Lumentum Holdings Inc. (LITE.US), a core participant in the "Google TPU AI computing chain" and a crucial optical component supplier for the "NVIDIA AI GPU computing chain," has seen growing institutional support for its stock's strong upward trajectory into 2025 following robust quarterly results and an optimistic outlook. With a staggering 340% surge over the full year, Lumentum stands as a definitive global AI computing "superstar stock," and its shares have already climbed more than 56% year-to-date.
As a leading US-based optical technology firm, Lumentum is positioned as one of the prime beneficiaries of the potentially prolonged contest between "Google TPU and NVIDIA GPU." Whether the competition remains balanced or one side gains a decisive lead, the optical module sector is expected to see long-term benefits. Jeff Pu, a senior analyst at GF Securities, stated in a recent report that Lumentum is set to gain continuously from the accelerating adoption of co-packaged optics (CPO) by AI chip leader NVIDIA (NVDA.US).
Lumentum's latest earnings report revealed strong demand in optical circuit switches (OCS) and CPO, leading to revenue and profit that exceeded expectations. The company also provided next-quarter guidance indicating an 85% year-over-year growth, underscoring its critical role in global AI computing infrastructure. For the quarter ended December 27, 2025, net revenue reached $665.5 million, a sharp 65.5% increase from the prior year, hitting the high end of the guidance range. For the upcoming quarter, management projected revenue between $780 million and $830 million, implying over 85% year-on-year growth and approximately 22% sequential growth, signaling sustained momentum.
At the 2025 GTC conference, NVIDIA introduced its CPO-based switches, with Quantum-X scheduled for the second half of 2025 and Spectrum-X for the second half of 2026. Jeff Pu noted that NVIDIA’s first-generation scale-out CPO switch, Quantum-X, uses a pluggable architecture rather than fully integrated CPO. He anticipates that a next-generation CPO switch with 115.2T performance may be unveiled at the 2026 GTC event, with TSMC likely taking the lead in producing core CPO chips. Supply chain scaling is expected to begin accelerating in Q2 2026, with a more pronounced ramp in late 2026 and 2027. GF Securities has raised its estimates for NVIDIA’s scale-out CPO switches to 2,000, 20,000, and 80,000 units for 2025, 2026, and 2027, respectively.
According to Pu, Lumentum should benefit from surging demand for continuous wave lasers, while fellow optical module maker Coherent (COHR.US) may see a more neutral impact. Based on recent earnings calls, Lumentum emphasized that optical scale-up represents a long-term structural opportunity likely to materialize by late 2027. Pu added that NVIDIA may begin introducing CPO/NPO solutions starting in the second half of 2027, beginning with the Rubin Ultra architecture, with rack-to-rack interconnects potentially shifting aggressively toward CPO or NPO-based optical links. He also indicated that TSMC’s CPO scale-up solution has entered the sampling phase, though mass production readiness remains uncertain, suggesting the NPO vs. CPO debate will continue.
Lumentum’s recent performance indicates that its OCS and CPO businesses are still in early stages, with significant growth potential as capacity ramps and orders are fulfilled. Combined with stable demand from traditional telecom and industrial markets, the company has set a strong growth trajectory for the full year and is well-positioned to benefit from the AI infrastructure build-out. Management confirmed receiving a multi-hundred-million-dollar incremental CPO order this quarter, with delivery scheduled for the first half of 2027.
CEO Michael Hurlston emphasized that Lumentum is at the starting line of two major opportunities: optical circuit switching and co-packaged optics. He noted that exploding bandwidth and energy efficiency requirements in AI data centers are driving the company’s strongest growth cycle in history.
Following the earnings release, Wall Street giant Morgan Stanley expressed excitement over Lumentum’s tangible progress in the emerging CPO market. Based on strong fundamental expectations, Morgan Stanley significantly raised its profit forecasts for Lumentum, projecting a remarkable 158% compound annual growth rate in earnings from fiscal 2025 to 2027.
Comparing Lumentum and Coherent reveals distinct business models: Lumentum focuses on manufacturing key optical communication components such as lasers and optical devices, supplying foundational building blocks integrated into various optical modules and systems within large AI data centers. Its core strength lies in laser sources and photonic components, making it a top-tier supplier for both Google TPU and NVIDIA GPU computing networks.
In contrast, Coherent operates with deeper vertical integration, spanning from raw materials to finished modules. It possesses stronger capabilities in producing complete optical modules and materials, giving it an advantage in highly integrated high-speed module markets.
Lumentum’s impressive stock performance in 2025 stems from its ability to benefit from both the Google TPU and NVIDIA GPU computing ecosystems. A common requirement across TPU and GPU-based AI clusters is the need for ultra-high bandwidth, low latency, and high energy efficiency in data center interconnects. As traditional copper and electronic switching solutions struggle to scale to thousands or even tens of thousands of chips due to power and thermal constraints, optical interconnect technologies like CPO, silicon photonics, and OCS are becoming essential.
These technologies replace electrical signals with light, significantly boosting bandwidth density and energy efficiency while reducing latency in large-scale AI training and inference networks. NVIDIA’s Spectrum-X and Quantum-X silicon photonic switches integrate laser and photonic technologies for improved power efficiency, with Lumentum’s high-performance lasers and optical components playing an indispensable role.
Similarly, Google has extensively embedded OCS clusters within its Jupiter/AI data center network to support TPU AI systems and large-scale training/inference workloads. Lumentum’s R300/R64 OCS products are designed for large-scale cloud and AI/ML data center networks, using MEMS-based optical switching to establish direct light paths between endpoints, bypassing electronic switching and OEO conversion for lower latency and power consumption.
From a technical perspective, whether in the emerging CPO era—where photonic components are co-packaged near switches/ASICs to cut latency and power—or in OCS architectures that use optical switching to replace electronic forwarding, high-performance lasers, optical switches, and dense optical interconnect modules are essential. Lumentum’s deep expertise in these foundational photonic components positions it as a key supplier across multiple AI high-performance network architectures.
In the medium to long term, as AI training scales—whether in massive GPU farms or TPU supercomputing racks—issues like cabling costs, interconnect scalability, and energy efficiency will persist. Industry analysis suggests that optical technologies such as OCS and CPO are transitioning from limited trials to large-scale deployment and may become standard in AI data center infrastructure. Lumentum’s long-standing technology portfolio in advanced optical communication hardware enables it to supply critical components across different AI network architectures, benefiting from the expansion and upgrades of both major computing pathways.