Valuation
At $947, LITE trades at 117x FY2026E P/E and 57x FY2027E P/E -- a premium to optical peers but
in line with AI infrastructure growth names given 66%+ revenue growth. The valuation looks
expensive on trailing metrics (166x TTM P/E) but compresses rapidly on forward earnings if
management executes: 32x on FY2028E EPS of $30. The probability-weighted 3-year target of ~$1,230
implies ~30% upside with a +10% annualized IRR. The asymmetry is slightly negative: bull upside
of +109% vs. bear downside of -52%. Fair value sits in $1,000-$1,300 on a 3-year view.
P/E FY2027E
57x
On $16.50 EPS estimate
EV/Revenue FY2027E
14.5x
On $5.0B revenue
EV/EBITDA FY2028E
21x
On $3.4B EBITDA
Prob-Weighted Target
$1,230
+30% upside, 10% ann. IRR
Current Valuation Snapshot
| Metric | FY2026E | FY2027E | FY2028E |
|---|---|---|---|
| Revenue | $3.0B | $5.0B | $8.0B |
| EV/Revenue | 24.2x | 14.5x | 9.1x |
| EV/EBITDA | 75x | 38x | 21x |
| P/E | 117x | 57x | 32x |
| Non-GAAP EPS | $8.10 | $16.50 | $30.00 |
Market cap ~$73.7B, EV ~$72.6B. Stock at $947. The multiple compresses rapidly on forward
estimates if management delivers on the $2B quarterly revenue target with 40%+ operating margins.
Peer Comparison
| Company | EV/Rev (NTM) | EV/EBITDA (NTM) | Rev Growth (NTM) | Fwd P/E |
|---|---|---|---|---|
| LITE (Lumentum) | ~14.5x | ~38x | ~66% | ~80x |
| COHR (Coherent) | ~8-10x | ~25-30x | ~30-35% | ~44x |
| CIEN (Ciena) | ~4-5x | ~18-22x | ~20-25% | ~30x |
| NVDA (NVIDIA) | ~15-25x | ~30-45x | ~30-50% | ~35-40x |
| AVGO (Broadcom) | ~15-20x | ~30-40x | ~30-40% | ~30-35x |
LITE commands a premium to optical peers given its higher growth rate and pure-play AI
infrastructure exposure. The ~80% P/E premium to Coherent is justified only if sole-source
positions in CPO and OCS deliver revenue at the magnitude and pace management has outlined.
5-Year Revenue Model by Segment
| Segment | FY2025A | FY2026E | FY2027E | FY2028E | FY2029E | FY2030E |
|---|---|---|---|---|---|---|
| Components | $1,095M | $1,990M | $3,200M | $4,800M | $5,800M | $6,400M |
| Systems | $560M | $1,020M | $1,800M | $3,200M | $4,200M | $4,800M |
| Total Revenue | $1,655M | $3,010M | $5,000M | $8,000M | $10,000M | $11,200M |
| YoY Growth | 21% | 82% | 66% | 60% | 25% | 12% |
FY2026E: Q1 $534M + Q2 $666M + Q3 $808M + Q4 $985M (guided midpoint). FY2027E assumes quarterly
trajectory from ~$1.05B to ~$1.45B. FY2028E aligned with management's $2B/qtr "North Star" target.
FY2029-30 deceleration as AI buildout cycle matures.
Profitability Model
| Metric | FY2025A | FY2026E | FY2027E | FY2028E | FY2029E | FY2030E |
|---|---|---|---|---|---|---|
| Non-GAAP GM | 34.7% | 44.5% | 48.0% | 51.0% | 52.0% | 52.5% |
| Non-GAAP OpM | 9.7% | 29.0% | 35.0% | 40.0% | 41.5% | 42.0% |
| Adj. EBITDA Margin | 16.0% | 32.0% | 38.0% | 43.0% | 44.5% | 45.0% |
| Non-GAAP EPS | $2.06 | $8.10 | $16.50 | $30.00 | $38.00 | $43.00 |
| Diluted Shares (M) | 71 | 95 | 102 | 105 | 107 | 108 |
GM expansion from: (1) EML/component mix shift, (2) pricing power from supply-demand imbalance,
(3) 200G ASP uplift (~2x vs 100G), (4) OCS above-average margins, (5) CW laser insourcing for
transceivers. Share count expanded from ~72M to ~102M from NVIDIA investment and convertible
note conversions. Tax rate assumed 16.5%.
Free Cash Flow Model
| Metric | FY2025A | FY2026E | FY2027E | FY2028E | FY2029E | FY2030E |
|---|---|---|---|---|---|---|
| Non-GAAP Op Inc | $160M | $875M | $1,750M | $3,200M | $4,150M | $4,700M |
| D&A (add back) | ~$105M | ~$130M | ~$175M | ~$225M | ~$275M | ~$300M |
| CapEx | ($275M) | ($500M) | ($750M) | ($900M) | ($700M) | ($600M) |
| Est. FCF | ~($60M) | ~$355M | ~$975M | ~$2,375M | ~$3,625M | ~$4,350M |
| FCF Margin | (3.6%) | 11.8% | 19.5% | 29.7% | 36.3% | 38.8% |
Heavy investment phase through FY2028 (Greensboro conversion, Japan expansion, Thailand buildout,
OCS/CPO lines). CapEx intensity peaks at ~15-19% of revenue in FY2026-FY2027, then falls to
~5-7% as major capacity comes online. Cash & investments of $3.17B at Q3 FY2026 (boosted by
NVIDIA's $2B). Convertible debt ~$2.1B across 2028, 2029, and 2032 notes.
Scenario Analysis (3-Year Targets)
| Scenario | Weight | FY2029 Rev | FY2029 EPS | Exit EV/EBITDA | Target Price | IRR |
|---|---|---|---|---|---|---|
| Bull: AI supercycle extends | 25% | $12.0B | $48 | 28x | $1,975 | +28% |
| Base: Execution on plan | 50% | $10.0B | $38 | 22x | $1,250 | +10% |
| Bear: Cycle peaks, execution stumbles | 25% | $6.5B | $18 | 14x | $450 | -22% |
| Probability-Weighted | 100% | -- | -- | -- | $1,230 | +10% |
Bull assumes AI capex extends beyond CY2028, CPO scale-up adds $2B+ TAM, Greensboro delivers
$3B+ capacity. Bear assumes capex pause in CY2028, EML oversupply from 6-inch InP, CPO delayed
beyond CY2029. The asymmetry is slightly negative: bull +109% vs bear -52%.
Revenue Growth Sensitivity
| FY2029 Revenue | EV/EBITDA 18x | 22x | 26x | 30x |
|---|---|---|---|---|
| $7.5B (OpM 36%) | $610 | $740 | $870 | $1,000 |
| $10.0B (OpM 41.5%) | $880 | $1,250 | $1,460 | $1,670 |
| $12.0B (OpM 43%) | $1,170 | $1,540 | $1,820 | $2,100 |
Margin Sensitivity (at $10B Revenue)
| Non-GAAP OpM | EV/EBITDA 18x | 22x | 26x |
|---|---|---|---|
| 35% | $720 | $880 | $1,040 |
| 40% | $840 | $1,135 | $1,330 |
| 42% | $900 | $1,270 | $1,490 |
| 45% | $980 | $1,420 | $1,670 |
Key Model Assumptions Traced to Fundamentals
| Assumption | Evidence |
|---|---|
| EML supply-demand gap persists through CY2027 | 25-30%+ imbalance increasing across Q1-Q3 FY2026 calls; LTAs in place through CY2027 |
| 200G EML mix reaches 35% by FY2027 | Started at 5% in FQ2'26, growing to 25% by end CY2026 per management; ~2x ASP uplift |
| OCS reaches >$1B annualized by CY2027 | $400M+ backlog (mostly CY2H 2026), 3 hyperscaler customers, CAGR >150% target |
| Gross margin reaches 50%+ | Components growing as % of mix; pricing power; management targets 50.5% at $2B/qtr milestone |
| Share count stabilizes ~105-110M | NVIDIA investment added ~16M equivalent shares; convertible dilution mostly reflected |
| CapEx peaks FY2027-FY2028 | Greensboro conversion, Japan expansion, OCS/CPO capacity; customer prepayments partially offset |
Data sourced from Daloopa, company earnings transcripts (FY2025-FY2026), OFC March 2026 presentation, BofA estimates, and SEC filings.