Lumentum Holdings Inc.’s stock price is likely to rise as the company’s optical networking and related components for next-generation artificial intelligence solutions boost sales more than previously expected, JPMorgan said. The investment bank reiterated its rating on Lumentum as overweight and raised its 12-month price target to $950 from $565, implying a 6% upside from Wednesday’s closing price. “We expect the exceptional pace of earnings growth to continue on the back of increased scale-up networks,” JPMorgan analyst Samik Chatterjee said in a note to clients on Thursday. “We are raising our expectations for Lumentum following investor presentations and meetings both within and outside of OFC… Collectively, these meetings delivered a stronger-than-expected level of future outlook across a variety of growth drivers.” OFC is a fiber optic communications conference and exhibition. Lumentum appears to be gaining more customers with its optical fiber switches, which is a major source of potential for stock price gains, JPMorgan said. An optical line switch is a device that determines the best path for optical signals to travel between fiber optic cables. This technology supports AI hyperscale data center networking and has the potential to enable faster and more energy-efficient data transmission. Lumentum announced that its optical circuit switches (OCS) are expected to reach $400 million in sales in the second half of 2026, with business accelerating thereafter in 2027. Its annual occupancy rate exceeds $1 billion. But JPMorgan says Lumentum’s OCS technology likely has a “longer road ahead than current targets reflect.” “The revenue trajectory currently outlined is primarily supported by new multi-year, multi-billion dollar contracts with large OCS customers, which are expected to account for half of revenue (in the second half of 2026),” Chatterjee wrote. However, “further upside factors not currently incorporated also include additional customer acquisition and execution around new (rack unit) form factors, the latter of which could lead to volume opportunities if faceplate and port density miniaturization is successful. In addition, JPMorgan says Lumentum’s electroabsorption modulated laser (EML) and data center interconnect (DCI) products are likely to attract more business than management predicted. Chatterjee said EML capacity expansion is already outpacing expectations and demand remains strong in the DCI market, where there are few providers. JPMorgan said Lumentum is also showing signs of “more disciplined” growth in operating expenses, which should also contribute to the stock’s rise. The investment bank’s latest call is in line with Wall Street consensus. Of the 24 analysts covering Lumentum, 19 rate the stock as a buy or strong buy. The stock is up 143% since the beginning of this year and 1,400% over the past year as the AI data center boom continues. LITE YTD Mountain Lumentum Holdings is up 143% since the beginning of the year.
