Lumentum Financial Model
Electronics Company Financials Example (Free Excel Download)
Lumentum is a market-leading designer and manufacturer of innovative optical and photonic products that enable optical networking and commercial laser applications worldwide.
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About this model
This model provides a comprehensive equity valuation and scenario planning tool for Lumentum Holdings Inc. (LITE) to determine whether the current market valuation accurately prices in the hyper-growth of its AI-driven Cloud & Networking segment against the cyclical headwinds in its Industrial Tech business.
- Lumentum is a market-leading designer and manufacturer of innovative optical and photonic products that enable optical networking and commercial laser applications worldwide.
- Business Segments: Cloud & Networking (~85% of FY2025 revenue) and Industrial Tech (~15% of FY2025 revenue).
- Key Geographies: Global revenue base with significant sales to network equipment manufacturers in North America and Asia, and manufacturing heavily concentrated in Thailand and internal wafer fabs in the US/UK.
- Business Model Type: Asset-heavy manufacturing combined with high-IP component design (indium phosphide wafer fabs and transceiver assembly).
- Competitive Position: A top-tier supplier of electro-absorption modulated lasers (EMLs) and pump lasers. Key competitors include Coherent (COHR), Fabrinet (FN), and vertically integrated players like Cisco (Acacia).
- Recent Major Events: Acquired Cloud Light Technology in November 2023 for ~$750 million to accelerate its datacom and AI transceiver capabilities. Transitioned segment reporting from "Optical Communications" and "Commercial Lasers" to "Cloud & Networking" and "Industrial Tech". Michael Hurlston recently succeeded Alan Lowe as CEO.
The downloadable Lumentum financial model includes SEC-sourced historical financials, forecast assumptions, core operating schedules, and valuation outputs in an Excel workbook built for review and scenario analysis.
A turnkey financial model
Live formulas, no hardcoded values
Outputs are driven by live formulas, so the workbook updates from its assumptions instead of relying on hardcoded results.
All assumptions in one tab
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Statements always balancing
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Distinct schedules for clarity
Debt, working capital, taxes, and cash flow can get messy quickly. We group calculations in clear schedules, not across disconnected tabs.
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Changes flow through the model
Update a key driver and see the impact carry through the forecast, financing, and return outputs. We never use hardcoded numbers in formulas.
Historicals & AssumptionsLumentum financial modelCompany, Historicals & Assumptions used
Source: SEC EDGAR · values in USD
| Line item | FY2022 | FY2023 | FY2024 | FY2025 | FY2026 |
|---|---|---|---|---|---|
| Revenue | $1.71B | $1.77B | $1.36B | $1.65B | $3.01B |
| Gross profit | $788.6M | $569.0M | $251.5M | $459.9M | $1.26B |
| Operating income | $303.3M | -$115.7M | -$434.0M | -$180.1M | $524.8M |
| Net income | $198.9M | -$131.6M | -$546.5M | $25.9M | -$6.94B |
Forecast assumptions
Defaults used in the downloadable model. Forecast horizon: FY2026–FY2030.
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How to build a detailed financial model for Lumentum
A complete walkthrough of every driver, margin, working-capital input, and capital-allocation assumption used in the downloadable model.
Revenue Deep Dive
Cloud & Networking
- Segment Name: Cloud & Networking (formerly Optical Communications)
- Revenue Driver Formula: (Datacom Transceiver Volume x Datacom ASP) + (Telecom Pump Laser/Component Volume x Telecom ASP)
- Historical Growth Rate: 30.0% YoY in FY2025 (Revenue of $1,410.8m).
- Key Growth Levers and Headwinds: Explosive demand for 800G and 1.6T optical modules for AI data centre interconnects (DCI) is the primary lever. Headwinds include legacy telecom carrier capex cyclicality and inventory digestion.
- Pricing Dynamics: Highly competitive, volume-based contractual pricing with hyperscalers, though leading-edge components (e.g., 200G EMLs) command significant ASP premiums.
- Revenue Recognition Notes: Recognised at a point in time upon transfer of control (shipment or delivery).
- Seasonality: Historically stronger in the second half of the calendar year due to consumer electronics and telecom build cycles, though AI demand has recently smoothed this into sequential quarter-on-quarter growth.
Industrial Tech
- Segment Name: Industrial Tech (formerly Commercial Lasers / 3D Sensing)
- Revenue Driver Formula: (Commercial Laser Units x ASP) + (3D Sensing Diode Volume x ASP)
- Historical Growth Rate: -14.6% YoY in FY2025 (Revenue of $234.2m).
- Key Growth Levers and Headwinds: Driven by macro manufacturing trends (sheet metal cutting, micro-machining) and smartphone 3D sensing adoption. Headwinds include loss of share in legacy smartphone platforms and weak industrial macroeconomics.
- Pricing Dynamics: Spot and short-term contracts; subject to intense price competition from Asian laser manufacturers.
- Revenue Recognition Notes: Point in time upon shipment.
- Seasonality: Tied to consumer electronics launch cycles (historically peaking in the September/December quarters for 3D sensing).
Cost Structure
Variable Costs / COGS
- Line-by-line breakdown: Raw materials (indium phosphide, gallium arsenide), direct manufacturing labour, fab overhead, yield losses, freight, and inventory write-downs.
- Gross margin range: GAAP Gross Margin has ranged from 18.5% to 28.0% recently; Non-GAAP Gross Margin ranges from 30.2% to 37.8% (FY2025 average was 34.7%).
- Key input costs: Precious metals, semiconductor substrates, and outsourced assembly/test costs.
- How COGS scales: Step-function. Wafer fabs have high fixed costs; as utilisation increases with AI demand, gross margins expand rapidly due to operating leverage.
Operating Expenses
- R&D: ~15-20% of revenue. Covers next-generation photonic integrated circuits, 1.6T transceiver design, and process engineering. Rarely capitalised.
- SG&A: ~10-15% of revenue. Largely headcount-driven, covering global sales teams, corporate IT, and administrative functions.
- Depreciation & Amortisation: ~8-10% of revenue. Heavy amortisation of acquired intangibles from NeoPhotonics and Cloud Light acquisitions.
- Stock-Based Compensation: ~8-12% of revenue. A material expense used to retain highly specialised photonics engineers.
- Restructuring / one-time charges: Frequent in recent years due to manufacturing footprint consolidation (moving assembly to Thailand) and M&A integration.
Margin Profile
- Gross margin: 30-38% (Non-GAAP). Expanding due to mix shift toward high-margin 200G EML chips.
- Operating margin: 0% to 15% (Non-GAAP). FY2025 was 9.7%, expanding rapidly as AI volumes scale.
- Net margin: 8-12% (Non-GAAP).
- Margin trend: Expanding aggressively. The transition from legacy telecom to high-speed AI datacom components is driving significant gross and operating margin accretion.
Balance Sheet Structure
- Total assets: ~$3.5 to $4.0 billion.
- Key asset categories: Cash & Short-Term Investments, Inventory, PP&E, Goodwill, and Intangible Assets.
- Goodwill & intangibles: ~35-40% of total assets, driven by the NeoPhotonics, Oclaro, and Cloud Light acquisitions.
- Working capital profile:
- Days Sales Outstanding (DSO): 60-75 days.
- Days Inventory Outstanding (DIO): 120-150 days (high due to long fab cycle times for indium phosphide).
- Days Payable Outstanding (DPO): 50-65 days.
- Net working capital: Positive and a significant use of cash during high-growth ramps.
- PP&E: ~$600-$800 million. Consists of wafer fabrication facilities in the US/UK and assembly/test facilities in Thailand.
- Right-of-use assets: Material but manageable (~$80-$100 million) related to leased office and manufacturing spaces.
Capital Expenditure & Investment
- Capex as % of revenue: 8-14% (FY2025 saw elevated capex for AI capacity expansion).
- Maintenance vs. growth split: ~30% maintenance / 70% growth (currently heavily skewed to growth for Thailand facility buildout and new fab equipment).
- Major capex programmes: Expanding indium phosphide wafer fab capacity and building out the Thailand transceiver manufacturing facility.
- Capitalised software: Immaterial.
- M&A pattern: Transformational and bolt-on acquirer (Oclaro in 2018, NeoPhotonics in 2022, Cloud Light in 2023).
- Typical acquisition multiple: 3-5x EV/Revenue depending on the target's margin profile and technology IP.
Debt & Capital Structure
- Total debt: ~$1.0 to $1.2 billion (primarily convertible notes).
- Net debt: Negative (Net cash position, with ~$877 million in cash and short-term investments as of FY2025).
- Debt/EBITDA ratio: ~2.5x - 3.5x on a gross basis, but <0x on a net basis.
- Key debt instruments: 0.50% Convertible Senior Notes due 2026 and 0.50% Convertible Senior Notes due 2028.
- Maturity profile: Near-term maturity of the 2026 convertible notes requires monitoring for potential refinancing or cash settlement.
- Interest rate profile: Almost entirely fixed at very low coupon rates (0.50%), though the effective interest rate is higher due to the debt discount amortisation.
- Share repurchase programme: Active opportunistically to offset dilution from stock-based compensation and convertible note conversions.
- Dividend policy: No dividend. 100% of cash flow is reinvested or used for buybacks/M&A.
Cash Flow Characteristics
- Operating cash flow conversion: Highly variable. OCF was $24.7m in FY2024 and improved significantly in FY2025, but conversion is often <1.0x during hyper-growth due to working capital needs.
- Free cash flow margin: Historically 10-15%, but recently negative or low single digits due to aggressive capex for AI capacity.
- Major non-cash items: Depreciation, amortisation of acquired intangibles, stock-based compensation, and amortisation of debt discount.
- Working capital cash flow impact: Major use of cash. Inventory builds are required months in advance of revenue due to long semiconductor manufacturing cycle times.
- Capex intensity: High. Photonics manufacturing requires expensive, specialised equipment.
- Cash tax rate: ~15-18% (Non-GAAP tax provision is ~16.5%), differing from the GAAP rate due to jurisdictional mix and IP structures.
Sheet Structure
- Summary & Scenarios: Dashboard with key outputs, share price implied, and scenario toggles (Base, AI Supercycle, Telecom Recession).
- Assumptions: Hardcoded drivers for revenue, margins, working capital, and capex.
- Revenue Build: Segment-level forecast for Cloud & Networking and Industrial Tech, driven by volume and ASP assumptions.
- Income Statement: GAAP and Non-GAAP P&L, mirroring Lumentum's 10-K line items (Net Revenue, COGS, Gross Profit, R&D, SG&A, Restructuring, Operating Income).
- Non-GAAP Reconciliation: Bridge from GAAP to Non-GAAP (adding back SBC, Amortisation of Intangibles, Restructuring).
- Balance Sheet: Assets (Cash, AR, Inventory, PP&E, Goodwill) and Liabilities (AP, Accrued Expenses, Convertible Debt, Equity).
- Cash Flow Statement: OCF (Net Income + D&A + SBC +/- NWC), CFI (Capex, M&A), CFF (Debt issuance/repayment, Buybacks).
- Working Capital Schedule: DSO, DIO, DPO calculations and absolute balances.
- Debt & Interest Schedule: Tranche-by-tranche build of Convertible Notes, OID amortisation, and interest expense.
- PP&E & Intangibles: Capex, depreciation waterfall, and amortisation of acquired intangibles.
- DCF Valuation: Unlevered free cash flow build, WACC calculation, terminal value, and implied share price.
Key Financial Relationships
- `Cloud & Networking Revenue = Prior Year Cloud & Networking Revenue x (1 + Cloud & Networking Growth Rate)`
- `Industrial Tech Revenue = Prior Year Industrial Tech Revenue x (1 + Industrial Tech Growth Rate)`
- `Total Net Revenue = Cloud & Networking Revenue + Industrial Tech Revenue`
- `Non-GAAP COGS = Total Net Revenue x (1 - Non-GAAP Gross Margin %)`
- `GAAP COGS = Non-GAAP COGS + SBC in COGS + Amortisation of Acquired Developed Technology + Restructuring in COGS`
- `R&D Expense = Total Net Revenue x R&D % of Revenue`
- `SG&A Expense = Total Net Revenue x SG&A % of Revenue`
- `Non-GAAP Operating Income = Total Net Revenue - Non-GAAP COGS - (R&D excluding SBC) - (SG&A excluding SBC)`
- `Inventory Balance = (GAAP COGS / 365) x DIO`
- `Accounts Receivable = (Total Net Revenue / 365) x DSO`
- `Interest Expense = (Convertible Notes 2026 Balance x 0.50%) + (Convertible Notes 2028 Balance x 0.50%) + Non-cash Amortisation of Debt Discount`
- `Unlevered Free Cash Flow = Non-GAAP Operating Income x (1 - Cash Tax Rate) + D&A - Capex - Change in Net Working Capital`
Cross-Sheet Dependencies
- Assumptions feeds Revenue Build, Income Statement, and Working Capital Schedule.
- Revenue Build feeds the top line of the Income Statement and drives AR in the Working Capital Schedule.
- Income Statement generates Net Income, which is the starting point for the Cash Flow Statement.
- Working Capital Schedule calculates changes in NWC, which feeds the Cash Flow Statement.
- PP&E & Intangibles calculates D&A, which feeds the Income Statement and the non-cash add-backs in the Cash Flow Statement.
- Debt & Interest Schedule calculates interest expense for the Income Statement and debt balances for the Balance Sheet.
- Cash Flow Statement generates ending cash, which links to the Balance Sheet (critical chain for balancing).
- Circularity Risk: Interest income depends on average cash balances, which depends on net income, which depends on interest income. A circularity breaker (toggle) must be included.
Sign Convention
- Revenue: Positive
- Expenses (COGS, R&D, SG&A): Positive in their specific schedules, subtracted in the Income Statement to yield profit.
- Assets: Positive
- Liabilities & Equity: Positive
- Cash Flow Statement: Cash inflows are positive; cash outflows (e.g., Capex, increases in Inventory, debt repayment) are negative.
- Contra-accounts (e.g., Accumulated Depreciation): Positive, but subtracted from gross balances.
Things Most Likely to Go Wrong
- Segment Restructuring: Lumentum changed its segments in FY2024 to "Cloud & Networking" and "Industrial Tech". Historical data prior to FY2024 must be mapped correctly; do not use the old "OpComms" and "Lasers" segments for future projections.
- GAAP vs. Non-GAAP Confusion: Lumentum's GAAP margins are heavily depressed by acquisition-related amortisation and SBC. The model must forecast on a Non-GAAP basis and bridge to GAAP, otherwise valuation multiples will be distorted.
- Convertible Debt Dilution: The 2026 and 2028 convertible notes have strike prices that, if exceeded, will increase the diluted share count. The model must include a treasury stock method calculation for these notes.
- Inventory Build for AI: Do not assume historical DIO will compress. The company is intentionally building inventory to secure long lead-time indium phosphide wafers for AI transceivers.
- SBC Misallocation: Stock-based compensation is spread across COGS, R&D, and SG&A. The model must strip this out to calculate true cash operating margins.
- Tax Rate Volatility: The GAAP tax rate is highly volatile due to valuation allowances and IP transfers. Use the management-guided Non-GAAP tax provision (~16.5%) for cash flow forecasting.
- Thailand Facility Capex: Capex is currently elevated above historical averages due to the Thailand facility ramp. Do not straight-line historical capex % of revenue; it must peak in FY2025/FY2026 and normalise thereafter.
- Fiscal Year Timing: Lumentum's fiscal year ends in late June. Ensure the model headers reflect FY ending June, not December.
Validation Checks
- "Non-GAAP Gross margin should be in the 34-40% range; flag if outside this band."
- "Total Assets must equal Total Liabilities + Equity in every period (Balance Sheet check = 0)."
- "Capex as % of revenue should peak around 12-15% in FY25/FY26 and normalise to 8-10%."
- "Cloud & Networking revenue should represent >85% of total revenue in the forecast period."
- "Cash flow from operations must reconcile exactly with the change in cash on the balance sheet minus CFI and CFF."
- "Effective Non-GAAP tax rate should remain between 15.0% and 18.0%."
- "Diluted share count must increase if the implied share price exceeds the convertible note conversion prices."
Key Assumptions (Default Values)
| Assumption | Default Value | Unit | Rationale |
|---|---|---|---|
| Cloud & Networking Growth (FY26) | 45.0 | % | Reflects massive AI data centre interconnect demand and 800G/1.6T module ramp. |
| Industrial Tech Growth (FY26) | 0.0 | % | Assumes stabilisation after a 14.6% decline in FY25 due to weak macro conditions. |
| Non-GAAP Gross Margin | 36.5 | % | Expansion from FY25 (34.7%) driven by higher mix of 200G EML chips and fab utilisation. |
| R&D as % of Revenue (Non-GAAP) | 14.0 | % | Operating leverage on higher revenue base, down slightly from historical 15-16%. |
| SG&A as % of Revenue (Non-GAAP) | 9.0 | % | Operating leverage as AI volumes scale without requiring proportional sales headcount. |
| Days Sales Outstanding (DSO) | 65 | Days | In line with historical averages and hyperscaler payment terms. |
| Days Inventory Outstanding (DIO) | 135 | Days | Remains elevated due to long fab cycle times and strategic buffer builds. |
| Days Payable Outstanding (DPO) | 55 | Days | In line with historical supplier payment trends. |
| Capex as % of Revenue | 12.0 | % | Elevated near-term to support Thailand facility and indium phosphide capacity. |
| Non-GAAP Tax Rate | 16.5 | % | Management guidance for the non-GAAP tax provision. |
| Diluted Shares Outstanding | 71.0 | Millions | Base share count plus estimated dilution from convertible notes at current prices. |
| WACC | 10.5 | % | Reflects high beta associated with optical component cyclicality and tech sector risk. |
| Terminal Growth Rate | 3.0 | % | Long-term growth rate reflecting data consumption secular tailwinds. |
Data Sources & Benchmarks
- SEC Filings: Lumentum Investor Relations (investor.lumentum.com) or SEC EDGAR for 10-K (filed August) and 10-Q filings.
- Key Peers for Benchmarking: Coherent (COHR), Fabrinet (FN), Infinera (INFN), Applied Optoelectronics (AAOI).
- Industry Data Sources: LightCounting (for optical transceiver market sizing and 800G/1.6T forecasts), Dell'Oro Group (for telecom and datacom capex trends).
- Consensus Estimates: Bloomberg or FactSet for quarterly revenue and Non-GAAP EPS consensus to validate near-term model outputs.
Sources
- Lumentum FY2025 Earnings Release and Presentation (August 2025)
- Lumentum Q2 FY2026 Earnings Release (February 2026)
- Lumentum Annual Report on Form 10-K for the fiscal year ended June 28, 2025
- Semiconductor Today: "Lumentum's quarterly revenue grows 65% year-on-year to $665.5m" (February 2026)
- MLQ.ai: Lumentum Holdings Business Model & Financials (March 2026)
Do more with the Lumentum model
Frequently asked
What does Lumentum do?+
Lumentum is a market-leading designer and manufacturer of innovative optical and photonic products. These products are crucial for enabling optical networking and commercial laser applications worldwide, serving a global customer base.
What are Lumentum's primary revenue drivers?+
Lumentum's revenue is predominantly driven by its Cloud & Networking segment, which accounts for approximately 85% of its FY2025 revenue and is experiencing hyper-growth due to AI demand. The company also generates revenue from its Industrial Tech business, though this segment faces cyclical headwinds.
How does Lumentum's capital expenditure strategy impact its financial outlook?+
Lumentum's capital expenditure, typically ranging from 8-14% of revenue, is currently heavily skewed towards growth investments, with about 70% allocated to expansion. This includes significant programs like expanding indium phosphide wafer fab capacity and building out the Thailand transceiver manufacturing facility, which are key uses of cash.
What are the key financial assumptions used in the Lumentum model?+
The Lumentum financial model uses key assumptions such as a revenue growth rate of approximately 3.08% and COGS as about 58.54% of revenue. Other significant assumptions include R&D at 13.25% of revenue, SGA at 15.18% of revenue, and a tax rate of 17.94%.
What is the significance of Lumentum's net working capital in its valuation?+
Lumentum's net working capital is positive and acts as a significant use of cash, particularly during periods of high growth. This is influenced by a high Days Inventory Outstanding (120-150 days) due to long fab cycle times for indium phosphide, which impacts cash flow projections.
Is there an Excel financial model available for Lumentum (LITE)?+
Yes, an Excel financial model for Lumentum (LITE) is available for download. This model offers a comprehensive tool for equity valuation and scenario planning, with a forecast horizon that extends from FY2026 through FY2030.
Have more financial modelling questions? Contact us
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