25% of total EML revenue, and management expects the share to exceed 50% by mid-2027. Lumentum also said EML shipments in the December 2026 quarter are expected to rise more than 50% year over year, while more capacity is being allocated to CW lasers.
Nomura said the supply gap in EML and CW lasers remains material, and that imbalance continues to support the optical module market.
Upgrade path runs through 1.6T, 3.2T, NPO and CPO
Lumentum management said CW lasers currently support most transceiver output in 1.6T silicon photonics applications, while EML is expected to regain a more important role in the 3.2T generation.
CW laser die size has already come down sharply. Performance gains have narrowed the gross margin gap with EML, though EML still comes out ahead. The company said both 200G EML and CW lasers contribute positively to margins. At present, 200G EML accounts for 25% of mix margin, and that figure is expected to move above 50% by mid-2027.
Management described near-packaged optics, or NPO, as an intermediate step before co-packaged optics, or CPO, reaches broader adoption. Commercialization is expected between late 2027 and 2028. NPO was described as an incremental market opportunity that had not been fully reflected in prior financial targets and one that could expand optical total addressable market, or TAM, in a meaningful way.
Lumentum also recently received its first purchase orders for ELS modules, with deliveries scheduled for the second half of 2027. According to management, NPO and CPO lasers share a common design platform spanning 120 milliwatt, 150 milliwatt and 400 milliwatt output levels, with what the company called industry-leading efficiency.
OCS shipments doubled and the $400 million target remains in sight
Optical circuit switching, or OCS, was another major focus in the report. Lumentum said OCS shipments doubled from 3QFY26 to 4QFY26. For 1QFY27, management guided to triple-digit year-over-year growth in OCS revenue.
The company is still working toward its target of reaching $400 million in OCS revenue in 2H26. Supply chain issues that had weighed on the business have been resolved, according to management. It also described 2027 demand signals as 「extremely strong」 and said it has already started working with contract manufacturers to add capacity while continuing to raise output at internal facilities.
Lumentum is also planning OCS products with both higher and lower port counts, including dedicated in-tray products. Nomura said OCS demand is closely tied to upgrades in optical interconnect architecture inside AI data centers and represents an important source of incremental demand in the broader optical communications market.
Chinese names highlighted as potential beneficiaries
Nomura argued that the global optical chip shortage is giving Chinese suppliers a clear window to win market share.
- Yuanjie Technology was identified as a company that could gain global share in optical chips.
- Innolight was cited as a likely beneficiary of the shift from 800G to 1.6T and rising silicon photonics penetration, supported by its supply chain execution.
- Tianfu Communication was described as a beneficiary of the incremental opportunity tied to NPO.
Nomura attached ratings and price targets to the three A-share companies. Yuanjie Technology was rated Neutral with a price target of RMB 1,375, based on 21x expected 2027 earnings per share. Innolight and Tianfu Communication were both rated Buy.
Source note and disclaimer
The article said Lumentum’s results validate an accelerating structural trend: bandwidth demand from AI data centers is moving from optical modules toward upstream optical chips, while supply-side capacity expansion is lagging demand growth. In the report’s framing, that gap is giving China’s optical communications chain, from chips to modules, a time window to capture opportunities.
It also noted that the piece was a summary and interpretation by Chaoxiang Research of a third-party brokerage report from Nomura Securities dated Aug. 12, 2026, combined with public market information. The cited ratings, price targets, earnings forecasts and related judgments were identified as the views of Nomura analysts only, representing the brokerage rather than Chaoxiang Research, and not constituting investment advice. The article further warned that markets carry risk and investment decisions should be made independently.