LITE 10-K & 10-Q changes, risk factors and insider trading
Lumentum Holdings Inc. · Nasdaq · Communications Equipment, Nec · CIK 1633978 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “Risks Related to Our Indebtedness”
New heading “Changes in demand and customer requirements for our products may be difficult to forecast. We may be unable to increase our manufacturing capacity to meet future demand, or we may experience difficulties in generating and maintaining demand to optimize our manufacturing capacity. If we are unable to align supply with demand, it could have an adverse effect on our business, results of operations, or financial condition.”
New heading “If we are unable to successfully identify, acquire and integrate suitable businesses, our operating results and prospects could be harmed, and any businesses we acquire may not perform as expected or be effectively integrated.”
New heading “Risks Related to Our Indebtedness”
New heading “Servicing our existing and future indebtedness, including the 2026 Notes, 2028 Notes, 2029 Notes and 2032 Notes (collectively referred to as the “convertible notes”) and any revolving loans under our Credit Agreement, may require a significant amount of cash, and we may not have sufficient cash flow or the ability to raise the funds necessary to satisfy our obligations under the convertible notes and our Credit Agreement, and our current and future indebtedness may limit our operating flexibility or otherwise affect our business.”
New heading “Our current and future indebtedness may limit our operating flexibility or otherwise affect our business.”
New heading “The 2032 Capped Call Options may affect the value of our common stock.”
New heading “We are subject to counterparty risk with respect to the 2032 Capped Call Options.”
Removed heading “Unstable market and economic conditions and adverse developments with respect to financial institutions and associated liquidity risk may have serious adverse consequences on our business and financial condition.”
Removed heading “We face a number of risks related to pursuing strategic transactions.”
Removed heading “We may be unable to successfully implement our acquisitions strategy or integrate acquired companies and personnel with existing operations.”
Removed heading “A widespread health crisis could adversely affect our business operations, financial performance, results of operations, financial position and the achievement of our strategic objectives.”
Removed heading “Servicing our existing and future indebtedness, including the 2026 Notes, 2028 Notes and 2029 Notes (collectively referred to as the “convertible notes”) may require a significant amount of cash, and we may not have sufficient cash flow or the ability to raise the funds necessary to satisfy our obligations under the convertible notes and our current and future indebtedness may limit our operating flexibility or otherwise affect our business.”
Largest changes
Like other companies, we are subject to ongoing attempts by malicious actors, including through hacking, malware, ransomware, denial-of-service attacks, social engineering, exploitation of internet-connected devices, and other attacks, to obtain unauthorized access to, or acquisition or other processing of confidential or other information or otherwise affect service reliability and threaten the confidentiality, integrity and availability of our systems and information stored or otherwise processed on our systems. Cyber threats have increased in recent years, in part due to increased remote work and frequent attacks, including in the form of phishing emails, malware attachments and malicious websites. Additionally, geopoliticalsee in full comparisontensionstensions, conflicts andconflicts, such as the Russia-Ukraine war and ongoing conflicts in the Middle East,wars, may increase our risks of cyber-attacks. Further, as artificial intelligence (“AI”) capabilities improve and become increasingly commonplace,we may seecyber-attacks leveraging AItechnology.are likely to pose increasing threats. These attackscouldcould,beforcraftedexample,with anleverage AItoolto directly attack information systems with increased speed and/or efficiency compared to a human threatactoractor, to identify or exploit security vulnerabilities, or to create more effective phishing emails. In addition, a vulnerability could be introduced fromthe result ofusandor our third-party service providers incorporating output of an AI tool, such asAI generatedAI-generated source code, that includes a threat. While we work to safeguard our internalnetworksystems and validate the security of our third-party service providers to mitigate these potential risks, including through information security policies and employee awareness and training, there is no assurance that such actions have been or will be sufficient to prevent cyber-attacks or security breaches or incidents. We have been in the past, and may be in the future, subject to social engineering attacks and other cyber-attacks, and these attacks may become more prevalent with a substantial portion of our workforce being distributed geographically, particularly given the resulting increased remote access to our networks andsystems as a result.systems. Further, our third-party service providers may have been and may be in the future subject to such attacks or otherwise may suffer security breaches or incidents. In addition, actions by our employees, service providers, partners, contractors, or others, whether malicious orin error,otherwise, could affect the security of our systems and information. Further, a breach or compromise of our information technology infrastructure or that of our third-party service providers could result in the misappropriation of intellectual property, business plans, trade secrets or other information. Additionally, while our security systems are designed to maintain the physical security of our facilities and information systems, accidental or willful security breaches or incidents or other unauthorized access by third parties to our facilities or our information systems could lead to unauthorized access to, or misappropriation, disclosure, or other processing of proprietary, confidential and other information.Moreover, new laws and regulations, such as the European Union’s General Data Protection Regulation (“GDPR”), the California Consumer Privacy Act (“CCPA”), and China’s Personal Information Protection Law, add to the complexity of our compliance obligations and increases our compliance costs. Although we have established internal controls and procedures intended to comply with such laws and regulations, any actual or alleged failure to fully comply could result in significant penalties and other liabilities, harm to our reputation and market position, business and financial condition.
“Our Credit Agreement contains various customary events of default that include, among others, non-payment of principal, interest or fees, inaccuracy of representations and warranties, breach of covenants, cross default to certain other indebtedness, bankruptcy and insolvency events, material judgments and events constituting a change of control, subject to thresholds and cure periods as set forth in the Credit Agreement. …”see in full comparison
“We operate in a market where demand can fluctuate rapidly and we may not be able to predict or quickly respond to trends in the dynamics of our markets and our customers or changes in customer demand, which could negatively impact our gross margins. Although AI is a relatively new demand driver for our products, it is evolving rapidly, and the expected timing and amount of investments related to AI can change significantly. As a result, it may be difficult to accurately forecast such demand and we may incur costs in anticipation of demand that ultimately does not materialize. …”see in full comparison
U.S. regulatory activity, such as tariffs, export controls, and economic sanctions laws have in the past, and may in the future, materially limit our ability to make sales to customers in certain regions of the world, including China, and which have in the past, and may in the future, increase our costs and harm our results of operations and financial condition. Throughoutsee in full comparison2025,2025 and 2026, the U.S. imposed a series of tariffs on imported goods.While theseThese tariffsarewere generally positioned to have the most significant impacts on goods originating from China, but nearly all countries worldwidearewere impacted at levels ranging from 15% to stacked tariffs in excess of 100% in some cases.TheWhile many of the tariffs and surcharges initially proposed were invalidated or expired, the tariff landscape continues to evolvedailyand, as a result, the full impact ofthesecurrent or future tariff measures on our business is uncertain.In addition to the geographic tariffs,U.S. government investigations are currently underway that may result in new tariffs on certain products, including semiconductors,computers,machines, and other products derivative of critical minerals. For example, on April 14, 2025, the Secretary of Commerce initiated an investigation under Section 232 of the Trade Expansion Act of 1962 to determine the effects on U.S. national security of imports of semiconductors, semiconductor manufacturing equipment, and their derivative products, including semiconductor substrates and bare wafers, legacy chips, leading-edge chips, microelectronics, and other components. Similarly, the U.S. government has initiated additional investigations that could result in tariffs or other trade restrictions affecting our operations, supply chain, customers, or markets. These include Section 232 investigations concerning processed critical minerals and their derivative products and robotics and industrial machinery, as well as Section 301 investigations concerning structural excess capacity and production in manufacturing sectors in certain foreign economies that have failed to adopt or effectively enforce forced labor prohibitions. Although these investigations are currently at different stages, they all may result in additional tariffs or trade restrictions, which could adversely impact our business. We may take actions to mitigate the impact of increases in tariffs and changes in trade policies, and any such actions could result in additional costs, manufacturing delays, or other difficulties, as well as additional risks, and may not be effective.
“Our ability to make scheduled payments of the principal of, to pay interest on or to refinance our indebtedness under the convertible notes, or to make cash payments in connection with any conversion of the convertible notes or upon any fundamental change if holders of the applicable series of the convertible notes require us to repurchase their convertible notes for cash, depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control. …”see in full comparison
“Our ability to make scheduled payments of the principal of, to pay interest on or to refinance our indebtedness under the convertible notes, or to make cash payments in connection with any conversion of the convertible notes or upon any fundamental change if holders of the applicable series of the convertible notes require us to repurchase their convertible notes for cash, depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control. …”see in full comparison
Full comparison: every changed paragraph (151)
•unfavorable economic and market conditions, including the impact of trade restrictionsrestrictions, orexport control laws and customs regulations, including tariffs, duties and export controlstariffs;
•our gross margins and operating margins may vary overtimeover time;
•our ability to sell to a significant customer;
•our ability to sell to a significant customer, as well as higher tariffs and other trade restrictions between the U.S. and other countries, including China and Thailand;
•headwinds caused by heightened, scheduled, or threatened tariffs imposed by the U.S. or other countries;
•our ability to timely adapt to changes in lawslaws, regulations, administrative procedures and theregulators’ adoption and interpretation of administrative rules and regulations,expectations, including those related to U.S. and international customsimport laws and export regulationscontrols;
•our strategic transactions and implementation strategy for our acquisitions, including the Cloud Light acquisitionacquisitions;
•actions taken by suppliers, customers and authorized or unauthorized resellers or distributors that adversely affect our reputation or violate import or export regulations;
Risks Related to Our Indebtedness
•our ability to service our current and future debt; and
•our current and future indebtedness, which may limit our operating flexibility or otherwise affect our business
•our ability to hire and retain key personnel;
•our ability to service our current and future debt;
•provisions of Delaware law and our certificate of incorporation and bylaws that may make a merger, tender offer or proxy contest difficult; and
•exclusive forum provisions in our bylaws;
•the potential impact of the hedging activity of the 2032 Capped Call Counterparties on the market price of our common stock; and
•counterparty risk with respect to the 2032 Capped Call Options
Our business and operating results depend significantly on general market and economic conditions. The current global macroeconomic environment is volatile and continues to be significantly and adversely impacted by inflation and a dynamic demand environment. Additionally, instability in the global credit and banking markets, the impact of uncertainty regarding inflation, trade wars, disputes and the effects of heightened, scheduled, or proposed tariffs, banking instability, capital expenditure reductions, unemployment, stock market volatility, thearmed instabilityconflicts in theand geopolitical environmenttensions in many parts of the world (including as a result of the on-going Russia-Ukraine war, ongoing conflicts in the Middle East, including the U.S.-Iran war, political and territorial conflicts in the Western Hemisphere, the conflict between Cambodia and Thailand, and China-Taiwan relations), the current economic challenges in China,China and the U.S., including global economic ramifications of Chinese and U.S. economic difficulties, and other disruptions may continue to put pressure on global economic conditions. Further, conditions in the global economy have an inherent degree of uncertainty. As a result, it is difficult to estimate the level of growth or contraction of the global economy as a whole. It is even more difficult to estimate growth or contraction in various parts, sectors, and regions of the economy, including the markets in which we participate. All aspects of our forecasts depend on estimates of growth or contraction in the markets we serve.
Adverse changes to and uncertainty in the global economy have affected industries in which our customers operate and have resulted in decreases in the rate of demand, consumption or use of certain of our customers’ products which, in turn, have resulted in, and may in the future result in, decreased demand for our products, revenue fluctuations, increased price competition for our products, and increased the risk of excess and obsolete inventories as well as higher overhead costs as a percentage of revenue. For example, customers who had built up large inventories when supply chains were tight related to the COVID-19 pandemic brought down inventories as supply constraints eased andand, in some casescases, these customers delayed projected shipments, which harmed our revenue and profitability. While conditions have continued to stabilize, in some respects, theseThese conditions may recur in the future, and similar losses or delays may harm our results of operations. The impact of economic challenges on the global financial markets could negatively impact our operations by affecting the solvency of our customers, the solvency of our key suppliers or the ability of our customers to obtain credit to finance purchases of our products. Further, supply chain disruptions have led and may continue to lead to increased costs and have harmed and may continue to harm our ability to meet customer demand, adversely affecting our revenue and profitability. If global economic and market conditions, or economic conditions in key markets, remain uncertain or deteriorate, our prospects for growth may be negatively impacted, and we may experience adverse impacts on our business, operating results, and financial condition.
U.S. regulatory activity, such as tariffs, export controls, and economic sanctions laws have in the past, and may in the future, materially limit our ability to make sales to customers in certain regions of the world, including China, and which have in the past, and may in the future, increase our costs and harm our results of operations and financial condition. Throughout 2025,2025 and 2026, the U.S. imposed a series of tariffs on imported goods. While theseThese tariffs arewere generally positioned to have the most significant impacts on goods originating from China, but nearly all countries worldwide arewere impacted at levels ranging from 15% to stacked tariffs in excess of 100% in some cases. TheWhile many of the tariffs and surcharges initially proposed were invalidated or expired, the tariff landscape continues to evolve daily and, as a result, the full impact of thesecurrent or future tariff measures on our business is uncertain. In addition to the geographic tariffs, U.S. government investigations are currently underway that may result in new tariffs on certain products, including semiconductors, computers,machines, and other products derivative of critical minerals. For example, on April 14, 2025, the Secretary of Commerce initiated an investigation under Section 232 of the Trade Expansion Act of 1962 to determine the effects on U.S. national security of imports of semiconductors, semiconductor manufacturing equipment, and their derivative products, including semiconductor substrates and bare wafers, legacy chips, leading-edge chips, microelectronics, and other components. Similarly, the U.S. government has initiated additional investigations that could result in tariffs or other trade restrictions affecting our operations, supply chain, customers, or markets. These include Section 232 investigations concerning processed critical minerals and their derivative products and robotics and industrial machinery, as well as Section 301 investigations concerning structural excess capacity and production in manufacturing sectors in certain foreign economies that have failed to adopt or effectively enforce forced labor prohibitions. Although these investigations are currently at different stages, they all may result in additional tariffs or trade restrictions, which could adversely impact our business. We may take actions to mitigate the impact of increases in tariffs and changes in trade policies, and any such actions could result in additional costs, manufacturing delays, or other difficulties, as well as additional risks, and may not be effective.
Any of the effects described in this risk factor could have an adverse effect on our business, results of operations, or financial condition.
Outside of the U.S., geopolitical escalations and retaliatory measures from various countries also have in the past, and may in the future, adversely impact business operations. Such measures include tariffs on imports from theof U.S. products into countries such as China, as well as China’s export control measures.measures targeting the U.S., Europe and Japan. For example, China imposed new export control measures affecting exports of rare earth metals and other critical minerals, limiting our ability to access these materials.materials, Additionalwhich may limit our ability to produce products, increase our selling and/or manufacturing costs, decrease margins, reduce the competitiveness of our products, reduce customer demand for our products, or inhibit our ability to sell products or purchase necessary equipment and supplies. Similarly, China restricted exports to Japan, which affected our substrate supply chain globally. Future changes to the trade policies of the U.S. and China are impossible to predict, andbut further changes or escalations inimpacting theglobal trade policies of one or both countries may continue to affect our business.
Adverse regulatory activity, such as export controls, economic sanctions and the imposition of heightened trade tariffs both globally and between the United States and China specifically carriescarry the risk of negatively impacting overall economic conditions, which could have negative repercussions on our industry and our business. Moreover, to the extent the governments of China, the United States or other countries seek to promote use of domestically produced products or to reduce the dependence on or use of products from each other (sometimes referred to as “decoupling”), they may adopt or apply regulations or policies that have the effect of reducing business opportunities for us. Such actions may take the form of specific restrictions on particular customers, products, technology areas, or business combinations. For example, in the area of investments and mergers and acquisitions, the United States has recently announced newimplemented requirements for approval by the United States government of outbound investments; and the approval by China regulatory authorities is required for business combinations of companies that conduct business in China over specific thresholds, regardless of where those businesses are based. Restrictions may also be imposed based on whether the supplier is considered unreliable or a security risk. For example, the Chinese government adopted a law that would restrict purchases from suppliers deemed to be “unreliable suppliers.suppliers” In May 2023, the Cyberspace Administration of. China has also banned the sale of products fromthat Micronit Technologydeems to certain entities in China and stated that such products pose significant security risks to China's criticalinformation informationand infrastructure supply chain and national security. Furthermore, imposition of new or additional tariffs or new or revised export,export or import or doing-business regulations, including trade sanctions, or non-tariff barriers to doing business could cause a decrease in the demanddemand, for,from customers or sales of our products to customersend-users located in China or other customers selling to Chinese end users orChina, increase the cost for our products, or promote competition from Chinese optical and photonics companies, which would directlyadversely impact our business and results of operations.
We purchase raw materials, packages and components from a limited number of suppliers, who are often small and specialized. Additionally, some of our suppliers are our sole sources for certain materials, equipment and components. We depend on the timely and continued supply and quality of the materials, packages and components that our suppliers supply to us. WeWhile we have entered into advanced payments to secure orders from some of these suppliers, we have not entered into long-term agreements with many of these suppliers. We do not have a guarantee of supply from many of these suppliers and, as a result, there is no assurance that we would be able to secure the equipment or components that we require, in sufficient quantity, quality and on reasonable terms. Our business and results of operations have been, and could continue to be, adversely affected by this dependency. Alternative sources to mitigate the risk that the failure of any sole supplier will adversely affect our business are not feasible in all circumstances. If we were to lose any one of these or other critical sources, or if there is as an industry-wide increase in demand for, or the discontinuation of, raw materials used in our products, it could be difficult or impossible for us, or we may be unable, to find an alternative supplier or raw material, in which case our operations could be adversely affected. We are also subject to risk from increasing or fluctuating market prices of certain raw materials, which are incorporated into our end products or used by our suppliers to manufacture our end products. Supplies for such raw materials have from time to time become restricted, or general market factors and conditions have in the past affected and may in the future affect pricing of such commodities (including, in particular, due to changes in applicable tariffs, inflation, trade restrictions, or other supply chain constraints). For example, China’s recent export controls affected the availability and price of rare earth metals and other critical minerals for us as well as our supply chain and customers, adversely affecting our operations, margins and sales.
Our ability to sell our products to a previously significant customer has been restricted.
In August 2020, the Bureau of Industry and Security of the U.S. Department of Commerce (“BIS”) issued final rules that further restricted access by Huawei Technologies Co. Ltd. and certain of its affiliates (collectively, “Huawei”) to U.S. technology, software and equipment produced domestically and abroad. The final rules prevent us from selling certain products subject to the Export Administration Regulations (“EAR”) to identified Huawei entities without a license issued by BIS. Based on internal review conducted in 2023, we determined that our products may be “subject to the EAR” and consequently restricted for export, reexport, and transfer to Huawei. As a result, we stopped all of our product shipments to Huawei, historically our largest networking customer in China, in the beginning of calendar year 2024. Further, even if we are able to obtain an export authorization to sell certain products to Huawei in the future, Huawei may not be able to source products from other suppliers due to the applicable export restrictions, which could then adversely impact Huawei’s demand for our products. All U.S. companies are dependent on the ability to obtain export authorizations to sell to Huawei. Until such export authorizations are available or the export restrictions are lifted, we are limited in our ability to sell our products, which could negatively impact our business, financial condition and operating results.products.
Based on internal review conducted in 2023, we determined that our products may be “subject to the EAR” and consequently restricted for export, reexport, and transfer to Huawei. As a result, we stopped all of our product shipments to Huawei, historically our largest networking customer in China, in the beginning of calendar year 2024.
We submitted voluntary self-disclosures to BIS regarding certain product shipments we made to Huawei following the adoption of the final rules. In August 2024, we received an administrative subpoena from BIS requesting the production of records in connection with our business with Huawei. We also received a related subpoena from the U.S. Department of Justice (“DOJ”) that also requested information regarding our business with Huawei. We have beenbeen, and will continue toto, cooperate with BIS and DOJ in responding to the subpoenas and their ongoing reviews. Any failure or alleged failure to comply with export controls laws and policies could have negative consequences, including significant legal costs, penalties, and potentially even denial of export privileges and debarment from participation in U.S. government contracts, any of which could have an adverse effect on our operations, reputation and financial condition.
Under the current regulatory policy and rules, our business with Huawei is now completely restricted. In addition to being unable to supply any products to Huawei, we are also currently unable to work with Huawei on future product developments, or confer any benefit to Huawei, and expect this to continue while Huawei remains subject to the export control restrictions. This cessation of all business activities with Huawei has negativelyresulted impactedin our inability to earn revenue from Huawei. Huawei and has negativelybeen impacted our financial condition and results of operations. Huawei may seekrequired to obtain similar or substitute products from other sources, which may include our competitors that are not subject to these restrictions,restrictions. orTherefore, towe developmay similarnever orrecover substitutethis productsdemand themselves.even if such export restrictions ease.
We cannot be certain what additional actions the U.S. government may take with respect to Huawei or other entities in China or other countries.countries, Weand we are unable to predict the duration and scope of the restrictions enacted in May 2019 and thereafter. OtherBIS customers, such as FiberHome Technologies Group, are also subjectcontinues to exportadd controlentities restrictionto sincethe Maylist 2020,of restricted parties and BIS may continue to expand restrictions to other cutomerscustomers or otherwise restrict our ability to ship products. Any further export or trade restrictions that impede our ability to export or sell our products and services could adversely affect our business, results of operations, financial condition and cash flows.
Unstable market and economic conditions and adverse developments with respect to financial institutions and associated liquidity risk may have serious adverse consequences on our business and financial condition.
Disruptions in access to bank deposits or lending commitments due to bank failures could adversely affect our liquidity, our business and financial condition. The failure of any bank or financial institution in which we deposit our funds or assets could reduce the amount of cash we have available for our operations or delay our ability to access such funds. Any such failure may increase the possibility of a sustained deterioration of financial market liquidity. The value of our investment portfolio could also be impacted if we hold debt instruments which were issued by any institutions that fail or become illiquid. Our ability to obtain raw materials for our supply chain and collections of cash from sales may be unduly impacted if any of our vendors or customers are affected by illiquidity events.
Our backlog may not be a reliable indicator of future operating results. Further, customer behaviors have been changing as a result of worldwide macroeconomic factors, including as a result of changes in the trade policies of the U.S. and its trading partners, such as the effects of heightened, scheduled or threatened tariffs, and which has reducedaffected demand and may continue to reduceaffect demand for certain of our products and services. If we are not able to respond to and manage the impact of these supply challenges and behavioral changes effectively, or if general macroeconomic conditions or conditions in the industries in which we operate deteriorate, our business, operating results, financial condition, and cash flows could be adversely affected.
Our gross margins, operating margins and segmentoperating profitmargins are expected to vary, and may be adversely affected in the future by numerous factors, including, but not limited to:
•factors beyond our control such as natural disasters, climate change, acts of war or terrorism, and pandemics and other public health emergencies;
Due to increased demand across a range of industries, our business and customers’ businesses haveare experiencedexperiencing and could, in the future, experience supply constraints due to both constrained manufacturing capacity, as well as component parts shortages. These supply constraints have adversely affected and could further affect availability, lead-times and cost of components, and could increase the likelihood of unexpected cancellations or delays of previously committed supply of key components. These challenges have resulted in extended lead-times to our customers or accelerated ordering for certain of our products that resulted in inventory backlog that was subsequently managed down, resulting in reduced ordering. Ordering patterns may be difficult to predict and we have experienced and may, in the future, experience negative impacts to our revenue and profitability as well as our ability to achieve our forecasts.
If we are unable to anticipate future technological shifts, market needs, requirements or opportunities, or fail to develop and introduce new products, product enhancements, manufacturing or supply chain capacity, or business strategies to meet those requirements or opportunities in a timely manner or at all, it could cause us to lose customers, substantially decrease or delay market acceptance and sales of our products and services, and significantly harm our business, financial condition, and results of operations. In addition, if we invest in developing products for a market that does not develop, it could significantly harm our business, financial condition, and results of operations. Even if we are able to anticipate, develop, and commercially introduce new products, enhancements or business strategies, any such products, enhancements or business strategies may not achieve market acceptance.
The markets in which we operate are dynamic and complex, and our success depends on our ability to deliver both our current product offerings and new products and technologies on time and at acceptable prices to our customers. The markets for our products are characterized by rapid technological change, frequent new product introductions and enhancements, substantial capital investment, changes in customer requirements, continued price pressures and a constantly evolving industry. Historically, these pricing pressures have led to a continued decline of average selling prices acrossin certain areas of our businessbusiness, and we expect that these historical trends will continue. The development of new, technologically advanced products is a complex and uncertain process requiring high levels of innovation and the accurate prediction of technology and market trends. The introduction of new products also often requires significant investment to ramp up production capacity, the benefit of which may not be realized if we are not successful in the production of such products or if customer demand does not develop as expected. Ramping of production capacity also entails risks of delays which can limit our ability to realize the full benefit of new product introductions. We cannot assure you that we will be able to identify, develop, manufacture, market or support new or enhanced products successfully, if at all, or on a timely basis. We also cannot assure you that potential markets for our new products will materialize on the timelines we anticipate, or at all, or that our technology will meet our customers’ specifications. In addition, the markets in which our customers compete experience rapid changes in technology, customer requirements, competitive products, and industry standards, which may impact the demand for our products or products that we are developing. For example, markets driven by AI/ML technology are changing rapidly and creating increased competition from large public companies as well as private companies and start-ups; and therefore, the demand for our products that address these markets may change and is difficult to predict. Our future performance will depend on the successful development, introduction, deployment and market acceptance of new and enhanced features and products that meet our customers’ current and future needs. Future demand for our products is uncertain and will primarily depend on continued technological development and the introduction of new or enhanced products. If this does not continue, sales of our products may decline which could adversely impact our business, results of operations and financial condition.
The end markets for optical products have experienced significant industry consolidation during the past few years. We expect this trend to continue as companies attempt to strengthen or hold their market positions in an evolving industry and as companies are acquired or are unable to continue operations. As a result, the markets for optical subsystems, components and laser diodes are highly competitive and the intensity of such competition is increasing. Our current competitors include a number of domestic and international public and private companies, many of which may have substantially greater financial, technical, marketing and distribution resources and brand name recognition than we have. As we expand into new markets, we face competition not only from our existing competitors, but also from new competitors, including existing companies with strong technological and sales positions in those markets. We may not be able to compete successfully against either current or future competitors, particularly, in light of increasing consolidation. Our competitors may continue to enter markets or gain or retain market share through introduction of new or improved products or with aggressive low pricing strategies that may impact the efficacy of our approach. These competitors may be able to devote greater resources than we can to the development, promotion, sale and support of their products. Additionally, the merger or consolidation of significant competitors have resulted in, and will likely result in, competitors with greater resources, which may enable them to offer a different market approach, or a lower cost structure through economies of scale or other efficiencies that we may be unable to match and which may intensify competition in the various markets. In addition, if we are unable to satisfy customer demand and customers are required to purchase products from our competitors, they may shift immediate and future purchases to such competitors, which could harm our customer relationships and adversely impact our access to certain end markets. Further, our competitors may seek to vertically integrate by buying suppliers that also supply products or components to us, which could enable them to further reduce prices, or could increase our costs. Our current or potential customers may also determine to develop and produce products for their own use which may be competitive to our products. Such vertical integration could reduce the market opportunity for our products. Increased competition could result in significant price erosion, reduced revenue, lower margins or loss of market share, any of which would significantly harm our business.
•changes in or limitations imposed by trade protection laws or other regulatory orders or requirements in the United States or in other countries;
•the restrictions in China on the export of indium, gallium, germanium and other rare earth metals and critical minerals; and other retaliatory responses in the trade policies of the U.S. or foreign governments;
•changes in or limitations imposed by trade protection laws or other regulatory orders or requirements in the United States or in other countries, including changes in the trade policies of the U.S. and its trading partners, heightened, scheduled, or threatened tariffs, sanctions, or other costs or requirements which may affect our ability to import or export our products from various countries or increase the cost to do so, including government action to restrict our ability to sell to foreign customers where sales of products may require export licenses (See Risk Factor entitled “Our ability to sell our products to a significant customer has been restricted”); the restrictions in China on the export of gallium and germanium and other rare earth metals and critical minerals; and other retaliatory responses in the trade policies of the U.S. or foreign governments;
•the imposition of sanctionsexport control measures on customers in China may cause those customers to seek domestic alternatives to our products, including developing alternatives internally, and our customers demand for our products could be impacted by their inability to obtain other materials subject to sanctions. For example, sanctions on sales to certain parties of U.S. semiconductors and semiconductor equipment has caused a delay in 5G deployment in China while the affected companies seek alternative solutions, which has reduced the demand for our products from some of our Chinese customers;
•markets for 5G infrastructure not developing in the manner or in the time periods we anticipate, including as a result of unfavorable developments with evolving laws and regulations worldwide;
•the impact of recessions and other economic conditions in economies outside the United States, including, for example, dipsdeclines in the manufacturing Purchasing Managers Index as well as the Institute for Supply Management data in the Eurozone;
•political developments, geopolitical unrest or other conflicts or wars in foreign nations, including the Russia-Ukraine war, the ongoing conflicts in the Middle East, the conflict between Cambodia and Thailand, and political developments in Hong Kong and Taiwan and the potential impact such developments or further actions could have on our customers in the markets in which we operate; and
We are also highly dependent on the ability to ship products to customers and to receive shipments from our suppliers. In the event of a disruption in the worldwide or regional shipping infrastructure, including as a result of geopolitical or armed conflicts, our access to supplies and our ability to deliver products to customers would correspondingly be negatively impacted. As a result of shipping disruptions, we have experiencedexperienced, among other things, increased costs to ship products and delays in receiving componentscomponents. andAny anysimilar disruptiondisruptions in the future would likely adversely affect our operating results and financial condition.
In addition to the above risks related to our international operations, we also face risks related to pandemics and epidemics. An outbreak of a contagious disease, and other adverse public health developments, particularly in Asia, could have an adverse effect on our business operations. The effects could include restrictions on our ability to travel to support our sites in Asia or other regions or our customers located there, disruptions in our ability to distribute products, and/or temporary closures of our facilities in Asia or the facilities of our suppliers or customers and their contract manufacturers.
•the risk of financial loss in excess of amounts covered by insurance, or uninsured risks, such as the loss caused by damage to the buildings as a result of earthquakes, floods, typhoons, tsunamis, fire,fires, and/or other natural disasters.
Changes in demand and customer requirements for our products may be difficult to forecast. We may be unable to increase our manufacturing capacity to meet future demand, or we may experience difficulties in generating and maintaining demand to optimize our manufacturing capacity. If we are unable to align supply with demand, it could have an adverse effect on our business, results of operations, or financial condition.
We operate in a market where demand can fluctuate rapidly and we may not be able to predict or quickly respond to trends in the dynamics of our markets and our customers or changes in customer demand, which could negatively impact our gross margins. Although AI is a relatively new demand driver for our products, it is evolving rapidly, and the expected timing and amount of investments related to AI can change significantly. As a result, it may be difficult to accurately forecast such demand and we may incur costs in anticipation of demand that ultimately does not materialize. We manufacture and purchase or commit to supplies based on forecasts of demand from our customers. If we overestimate demand, or if customers cancel or defer orders, change requirements or choose to purchase from our competitors, we may not be able to utilize on-hand inventory or reduce purchase commitments accordingly. If demand does materialize, but is lower than expected, we may not be able to reduce our costs in response, which would adversely impact our gross margins. We have experienced pressure on margins and profitability due to lower average selling prices, increase prices for certain products, price increase on certain products as a result of our supplier cost increases, inventory write-downs, cancellation penalties, and impairments charges, and may incur similar costs, charges and pressure on margins and profitability in the future.
Our ability to meet demand is influenced by numerous factors, including changes in product development cycles, ramping technologies, and evolving customer requirements. Our ability to increase supply of our products is especially dependent on our ability to increase our manufacturing capacity, both at our own facilities and those of our contract manufacturers. Our ability to increase production is subject to a number of uncertainties inherent in all new manufacturing operations, including ongoing compliance with regulatory requirements, procurement and maintenance of construction, environmental and operational licenses and approvals for additional expansion, clean-room capacity, supply chain constraints, hiring, training and retention of qualified employees, implementing highly complex manufacturing processes, and the pace of bringing production equipment and processes online with the capability to manufacture high-quality products. We may also face difficulties in optimizing our manufacturing capacity, which may result in underutilization of our manufacturing facilities and excess inventory of our manufactured products. If we experience any issues or delays in increasing production capacity in our current or new manufacturing facilities or generating and maintaining demand for our products we manufacture there, our business, prospects, operating results and financial condition may be harmed.
If demand exceeds our forecasts, we may be unable to scale and increase supply sufficiently to meet such demand, which could result in a loss of revenue, decisions about manufacturing priorities, decisions on supply allocation, damage to customer relationships, legal or other disputes, loss of business and market share to competitors, and loss of future opportunities.
The manufacturing of our products may be adversely affected ifIf we are unable to manufacture certain products in our manufacturing facilities or if we or our contract manufacturers and suppliers are unable or fail to meet our production requirements.requirements, our business may be adversely affected.
We manufacture some of our finished good products as well as some of the components that we provide to our contract manufacturers in our China, Japan, Thailand, United Kingdom, and San Jose, California manufacturing facilities. For some of the components and finished good products, we are the sole manufacturer. Our manufacturing processes are highly complex, and issues are often difficult to detect and correct. From time-to-time, we have experienced problems achieving acceptable yields in our manufacturing facilities, resulting in delays in the availability of our products and inability to meet customer demand. In addition, if we experience problems with our manufacturing facilities or are unable to continue operations at any of these sites, including as a result of social, geopolitical, environmental or health factors, damage caused by natural disasters, energy shortages or increased energy costs or other problems or events beyond our control, including pandemics or widespread health epidemics, it would be costly and require a long period of time to move the manufacture of these components and finished good products to a different facility or contract manufacturer which could then result in interruptions in supply, and would likely materially impact our financial condition and results of operations. Our business and operations would be severely impacted if there were any future widespread health crisis or related restrictions imposed by governments or private industry in regions we operate.
Additionally, if operations at these contract manufacturers are adversely impacted, such as by natural disasters, energy shortages or restrictions due to the impact of a widespread health crisis disruptions or any resulting economic impact to their business, this would likely materially impact our financial condition and results of operations. Our ability to control the quality of products produced by contract manufacturers has and may in the future be impaired by pandemics or widespread health epidemics disruptions, and quality issues might not be resolved in a timely manner. Additionally, if our contract manufacturers continue experiencing disruptions or discontinue operations, we may be required to identify and qualify alternative manufacturers, which is expensive and time consuming. If we are required to change or qualify a new contract manufacturer, this would likely cause business disruptions and adversely affect our results of operations and could harm our existing customer relationships.
Despite rigorous testing for quality, both by us and the contract manufacturers to whom we sell products and from whom we buy products, we may receive and ship defective products. We may incur significant costs to correct defective products which could result in the loss of future sales and revenue, indemnification costs or costs to replace or repair the defective products, litigation and damage to our reputation and customer relations. Defective products may also cause diversion of management attention from our business and product development efforts.
Our manufacturing operations and those of our contract manufacturers may be affected by natural disasters such as earthquakes, floods, typhoons, tsunamis, fires and widespread health crises, changes in legal requirements, labor competition, shortages and turnover, labor strikes and other labor unrest, wars or other conflicts, and economic, political or other forces that are beyond our control. For example, in the past one of our former contract manufacturers experienced a labor strike which threatened the contract manufacturer’s ability to fulfill its product commitments to us and, in turn, our ability to fulfill our obligations to our customers. We are heavily dependent on a small number of manufacturing sites. Our business and operations would be severely impacted by any significant business disruptions for which we may not receive, and regardless of whether we receive, adequate recovery from insurance. There has been an increased focus on corporate social and environmental responsibility in our industry. As a result, a number of our customers may adopt policies that include social and environmental responsibility provisions that their suppliers should comply with. These provisions may be difficult and expensive to comply with, given the complexity of our supply chain. We may be unable to cause our suppliers or contract manufacturers to comply with these provisions which may adversely affect our relationships with customers.
Further, certain of our suppliers are located in China, which exposes us to risks associated with Chinese laws and regulations and U.S. laws, regulations and policies with respect to China, such as those related to importexport controls, tariffs and export policies, the recent imposition of higher U.S. tariffs on many products from China, retaliatory actions taken by the U.S. and China in response to actions taken by the other,measures, and risks related to taxation and the treatment of intellectual property. Chinese and U.S. laws and regulations are subject to frequent change, and if our suppliers are unable to obtain or retain the requisite legal permits or otherwise to comply with Chinese and U.S. legal requirements, we may be forced to obtain products from other manufacturers or to make other operational changes, including transferring our manufacturing to another manufacturer or to our own manufacturing facilities. In addition, many of our products are sourced from suppliers based outside of the United States, primarily in Asia. We may continue to face uncertainty with respect to our suppliers’ abilities to supply products due to supply chain and inventory impacts, tax and trade policies, the effects of trade wars, including heightened, scheduled, and threatened tariffs and trade restrictions, and government regulations affecting trade between the United States and other countries. Major developments in tax policy or trade relations, such as the imposition of tariffs on imported products, for example, higher U.S. tariffs on the import of certain products manufactured in Thailand or China (and vice-versa), could increase our product and product-related costs or require us to seek alternative suppliers, either of which could result in decreased sales or increased product and product-related costs. Any such developments could have a material impact on our ability to meet our customers’ expectations and may materially impact our operating results and financial condition.
If we are unable to successfully identify, acquire and integrate suitable businesses, our operating results and prospects could be harmed, and any businesses we acquire may not perform as expected or be effectively integrated.
Management's Discussion & Analysis (MD&A)
New heading “Operating Segment Information”
Removed heading “Cloud & Networking”
Removed heading “Cloud Light Acquisition”
Removed heading “Supply Chain and Inventory Management”
Largest changes
“Cash provided by operating activities was $126.3 million during the year ended June 28, 2025, which reflects the net income of $25.9 million and non-cash items of $414.9 million, partially offset by $314.5 million of changes in our operating assets and liabilities. …”see in full comparison
“We have two reportable segments, Cloud & Networking and Industrial Tech. The two operating segments were primarily determined based on how our Chief Operating Decision Maker (“CODM”) views and evaluates our operations. The CODM regularly reviews operating results to make decisions about resources to be allocated to the segments and to assess their performance. Our CODM allocates resources to the segments based on their business prospects, competitive factors, segment net revenue and segment profit. …”see in full comparison
“If these tariff-related cost increases persist or escalate, our financial results could be adversely affected, including lower profitability. Additionally, changes in the global trade landscape could result in reduced market competitiveness and a slowdown in consumer demand as well as disruptions to our supply chain, including longer lead times, higher shipping costs, or limited availability of key inputs. This may constrain our ability to meet customer demand in a timely manner, potentially affecting our revenue growth and operational efficiency. …”see in full comparison
“During fiscal year 2025, we recorded restructuring and related charges of $22.8 million, This included $14.6 million of assets written off, including property, plant and equipment, right-of-use assets, prepayments and other current assets as well as charges for other contractual commitments associated with site closures, and $4.3 million of employee severance primarily due to efforts to consolidate our sites and focus on other market opportunities, including cloud and AI markets. …”see in full comparison
“Our supply chain is complex, and we need to manage supply of certain components required to build our products while confronted with fluctuating demand from our customers. Our business and our customers’ businesses were negatively impacted by worldwide logistics and supply chain issues during and following the COVID-19 pandemic, including constraints on available cargo capabilities and limited availability of once broadly available supplies of both raw materials and finished components. …”see in full comparison
Full comparison: every changed paragraph (90)
We are a leadingglobal leader in optical and photonic technologies and an industry-leading provider of optical and photonic products and are recognized as an industry leader based on revenue and market share. Our products are essential to a range of cloud, artificial intelligence and machine learning (“AI/ML”), telecommunications, consumer, and industrial end-market applications.
We believe the global markets in which Lumentum participates have fundamentally robust, long-term trends that will increase the need for our photonics products and technologies. We believe the world is becoming more reliant on ever-increasing amounts of data flowing through optical networks and data centers. Lumentum’s products and technology enable the scaling of these optical networks and data centers to higher capacities. AI/ML has caused a dramatic surge in the growing demands on data networking in cloud data centers and accelerated the usage of optical components and modules. We expect that the accelerating shift to digital and virtual approaches to many aspects of work and life will continue into the future. Virtual meetings, video calls, and hybrid in-person and virtual environments for work and other aspects of life will continue to drive strong needs for bandwidth growth and present dynamic new challenges that our technologies address. As manufacturers demand higher levels of precision, new materials, and factory and energy efficiency, suppliers of manufacturing tools globally are turning to laser-based approaches, including the types of lasers Lumentum supplies. Laser-based 3D sensing and LiDAR for security, industrial and automotive applications are rapidly developing markets. The technology enables computer vision applications that enhance security, safety, and new functionality in the electronic devices that people rely on every day. The use of LiDAR and in-cabin 3D sensing in automobile and delivery vehicles will over time significantly addsadd to our long-term market opportunity. Additionally, we expect 3D-enabled machine vision solutions to expand significantly in industrial applications in the coming years.
We disaggregate revenue by type of product, which are Components and Systems, and by geography. A Components product is defined as one of the individual building blocks that goes into creating a larger solution. It is typically not a complete solution on its own but rather a specialized element that enables system functionality. This includes semiconductor laser chips, laser sub-assemblies, line subsystems and wavelength management systems. These are supplied to customers who then integrate them into their own full system solutions. Components represent foundational parts that support or enable that system’s operation and include optical chips and subsystems that are supplied to cloud data center operators, AI/ML infrastructure providers, and network equipment manufacturer customers.
A Systems product is defined as a complete, stand-alone solution that delivers full functionality to the end customer. It is typically self-contained and ready to operate within a customer’s network or application environment. This includes optical modules, optical circuit switches, and industrial lasers such as short-pulse solid-state lasers and kilowatt-class fiber lasers. These products integrate multiple technologies and subsystems into a finished solution that directly addresses a customer’s needs. A system represents the end-product that can be deployed and used independently.
We have two reportable segments, Cloud & Networking and Industrial Tech. The two operating segments were primarily determined based on how our Chief Operating Decision Maker (“CODM”) views and evaluates our operations. The CODM regularly reviews operating results to make decisions about resources to be allocated to the segments and to assess their performance. Our CODM allocates resources to the segments based on their business prospects, competitive factors, segment net revenue and segment profit. Segment profit includes operating expenses directly managed by operating segments, including research and development, and direct sales and marketing expenses. Segment profit does not include stock-based compensation, acquisition or integration related costs, amortization and impairment of acquisition-related intangible assets, restructuring and related charges, and certain other charges. Additionally, we do not allocate certain marketing and general and administrative expenses, as these expenses are not directly attributable to our operating segments.
Cloud & Networking
Our Cloud & Networking products comprise a comprehensive portfolio of optical and photonic chips, components, modules, and subsystems supplied to cloud data center operators, AI/ML infrastructure providers, and network equipment manufacturer customers who are building cloud data center and network infrastructures. Our products enable high-capacity optical links for cloud computing, AI/ML workloads, and data center interconnect (“DCI”) applications, as well as for communications service provider networks. Our offerings support access (local), metro (intracity), long-haul (intercity and global), and submarine (undersea) network infrastructure. Additionally, our Cloud & NetworkingOur products serve enterprise network infrastructure needs, including storage area networks (“SANs”), local area networks (“LANs”), and wide area networks (“WANs”). Demand for our products is fueled by the ongoing expansion of network capacity required to support cloud and services, AI/ML processing, streaming video, video conferencing, wireless and mobile connectivity, and the internet of things (“IoT”). In addition, our industrial laser products are used for precision material processing across diverse industries, including semiconductor and microelectronics fabrication, electric vehicle and battery production, metal cutting and welding, and advanced manufacturing that emphasize greater manufacturing precision, flexibility, and sustainability.
Operating Segment Information
Prior to fiscal year 2026, we operated in two reportable segments: Cloud & Networking and Industrial Tech. During the first quarter of fiscal year 2026, we implemented a reorganization and are now managed as a single, integrated enterprise. A unified management team oversees operations across the entire company rather than through discrete operating segments. The Chief Operating Decision Maker (“CODM”) is our Chief Executive Officer, who reviews financial information presented as a single enterprise to allocate resources and evaluate financial performance.
The CODM assesses performance and allocates resources based on consolidated net (loss) income from our consolidated statements of operations. This metric is used to set budgets, evaluate performance, review actual results, and determine whether to reinvest profits, pursue acquisitions, or make other capital management decisions. Segment expenses are reflected in our consolidated statements of operations and cash flows, while segment assets are measured through the consolidated assets on the consolidated balance sheets. Accordingly, we operate in a single reporting segment. Comparative prior-period segment information has been updated to reflect this structure, with no impact on previously reported consolidated results of operations, financial position or cash flows.
IndustrialIndustry TechConditions
Our Industrial Tech products include short-pulse solid-state lasers, kilowatt-class fiber lasers, diode lasers, and gas lasers, serving a wide range of end-markets applications. In the consumer market, our laser light sources are integrated into customers’ 3D sensing cameras, primarily used in mobile devices. In the industrial manufacturing market, our lasers are embedded in machine tools used for precision material processing across diverse industries, including semiconductor and microelectronics fabrication, electric vehicle and battery production, metal cutting and welding, and advanced manufacturing. Adoption of our Industrial Tech products is driven by the need to advance semiconductor and microelectronics technology roadmaps and by Industry 4.0 and 5.0 trends that emphasize greater manufacturing precision, flexibility, and sustainability.
Cloud Light Acquisition
On November 7, 2023 (the “Closing date”), we completed the acquisition of Cloud Light. Cloud Light designs, markets, and manufactures advanced optical modules for data center interconnect applications. This acquisition enabled us to be well-positioned to serve the growing needs of cloud & networking customers, particularly those focused on optimizing their data center infrastructure for the demands of AI/ML. On the Closing date, we paid $705.0 million of total cash consideration to Cloud Light. Additionally, each of Cloud Light’s outstanding options was exchanged for a combination of cash and options to acquire Lumentum common stock having equivalent value (the “replacement options”). These replacement options have a total fair value of $38.9 million as of the Closing date, of which $23.5 million attributable to pre-acquisition service is recorded as part of the purchase price consideration and the remaining $15.4 million is recorded as post-acquisition stock-based compensation expense over the vesting period of three years from the Closing date. We also incurred a total of $9.6 million of merger-related costs, representing professional and other direct acquisition costs, which was recorded as general and administrative expense in the consolidated statement of operations for the year ended June 29, 2024. Refer to “Note 4. Business Combination” to the consolidated financial statements for additional information.
Supply Chain and Inventory Management
Our supply chain is complex, and we need to manage supply of certain components required to build our products while confronted with fluctuating demand from our customers. Our business and our customers’ businesses were negatively impacted by worldwide logistics and supply chain issues during and following the COVID-19 pandemic, including constraints on available cargo capabilities and limited availability of once broadly available supplies of both raw materials and finished components. From time to time, we experience shortages of the types of components we and our customers require in our products, and we have had to incur incremental supply and procurement costs in order to increase our ability to fulfill demands from our customers.
In addition, throughThrough fiscal year 2024, we experienced significant fluctuations in demand as customers delayed projected shipments or built up inventory in response to supply shortages and then brought down inventories as supply chain constraints eased. Our revenue fluctuated in response to these changes in demand and our margins were adversely impacted as we were not been able to fully recover costs, such as underutilized manufacturing capacity. However, duringbeginning in the first quarter of fiscal year 2025, network equipment manufacturers continued to normalizenormalized inventory levels; and since then, we sawhave seen increasing demand from AI and cloud customers as they continue to expand their data centers.centers, driven in part by the continued advances in cloud and AI infrastructure. This demand is outpacing our current supply which has required us to make decisions on supply allocation. We are investing in manufacturing capacity, both internally and with contract manufacturers, to meet demand.
Our supply chain is complex, and we need to manage supply of certain components required to build our products while confronted with fluctuating demand from our customers. From time to time, we experience logistics and supply chain issues and shortages of the types of components we and our customers require in our products, and when we experience these shortages, we have had to incur incremental supply and procurement costs in order to increase our ability to fulfill demands from our customers.
Due to worldwide operations, we and our customers are also subject to risks relating to the global trade environment. TheWe Company isare actively monitoring and assessing the global trade environment, particularly with respect to recentvarious changesproposed and proposedenacted changes in tariff regulations and trade restrictions. The ongoing uncertainty surrounding trading policies, including the potential for additional tariffs, restrictions related to our customers and retaliatory measures by non-U.S. governments, continues to create a volatile environment that could disrupt our operations. The imposition of tariffs on certain imported goods and materials and export controls on critical components may increase our costs and place upward pressure on the cost of goods sold, which, in turn, may reduce our gross margins if we are unable to pass these costs onto customers through price increases.
If these tariff-related cost increases persist or escalate, our financial results could be adversely affected, including lower profitability. Additionally, changes in the global trade landscape could result in reduced market competitiveness and a slowdown in consumer demand as well as disruptions to our supply chain, including longer lead times, higher shipping costs, or limited availability of key inputs. This may constrain our ability to meet customer demand in a timely manner, potentially affecting our revenue growth and operational efficiency. The impact of tariffs on our business is hard to predict, as it is dependent on negotiations with customers and suppliers and other mitigation efforts and potential further changes in global trade policies, including higher tariffs or trade restrictions in the U.S. or other countries.
For more information on risks associated with supply chain constraints and customer inventory, as well as tariffs and other trade restrictions, refer to Item 1A “Risk Factors” of this Annual Report.
Our consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) as set forth in the Financial Accounting Standards Board’s Accounting Standards Codification (“ASC”). We also consider the various staff accounting bulletins and other applicable guidance issued by the United States Securities and Exchange Commission (“SEC”). GAAP, as set forth within the ASC, requires us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions onupon which we rely are reasonable based onupon information available to us at the time that we make these estimates, judgments and assumptions.assumptions are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented. To the extent there are differences between these estimates, judgments or assumptions and actual results, these difference will affect our financial statements.statements will be affected. The accounting policies that reflect our more significant estimates, judgments and assumptions and which we believe are the most critical to aid in fully understanding and evaluating our reported financial results include the following:
The majority of our revenue comes from product sales, consisting of sales of hardware products to our customers. Our revenue contracts generally include only one performance obligation. Revenues are recognized at a point in time when control of the promised goods or services are transferred to our customers upon shipment or delivery of goods or rendering of services, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. We have entered into vendor managed inventory (“VMI”) programs with our customers. Under these arrangements, we receive purchase orders from our customers, and the inventory is shipped to the VMI location upon receipt of the purchase order. The customer then pulls the inventory from the VMI hub based on its production needs. Revenue under VMI programs is recognized when control transfers to the customer, which is generally once the customer pulls the inventory from the hub.
Our revenue arrangements do not contain significant financing components as our standard payment terms are less than one year.components.
If a customer pays consideration, or we have a right to an amount of consideration that is unconditional before we transfer a good or service to the customer, those amounts are classified as deferred revenue or deposits received from customers which are included in other current liabilities or other long-term liabilities when the payment is made or it is due, whichever is earlier.made.
We disaggregate revenue by geography and by type of product. Refer to “Note 18. Revenue Recognition” to the consolidated financial statements for a presentation of disaggregated revenue. We do not present other levels of disaggregation, such as by type of products, customer, markets, contracts, duration of contracts, timing of transfer of control and sales channels, as this information is not used by our Chief Operating Decision Maker (“CODM”) to manage the business.
The authoritative guidance provides for recognition of deferred tax assets if the realization of such deferred tax assets is more likely than not to occur based on an evaluation of both positive and negative evidence and the relative weight of the evidence. WeIn considering the need for valuation allowance, we consider future growth, forecasted earnings,earnings including future taxable income, the mix of earnings in the jurisdictions in which we operate, historical earnings,earnings including historical earnings adjusted for non-recurring items, taxable income in prior years, if carry-back is permitted under the law, and prudent and feasible tax planning strategies in determining the need for a valuation allowance. In the event we were to determine that we would not be able to realize all or part of our net deferred tax assets in the future, an adjustment to the deferred tax assets valuation allowance would be charged to earnings in the period in which we make such a determination, or goodwill would be adjusted at our final determination of the valuation allowance related to an acquisition within the measurement period. If we later determine that it is more likely than not that the net deferred tax assets would be realized, we would reverse the applicable portion of the previously provided valuation allowance as an adjustment to earnings at such time.strategies.
In the event we determine that we would not be able to realize all or part of our net deferred tax assets in the future, an adjustment to the deferred tax assets valuation allowance would be charged to earnings in the period in which we make such a determination, or goodwill would be adjusted at our final determination of the valuation allowance related to an acquisition within the measurement period. Conversely, if we later determine that it is more likely than not that all or a portion of the net deferred tax assets will be realized, we would reverse the applicable portion of the previously established valuation allowance. A release of valuation allowance decreases our income tax expense in the period of release, increases our net income, and reduces our effective tax rate. Such releases may be material to our financial statements depending on the size of the deferred tax assets involved.
In the fourth quarter of fiscal year 2026, we released $236.3 million of valuation allowance on the majority of our U.S. federal and state deferred tax assets after we considered all available positive and negative evidence. As of June 27, 2026, we have a cumulative U.S. loss for the 3-year period on the basis of pretax income adjusted for recurring permanent book-to-tax differences. The cumulative loss is driven by the loss on debt extinguishment of $7,756.6 million. Because of this cumulative U.S. loss, we developed an objectively verifiable estimate of future taxable income based upon our recent U.S. operating results which excluded the loss on debt extinguishment. In other words, we would have had cumulative U.S. income for the 3-year period based on our pretax income adjusted for recurring permanent book-to-tax differences without the loss on debt extinguishment. Additional positive evidence that we have considered in our assessment of the need for a valuation allowance included existing contracts and firm sales backlog, as well as utilization of more U.S. tax attribute than generated which reduces our U.S. federal and state net deferred tax assets. Based upon this objectively verifiable estimate of future income, our U.S. deferred tax assets are more likely than not to be realized prior to expiration with the exception of federal foreign tax credit carryforwards and California research and development credit carryforwards. We continued to maintain valuation allowances against these deferred tax assets because, based on their character, jurisdiction, applicable utilization limitations, and expiration periods, it is more likely than not that they will not be utilized in the future. As of the end of fiscal year 2026, we maintained an $81.4 million valuation allowance on these U.S. deferred tax assets.
In the fourth quarter of fiscal year 2025, we released $153.1 million of valuation allowances on our United Kingdom (“U.K.”) deferred tax assets after we considered all available positive and negative evidence related to our U.K. subsidiary. We analyzed the U.K. subsidiary’s historical operating results, projected future taxable income, tax planning strategies, and reversals of deferred tax liabilities, and determined that the weight of available objectively verifiable positive evidence supported the realizability of the U.K. deferred tax assets. In weighing the available evidence, more weight was placed upon our forecasts of future taxable income than on the history of pre-tax losses as such losses were generated under our prior U.K. business operating model which will no longer be in effect beginning with fiscal year 2026, and the guarantee of a positive operating margin as we effectuated an internal restructuring at the end of fiscal year 2025. Further, the most significant deferred tax asset in the U.K. is the net operating loss carryforward. Under the U.K. tax law, net operating losses may be carried forward indefinitely, and we have considered the indefinite carryforward period to be positive evidence.
The recognition and measurement of current taxes payable or refundable and deferred tax assets and liabilities requires that we make certain estimates and judgments. Changes to these estimatesestimates, orincluding a changechanges in judgment regarding the realizability of deferred tax assets and the need for or release of valuation allowances, may have a material impact on our tax provisionprovision, net income, and effective tax rate in a future period.
We have the option to first assess qualitative factors to determine whether it is necessary to perform the quantitative goodwill impairment test. The qualitative factors we assess include long-term prospects of our performance, share price trends and market capitalization, and Companyevents specific events.to us. Unanticipated events and circumstances may occur that affect the accuracy of our assumptions, estimates and judgments. For example, if the price of our common stock were to significantly decrease combined with other adverse changes in market conditions, thus indicating that the underlying fair value of our reporting units may have decreased, we may reassess the value of our goodwill in the period such circumstances were identified.
This section of this Form 10-K generally discusses fiscal year 20252026 compared to fiscal year 2024.2025. The comparison of the fiscal year 20242025 results with the fiscal year 20232024 results that are not included in this Form 10-K can be found in the “Management’s Discussion and Analysis Results of Operations” section in the Company’sour fiscal year 20242025 Annual Report within Part II, Item 7 of Form 10-K, filed on August 21,19, 2024.2025.
Net revenue increased by $285.8$1,369.0 million, or 21.0%,83.2%, during fiscal year 2025 as2026 compared to fiscal year 2024,2025, duedriven toby a $325.9$889.3 million increase in CloudComponents &products Networking net revenue offset byand a $40.1$479.7 million decreaseincrease in IndustrialSystems Tech net revenue.products.
The Components products net revenue growth was primarily driven by the ramp of laser chip and laser assembly product shipment, which represent 78% of the total growth to support strong, broad-based demand across intra-data center, data center interconnect, and long-haul applications, complemented by a slight increase in average selling prices of laser chip products driven primarily by a shift to 200G lane speeds. The remaining approximately 22% of Components net revenue growth was primarily due to an increase in shipment volume of data transport products, encompassing line subsystems solutions for long-haul terrestrial networks and charge pump products used in undersea network installations.
The System products net revenue growth was primarily driven by our cloud transceiver product lines which increased by more than 173% due to an increase in shipment volume, partially offset by lower average selling prices. We also continued the initial phase of optical circuit switch shipments, which contributed more than $90.0 million of revenue during fiscal year 2026. and we remain on track for manufacturing expansion over the coming quarters to support future growth.
The increase in Cloud & Networking net revenue is primarily due to higher unit sales from cloud and AI/ML customers, which increased by $193.2 million, in part due to a full year of revenue from Cloud Light, which we acquired in the second quarter of fiscal year 2024. In addition, revenue from network equipment manufacturers increased by $132.7 million as a result of higher unit sales from the market recovery and the related inventory normalization. The decrease in Industrial Tech net revenue is primarily due to a decline in unit sales of our imaging and sensing products due to higher market competition in the consumer end-market for these products, which was partially offset by a $17.5 million increase in our laser products due to higher market demand.
During our fiscal years 2025,2026, 20242025 and 2023,2024, net revenue generated from a single end customer which represented 10% or greater of total net revenue is summarized as follows:
We operate in three geographic regions: Americas, Asia-Pacific, and EMEA (Europe, Middle East, and Africa). Net revenue is assigned to the geographic region and country where our product is initially shipped to. For example, certain customers may request shipment of our product to a contract manufacturer in one country, which may differ from the location of their end customers. The following table presents net revenue by the three geographic regions we operate in and net revenue from countries that represented 10% or more of our total net revenue (in millions, except percentage data):
The following table presents net revenue by the three geographic regions we operate in and net revenue from countries that represented 10% or more of our total net revenue (in millions, except percentage data):
Gross margin in fiscal year 2026 increased to 41.7% from 28.0% in fiscal year 2025, primarily driven by higher revenue from our laser chip, laser assembly, and data transport products. Approximately 54% of the gross margin dollar increase was driven by lower manufacturing costs as a percentage of revenue, primarily due to higher internal factory utilization. Additionally, 29% of the gross margin increase was driven by a mix shift to higher margin products. The remaining 17% increase in gross margin relates to the decrease in amortization of acquired intangibles.
Gross margin in fiscal year 2025 increased to 28.0% from 18.5% in fiscal year 2024. The increase was driven by a $20.8 million reduction in excess and obsolete inventory charges during fiscal year 2025, primarily as a result of the U.S. trade restrictions imposed during fiscal year 2024 whereby we were no longer able to sell certain products to one of our customers. In addition, costs incurred related to the acquisition of Cloud Light, including integration costs and amortization of inventory fair value adjustments were $23.5 million lower compared to the prior year. In fiscal year 2024, we also incurred $20.7 million of higher excess capacity charges as a result of our manufacturing synergy plans in connection with the NeoPhotonics integration, transferring product lines out of China due to U.S. export restrictions, and a drop in demand due to customers actively working to reduce their elevated inventory levels. Our Cloud & Networking gross profit increased year over year primarily due to higher unit sales of our products for both cloud and AI/ML applications. Our Industrial Tech segment gross margin decreased year over year primarily due to lower revenue, mainly from sales of imaging and sensing products.
The markets in which we sell products are undergoing product, architectural and business model transitions, havedriven in part by the deployment of AI, high customer concentrations, are highly competitive, are price sensitive and/or are affected by customer seasonality and have variantvariants in buying patterns. We expect these factors to result in variability of our gross margin, and our gross margin may be subject to increasing downward pressure due to these factors.
Segment Profit
Cloud & Networking segment profit increased by $140.0 million, or 112.4%, during fiscal year 2025 as compared to fiscal year 2024 primarily due to higher sales of our products for both cloud and AI/ML applications. Industrial Tech segment profit decreased by $13.0 million, or 51.8%, during fiscal year 2025 as compared to fiscal year 2024 primarily due to lower revenue, mainly from lower sales of imaging and sensing products due to increasing competition and share normalization.
R&D expense increased by $52.6 million, or 17.3% during fiscal year 2026 compared to fiscal year 2025, primarily due to a $23.2 million increase in our cash incentive compensation due to higher revenue and profit levels, whereas the fiscal year 2025 annual incentive plan was mostly equity-based, a $19.9 million increase related to new R&D programs, and a $14.4 million increase in payroll related expenses primarily driven by equity-related taxes. These increases were offset in part by a $4.5 million decrease in stock-based compensation.
R&D expense was approximately flat in fiscal year 2025 as compared to fiscal year 2024. Salary expenses were lower by $10.0 million as a result of lower headcount and restructuring actions taken in the past, primarily due to the discontinuation of our in-house development of coherent DSPs and Radio Frequency Integrated Circuits (“RFICs”). The decrease was offset by higher variable compensation due to higher profit levels, which increased our cash incentive compensation by $5.3 million, and increased our stock-based incentive compensation by $5.0 million.
SG&A expense increased by $15.0 million, or 4.3%, during fiscal year 2026 compared to fiscal year 2025, primarily due to a $20.2 million increase in our cash incentive compensation due to higher revenue and profit levels, whereas the fiscal year 2025 annual incentive plan was mostly equity-based, a $16.0 million increase in payroll related expenses primarily driven by equity-related taxes, and a $7.7 million loss on sale of two commercial buildings. These increases were offset in part by a $9.5 million decrease in amortization of intangible assets as certain assets were fully amortized, a $5.1 million decrease in stock-based compensation as a result of equity award modifications made in 2025, a $5.2 million decrease related to executive employee transitions, and a $3.2 million reductions in bad debt expense.
SG&A expense increased by $37.5 million, or 12.1%, during fiscal year 2025 as compared to fiscal year 2024, primarily driven by an increase of $38.0 million in stock-based compensation driven by equity award modifications and $5.2 million of severance payments, both primarily due to the resignation of our former Chief Executive Officer, as well as an increase of $8.1 million related to cash incentive compensation due to the higher levels of revenue and profit. This was partially offset by a $13.0 million decrease in salary expenses as a result of recent restructuring actions and a $2.8 million of reduction in integration related costs.
During fiscal year 2026, we recorded restructuring and related charges of $11.4 million, primarily related to a reduction in force during the period in order to enhance operational efficiency and realign our investments toward the most critical initiatives Refer to “Note 12. Restructuring and Related Charges” to the consolidated financial statements.
During fiscal year 2025, we recorded restructuring and related charges of $22.8 million, This included $14.6 million of assets written off, including property, plant and equipment, right-of-use assets, prepayments and other current assets as well as charges for other contractual commitments associated with site closures, and $4.3 million of employee severance primarily due to efforts to consolidate our sites and focus on other market opportunities, including cloud and AI markets. In addition, we also recorded $3.0 million of charges related to the discontinuation of our in-house development of coherent Digital Signal Processors (“DSPs”) and Radio Frequency Integrated Circuits (“RFICs”).
Refer to “Note 12. Restructuring and Related Charges” to the consolidated financial statements.
OnIn Decemberfiscal 17,year 2024,2025, we enteredcompleted intothe ansale agreement to sellof our assets in an entity in Shenzhen, China. On March 5, 2025, we completed the saleChina and received net proceeds of $47.8 million, which was net of cash of $17.6 million and direct selling costs of $1.1 million. The net assets sold consisted primarily of building, building improvements and land rights as of December 17, 2024 with a net carrying value of $12.9 million, and were used by the Cloud and Networking segment for manufacturing and research and development activities. As a result, we recognized a gain on sale of facility of $34.9 million, which was recorded in our consolidated statements of operations for the year ended June 28, 2025. We paid $4.4 million of withholding taxes on this sale transaction, which is recorded as part of the income tax provision for the year ended June 28, 2025. We also incurred $0.7 million of indirect selling expenses related to this transaction, which was recorded as part of selling, general and administrative expenses in our consolidated statements of operations for thefiscal year ended June 28, 2025.
Escrow Settlement
In November 2023, we completed the acquisition of Cloud Light Technology Limited (“Cloud Light”). In accordance with a definitive merger agreement, dated as of October 29, 2023, between us and Cloud Light, cash consideration included $75.8 million of cash held in an escrow fund to support Cloud Light’s indemnification obligations and customary adjustment for working capital. In November 2025, we and the former shareholders of Cloud Light mutually agreed to settle outstanding indemnification claims for $27.5 million and signed a settlement agreement releasing the balance of the escrow fund to the former Cloud Light shareholders and releasing them of their indemnification obligations. Since the measurement period has expired, we recorded the settlement amount of $27.5 million as other income, net in our consolidated statements of operations for the fiscal year 2026.
Loss on Debt Extinguishment
During our fourth quarter of fiscal year 2026, we entered into privately negotiated exchange arrangements with certain holders of our 2026 Notes, 2028 Notes, and 2029 Notes. Pursuant to these agreements, we issued an aggregate of approximately 10.6 million shares of our common stock in exchange for approximately $264.8 million, $650.4 million, and $209.7 million aggregate principal amount of the 2026 Notes, 2028 Notes, and 2029 Notes, respectively, and the related conversion value in excess of the principal amounts thereof. This resulted in a $7,756.6 million loss on debt extinguishment, which includes $7,755.1 million of conversion value in excess of principal amounts, $3.1 million of related transaction costs and $2.9 million of unamortized debt issuance costs, offset by $2.9 million of forfeited interest and $1.6 million of negotiated exchange discount recorded in our consolidated statement of operations for the fiscal year 2026.
Refer to “Note 7. Balance Sheet Details” to the consolidated financial statements.
Interest expense in fiscal year 2026 slightly decreased by $0.4 million, or 2%, as compared to fiscal year 2025, primarily due to the early conversion and equitizations of a portion of the 2026 Notes, 2028 Notes, and 2029 Notes, offset in part by the interest expense from the issuance of the 2032 Notes in September 2025. Interest expense also includes the amortization of the debt issuance costs of our convertible notes.
Interest expense in fiscal year 2025 decreased by $11.6 million, or 34.3%, as compared to fiscal year 2024, primarily due to the repayment in full of our 0.25% convertible senior notes due in 2024 (the “2024 Notes”) upon maturity in March 2024.
What changed in the latest 10-Q
Risk Factors
Largest changes
U.S. regulatory activity, such as tariffs, export controls, and economic sanctions laws have in the past, and may in the future, materially limit our ability to make sales to customers in certain regions of the world, including China, and which have in the past, and may in the future, increase our costs and harm our results of operations and financial condition. Throughoutsee in full comparison2025,2025 and 2026, the U.S. imposed a series of tariffs on imported goods. While these tariffs are positioned to have the most significant impacts on goods originating from China, nearly all countries worldwide are impacted at levels ranging from 15% to stacked tariffs in excess of 100% in some cases. The tariff landscape continues to evolvedailyand, as a result, the full impact of these tariff measures on our business is uncertain. In addition to the geographic tariffs, U.S. government investigations are currently underway that may result in new tariffs on certain products, including semiconductors, computers, and other products derivative of critical minerals. On April 14, 2025, the U.S. Bureau of Industry and Security announced the initiation of investigations into the industry on the effects on U.S. national security of imports of semiconductors under Section 232 of the Trade Expansion Act of 1962. The scope of the industry-wide investigation includes semiconductors, semiconductor manufacturing equipment, and their derivative products, including semiconductor substrates and bare wafers, legacy chips, leading-edge chips, microelectronics, and other components. On February 20, 2026, the administration announced they would initiate new trade investigations under Section 301 of the Trade Act of 1974. While the scope of any such investigations is currently unknown, these proposed investigations may also result in additional tariffs or trade restrictions, which could adversely impact our business. We may take actions to mitigate the impact of increases in tariffs and changes in trade policies, and any such actions could result in additional costs, manufacturing delays, or other difficulties, as well as additional risks, and may not be effective. Any of the effects described in this risk factor could have an adverse effect on our business, results of operations, or financial condition.
We are also subject to laws and regulations relating to our collection, use, protection and other processing of personal data of our employees, customers and others. These laws and regulations are subject to frequent modifications and updates and require ongoing supervision. For example, the European Union adopted the GDPR, which became effective in May 2018, establishing stringent requirements for data protection in Europe and providingsee in full comparisonfor substantial penalties for noncompliance. Brazil passed the General Data Protection Law, which became effective in August 2020, to regulate processing of personal data of individuals. It also providesfor substantial penalties for noncompliance. Additionally, California has the CCPA, which went into effect on January 1, 2020, and which was amended and supplemented by California Privacy Rights Act (“CPRA”), which went into effect on January 1, 2023. Other legislation relating to privacy, data protection and cybersecurity has been proposed or adopted in several other states, including the enactment of legislation similar to the CCPA and CPRA enacted in numerous states. Aspects of the CCPA, CPRA and these other laws and regulations, as well as their enforcement, remain unclear. The U.S. federal government also is contemplating federal privacy legislation, and the U.S. Department of Justice has issued regulations restricting certain bulk transfers of sensitive personal data. The effects and impact of these or other laws and regulations relating to privacy, data protection and cybersecurity are potentially significant and may require us to modify practices and policies and to incur substantial costs and expenses in efforts to comply. Laws and regulations relating to privacy, data protection and cybersecurity continue to evolve in various jurisdictions, with existing laws and regulations subject to new and differing interpretations and new laws and regulations being proposed and adopted. It is possible that our practices may be deemed not to comply with those legal requirements relating to privacy, data protection and cybersecurity that apply to us now or in the future.
We cannot be certain what additional actions the U.S. government may take with respect to Huawei or other entities in China or othersee in full comparisoncountries.countriesWeand we are unable to predict the duration and scope of the restrictions enacted in May 2019 and thereafter.For example, other customers, such as FiberHome Technologies Group, have been subject to export control restriction since May 2020, andBIS continues to add entities to the list of restricted parties, and may expand restrictions to other customers or otherwise restrict our ability to ship products. Any further export or trade restrictions that impede our ability to export or sell our products and services could adversely affect our business, results of operations, financial condition and cash flows.
Like other companies, we are subject to ongoing attempts by malicious actors, including through hacking, malware, ransomware, denial-of-service attacks, social engineering, exploitation of internet-connected devices, and other attacks, to obtain unauthorized access to, or acquisition or other processing of confidential or other information or otherwise affect service reliability and threaten the confidentiality, integrity and availability of our systems and information stored or otherwise processed on our systems. Cyber threats have increased in recent years, in part due to increased remote work and frequent attacks, including in the form of phishing emails, malware attachments and malicious websites. Additionally, geopolitical tensions and conflicts, such as the Russia-Ukraine war and ongoing conflicts in the Middle East, including the recent escalation of the U.S-Iran war, may increase our risks of cyber-attacks. Further, as artificial intelligence (“AI”) capabilities improve and become increasingly commonplace, cyber-attacks leveraging AI technology are likely to pose increasing threats. These attacks could, for example,see in full comparisonbe crafted with anleverage AItoolto directly attack information systems with increased speed and/or efficiency compared to a human threat actor or to create more effective phishing emails. In addition, a vulnerability could be introduced from the result of us and our third-party service providers incorporating output of an AI tool, such asAI generatedAI-generated source code, that includes a threat. While we work to safeguard our internal network systems and validate the security of our third-party service providers to mitigate these potential risks, including through information security policies and employee awareness and training, there is no assurance that such actions have been or will be sufficient to prevent cyber-attacks or security breaches or incidents. We have been in the past, and may be in the future, subject to social engineering attacks and other cyber-attacks, and these attacks may become more prevalent with substantial portion of our workforce being distributed geographically, particularly given the increased remote access to our networks and systems as a result. Further, our third-party service providers may have been and may be in the future subject to such attacks or otherwise may suffer security breaches or incidents. In addition, actions by our employees, service providers, partners, contractors, or others, whether malicious or in error, could affect the security of our systems and information. Further, a breach or compromise of our information technology infrastructure or that of our third-party service providers could result in the misappropriation of intellectual property, business plans, trade secrets or other information. Additionally, while our security systems are designed to maintain the physical security of our facilities and information systems, accidental or willful security breaches or incidents or other unauthorized access by third parties to our facilities or our information systems could lead to unauthorized access to, or misappropriation, disclosure, or other processing of proprietary, confidential and other information. Moreover,newevolving laws and regulations, such as the European Union’s General Data Protection Regulation (“GDPR”), the California Consumer Privacy Act (“CCPA”), and China’s Personal Information Protection Law, add to the complexity of our compliance obligations and increases our compliance costs. Although we have established internal controls and procedures intended to comply with such laws and regulations, any actual or alleged failure to fully comply could result in significant penalties and other liabilities, harm to our reputation and market position, business and financial condition.
Our business and operating results depend significantly on general market and economic conditions. The current global macroeconomic environment is volatile and continues to be significantly and adversely impacted by inflation and a dynamic demand environment. Additionally, instability in the global credit markets, the impact of uncertainty regarding inflation, trade wars, and the effects of heightened, scheduled, or proposed tariffs, banking instability, capital expenditure reductions, unemployment, stock market volatility, the instability in the geopolitical environment in many parts of the world (including as a result of the on-going Russia-Ukraine war, ongoing conflicts in the Middle East, including the recent escalation of the U.S.-Iran war, political and territorial conflicts in the Western Hemisphere, the conflict between Cambodia and Thailand, and China-Taiwan relations),see in full comparisonthe currenteconomic challenges inChina,China and the U.S., including global economic ramifications of Chinese and U.S. economic difficulties, and other disruptions may continue to put pressure on global economic conditions. Further, conditions in the global economy have an inherent degree of uncertainty. As a result, it is difficult to estimate the level of growth or contraction of the global economy as a whole. It is even more difficult to estimate growth or contraction in various parts, sectors, and regions of the economy, including the markets in which we participate. All aspects of our forecasts depend on estimates of growth or contraction in the markets we serve.
We manufacture some of our finished good products as well as some of the components that we provide to our contract manufacturers in our China, Japan, Thailand, United Kingdom, and San Jose, California manufacturing facilities. For some of the components and finished good products, we are the sole manufacturer. Our manufacturing processes are highly complex, and issues are often difficult to detect and correct. From time-to-time, we have experienced problems achieving acceptable yields in our manufacturing facilities, resulting in delays in the availability of our products and inability to meet customer demand. In addition, if we experience problems with our manufacturing facilities or are unable to continue operations at any of these sites, including as a result of social, geopolitical, environmental or health factors, damage caused by natural disasters, energy shortages or increased energy costs or other problems or events beyond our control,see in full comparisonincluding pandemics or widespread health epidemics,it would be costly and require a long period of time to move the manufacture of these components and finished good products to a different facility or contract manufacturer which could then result in interruptions in supply, and would likely materially impact our financial condition and results of operations. Our business and operations would be severely impacted if there were any future widespread health crisis or related restrictions imposed by governments or private industry in regions we operate.
Full comparison: every changed paragraph (19)
Our business and operating results depend significantly on general market and economic conditions. The current global macroeconomic environment is volatile and continues to be significantly and adversely impacted by inflation and a dynamic demand environment. Additionally, instability in the global credit markets, the impact of uncertainty regarding inflation, trade wars, and the effects of heightened, scheduled, or proposed tariffs, banking instability, capital expenditure reductions, unemployment, stock market volatility, the instability in the geopolitical environment in many parts of the world (including as a result of the on-going Russia-Ukraine war, ongoing conflicts in the Middle East, including the recent escalation of the U.S.-Iran war, political and territorial conflicts in the Western Hemisphere, the conflict between Cambodia and Thailand, and China-Taiwan relations), the current economic challenges in China,China and the U.S., including global economic ramifications of Chinese and U.S. economic difficulties, and other disruptions may continue to put pressure on global economic conditions. Further, conditions in the global economy have an inherent degree of uncertainty. As a result, it is difficult to estimate the level of growth or contraction of the global economy as a whole. It is even more difficult to estimate growth or contraction in various parts, sectors, and regions of the economy, including the markets in which we participate. All aspects of our forecasts depend on estimates of growth or contraction in the markets we serve.
U.S. regulatory activity, such as tariffs, export controls, and economic sanctions laws have in the past, and may in the future, materially limit our ability to make sales to customers in certain regions of the world, including China, and which have in the past, and may in the future, increase our costs and harm our results of operations and financial condition. Throughout 2025,2025 and 2026, the U.S. imposed a series of tariffs on imported goods. While these tariffs are positioned to have the most significant impacts on goods originating from China, nearly all countries worldwide are impacted at levels ranging from 15% to stacked tariffs in excess of 100% in some cases. The tariff landscape continues to evolve daily and, as a result, the full impact of these tariff measures on our business is uncertain. In addition to the geographic tariffs, U.S. government investigations are currently underway that may result in new tariffs on certain products, including semiconductors, computers, and other products derivative of critical minerals. On April 14, 2025, the U.S. Bureau of Industry and Security announced the initiation of investigations into the industry on the effects on U.S. national security of imports of semiconductors under Section 232 of the Trade Expansion Act of 1962. The scope of the industry-wide investigation includes semiconductors, semiconductor manufacturing equipment, and their derivative products, including semiconductor substrates and bare wafers, legacy chips, leading-edge chips, microelectronics, and other components. On February 20, 2026, the administration announced they would initiate new trade investigations under Section 301 of the Trade Act of 1974. While the scope of any such investigations is currently unknown, these proposed investigations may also result in additional tariffs or trade restrictions, which could adversely impact our business. We may take actions to mitigate the impact of increases in tariffs and changes in trade policies, and any such actions could result in additional costs, manufacturing delays, or other difficulties, as well as additional risks, and may not be effective. Any of the effects described in this risk factor could have an adverse effect on our business, results of operations, or financial condition.
We purchase raw materials, packages and components from a limited number of suppliers, who are often small and specialized. Additionally, some of our suppliers are our sole sources for certain materials, equipment and components. We depend on the timely and continued supply and quality of the materials, packages and components that our suppliers supply to us. We have not entered into long-term agreements with many of these suppliers. We do not have a guarantee of supply from these suppliers and, as a result, there is no assurance that we would be able to secure the equipment or components that we require, in sufficient quantity, quality and on reasonable terms. Our business and results of operations have been, and could continue to be, adversely affected by this dependency. Alternative sources to mitigate the risk that the failure of any sole supplier will adversely affect our business are not feasible in all circumstances. If we were to lose any one of these or other critical sources, or if there is as an industry-wide increase in demand for, or the discontinuation of, raw materials used in our products, it could be difficult for us, or we may be unable, to find an alternative supplier or raw material, in which case our operations could be adversely affected. We are also subject to risk from increasing or fluctuating market prices of certain raw materials, which are incorporated into our end products or used by our suppliers to manufacture our end products. Supplies for such raw materials have from time to time become restricted, or general market factors and conditions have in the past affected and may in the future affect pricing of such commodities (including, in particular, due to changes in applicable tariffs, inflation, trade restrictions, or other supply chain constraints). For example, China’s recent export controls affected the availability and price of rare earth metals and other critical minerals for us as well as our supply chain and customers, adversely affecting our operations, margins and sales.
We cannot be certain what additional actions the U.S. government may take with respect to Huawei or other entities in China or other countries.countries Weand we are unable to predict the duration and scope of the restrictions enacted in May 2019 and thereafter. For example, other customers, such as FiberHome Technologies Group, have been subject to export control restriction since May 2020, and BIS continues to add entities to the list of restricted parties, and may expand restrictions to other customers or otherwise restrict our ability to ship products. Any further export or trade restrictions that impede our ability to export or sell our products and services could adversely affect our business, results of operations, financial condition and cash flows.
•an increase or decrease in demand offor our products;
•increased costs due to changes in component pricing or charges incurred due to the inaccurately forecasting product demand or underutilization of manufacturing capacity;
•adverse social, political and economic conditions, such as inflation, high interest ratesrates, energy shortages or increased energy prices and risk of global or regional recession;
•political developments, geopolitical unrest or other conflicts in foreign nations, including the Russia-Ukraine war, the ongoing conflicts in the Middle East, including the recent escalation of the U.S-Iran war, the conflict between Cambodia and Thailand, political and territorial conflicts in the Western Hemisphere, political developments in Hong Kong and Taiwan, and the potential impact such developments or further actions could have on our customers in the markets in which we operate; and
We are also highly dependent on the ability to ship products to customers and to receive shipments from our suppliers. In the event of a disruption in the worldwide or regional shipping infrastructure, including as a result of escalating geopolitical conflicts, our access to supplies and our ability to deliver products to customers would correspondingly be negatively impacted. As a result of shipping disruptions, we have experienced among other things, increased costs to ship products and delays in receiving components and any disruption in the future would likely adversely affect our operating results and financial condition.
If we are unable to manufacture certain products in our manufacturing facilities or if we or our contract manufacturers and suppliers are unable or fail to meet our production requirements, our business maybemay be adversely affected.
We manufacture some of our finished good products as well as some of the components that we provide to our contract manufacturers in our China, Japan, Thailand, United Kingdom, and San Jose, California manufacturing facilities. For some of the components and finished good products, we are the sole manufacturer. Our manufacturing processes are highly complex, and issues are often difficult to detect and correct. From time-to-time, we have experienced problems achieving acceptable yields in our manufacturing facilities, resulting in delays in the availability of our products and inability to meet customer demand. In addition, if we experience problems with our manufacturing facilities or are unable to continue operations at any of these sites, including as a result of social, geopolitical, environmental or health factors, damage caused by natural disasters, energy shortages or increased energy costs or other problems or events beyond our control, including pandemics or widespread health epidemics, it would be costly and require a long period of time to move the manufacture of these components and finished good products to a different facility or contract manufacturer which could then result in interruptions in supply, and would likely materially impact our financial condition and results of operations. Our business and operations would be severely impacted if there were any future widespread health crisis or related restrictions imposed by governments or private industry in regions we operate.
Additionally, if operations at these contract manufacturers are adversely impacted, such as by natural disasters, energy shortages or restrictions due to the impact of a widespread health crisis disruptions or any resulting economic impact to their business, this would likely materially impact our financial condition and results of operations. Our ability to control the quality of products produced by contract manufacturers has and may in the future be impaired by pandemics or widespread health epidemics disruptions, and quality issues might not be resolved in a timely manner. Additionally, if our contract manufacturers continue experiencing disruptions or discontinue operations, we may be required to identify and qualify alternative manufacturers, which is expensive and time consuming. If we are required to change or qualify a new contract manufacturer, this would likely cause business disruptions and adversely affect our results of operations and could harm our existing customer relationships.
On July 4, 2025, H.R.1, the One Big Beautiful Bill Act (“OBBBA”), was signed into law which contains a broad range of provisions affecting businesses including permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions. We have evaluated these changes during the three and sixnine months ended DecemberMarch 27,28, 20252026 and believe the impact to our tax provision during these periods is not material.
We are exposed to foreign exchange risks with regard to our international operations which may affect our operating results. Since we conduct business in currencies other than U.S. dollars but report our financial results in U.S. dollars, we face exposure to fluctuations in currency exchange rates. Due to these fluctuations, operating results may differ materially from expectations, and we may record significant gains or losses on the remeasurement of intercompany balances. Although we price our products primarily in U.S. dollars, a portion of our operating expenses are incurred in foreign currencies. For example, a portion of our expenses are denominated in the U.K. pound sterling, Chinese yuan and Thai baht. In addition, we also have term loans denominated in Japanese Yen. Fluctuations in the exchange rate between these currencies and other currencies in which we collect revenues and/or pay expenses could have a material effect on our future operating results. Recently, our exposure to foreign currencies has increased as our non-U.S. manufacturing footprint has expanded. We continue to look for opportunities to leverage the lower cost of non-U.S. manufacturing, including the United Kingdom, China, Thailand, and Japan. While these geographies are lower cost than the U.S. and such concentration will in general lower our total cost to manufacture, this increase in concentration in non-U.S. manufacturing will also increase the volatility of our results. If the value of the U.S. dollar depreciates relative to certain other foreign currencies, it would increase our costs including the cost of local operating expenses and procurement of materials or services that we purchase in foreign currencies, as expressed in U.S. dollars. Conversely, if the U.S. dollar strengthens relative to other currencies, such strengthening could raise the relative cost of our products to non-U.S. customers, especially as compared to foreign competitors, and could reduce demand. Global economic volatility has had a significant impact on the exchange markets, which heightened this risk, and we expect the higher level of volatility in foreign exchange markets will likely continue.
The ultimate impact of any future widespread health crisis on our operations and financial performance depends on many factors that are not within our control, including, but not limited, to: governmental, business and individuals’ actions that may be taken in response to the crisis; the impact of the crisis and actions taken in response on global and regional economies, travel, and economic activity; general economic uncertainty in key global markets and financial market volatility, including increasing levels of inflation in the United States; and global economic conditions and levels of economic growth. In addition, the global economic volatility related to any health crisis may significantly impact the foreign exchange markets, and the currencies of various countries in which we operate and in which we have significant volume of local-currency denominated expenses creating significant volatility.
Like other companies, we are subject to ongoing attempts by malicious actors, including through hacking, malware, ransomware, denial-of-service attacks, social engineering, exploitation of internet-connected devices, and other attacks, to obtain unauthorized access to, or acquisition or other processing of confidential or other information or otherwise affect service reliability and threaten the confidentiality, integrity and availability of our systems and information stored or otherwise processed on our systems. Cyber threats have increased in recent years, in part due to increased remote work and frequent attacks, including in the form of phishing emails, malware attachments and malicious websites. Additionally, geopolitical tensions and conflicts, such as the Russia-Ukraine war and ongoing conflicts in the Middle East, including the recent escalation of the U.S-Iran war, may increase our risks of cyber-attacks. Further, as artificial intelligence (“AI”) capabilities improve and become increasingly commonplace, cyber-attacks leveraging AI technology are likely to pose increasing threats. These attacks could, for example, be crafted with anleverage AI tool to directly attack information systems with increased speed and/or efficiency compared to a human threat actor or to create more effective phishing emails. In addition, a vulnerability could be introduced from the result of us and our third-party service providers incorporating output of an AI tool, such as AI generatedAI-generated source code, that includes a threat. While we work to safeguard our internal network systems and validate the security of our third-party service providers to mitigate these potential risks, including through information security policies and employee awareness and training, there is no assurance that such actions have been or will be sufficient to prevent cyber-attacks or security breaches or incidents. We have been in the past, and may be in the future, subject to social engineering attacks and other cyber-attacks, and these attacks may become more prevalent with substantial portion of our workforce being distributed geographically, particularly given the increased remote access to our networks and systems as a result. Further, our third-party service providers may have been and may be in the future subject to such attacks or otherwise may suffer security breaches or incidents. In addition, actions by our employees, service providers, partners, contractors, or others, whether malicious or in error, could affect the security of our systems and information. Further, a breach or compromise of our information technology infrastructure or that of our third-party service providers could result in the misappropriation of intellectual property, business plans, trade secrets or other information. Additionally, while our security systems are designed to maintain the physical security of our facilities and information systems, accidental or willful security breaches or incidents or other unauthorized access by third parties to our facilities or our information systems could lead to unauthorized access to, or misappropriation, disclosure, or other processing of proprietary, confidential and other information. Moreover, newevolving laws and regulations, such as the European Union’s General Data Protection Regulation (“GDPR”), the California Consumer Privacy Act (“CCPA”), and China’s Personal Information Protection Law, add to the complexity of our compliance obligations and increases our compliance costs. Although we have established internal controls and procedures intended to comply with such laws and regulations, any actual or alleged failure to fully comply could result in significant penalties and other liabilities, harm to our reputation and market position, business and financial condition.
Our ability to make scheduled payments of the principal of, to pay interest on or to refinance our indebtedness under the convertible notes, or to make cash payments in connection with any conversion of the convertible notes or upon any fundamental change if holders of the applicable series of the convertible notes require us to repurchase their convertible notes for cash, depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control. Our business may not generate cash flow from operations in the future sufficient to service our indebtedness and make necessary capital expenditures. In addition, during the three months ended DecemberMarch 27,28, 2025,2026, the last reported sale price of the Company’s common stock was at least 130% of the applicable conversion price of each of the respective convertible notes in effect for at least 20 trading days during the last 30 trading days in the three months ended DecemberMarch 27,28, 20252026; therefore, the convertible notes are convertible at the option of the holders with the principal balance to be settled in cash. To the extent all convertible note holders elect to convert all or a significant portion of the convertible notes within a short period of time, our liquidity would be adversely impacted, and could adversely impact our ability to continue as a going concern. If we are unable to generate sufficient cash flow to meet our obligations, we may be required to adopt one or more alternatives, such as selling assets, restructuring indebtedness or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations. In addition, our existing and future indebtedness could have important consequences to our stockholders and significant effects on our business. For example, it could:
On December 19, 2025, we entered into a credit agreement (the “Credit Agreement”) with the lenders party thereto and Wells Fargo Bank, National Association, as administrative and collateral agent. The Credit Agreement provides for a senior secured revolving credit facility in an aggregate principal amount of $400.0 million, including a $23.0 million sublimit for the issuance of letters of credit. As of DecemberMarch 27,28, 2025,2026, there were no borrowings outstanding under the revolving credit facility.
We are also subject to laws and regulations relating to our collection, use, protection and other processing of personal data of our employees, customers and others. These laws and regulations are subject to frequent modifications and updates and require ongoing supervision. For example, the European Union adopted the GDPR, which became effective in May 2018, establishing stringent requirements for data protection in Europe and providing for substantial penalties for noncompliance. Brazil passed the General Data Protection Law, which became effective in August 2020, to regulate processing of personal data of individuals. It also provides for substantial penalties for noncompliance. Additionally, California has the CCPA, which went into effect on January 1, 2020, and which was amended and supplemented by California Privacy Rights Act (“CPRA”), which went into effect on January 1, 2023. Other legislation relating to privacy, data protection and cybersecurity has been proposed or adopted in several other states, including the enactment of legislation similar to the CCPA and CPRA enacted in numerous states. Aspects of the CCPA, CPRA and these other laws and regulations, as well as their enforcement, remain unclear. The U.S. federal government also is contemplating federal privacy legislation, and the U.S. Department of Justice has issued regulations restricting certain bulk transfers of sensitive personal data. The effects and impact of these or other laws and regulations relating to privacy, data protection and cybersecurity are potentially significant and may require us to modify practices and policies and to incur substantial costs and expenses in efforts to comply. Laws and regulations relating to privacy, data protection and cybersecurity continue to evolve in various jurisdictions, with existing laws and regulations subject to new and differing interpretations and new laws and regulations being proposed and adopted. It is possible that our practices may be deemed not to comply with those legal requirements relating to privacy, data protection and cybersecurity that apply to us now or in the future.
Management's Discussion & Analysis (MD&A)
New heading “Gain on Sale of Facility”
Removed heading “Investing Cash Flow”
Largest changes
“The 2028 Notes, 2029 Notes and 2032 Notes are held by more than 60 unique holders and no holders had individual aggregate principal values greater than $505.0 million at December 27, 2025. To the extent Note holders elect to convert all or a significant portion of the Notes within a short period of time, our liquidity would be adversely impacted, and the Note holders’ ability to exercise their conversion right raises a substantial doubt that we could continue as a going concern. …”see in full comparison
SG&A expense increased bysee in full comparison$28.6$7.4 million, or18.7%,2.8%, during thesixnine months endedDecemberMarch27,28,20252026 compared to thesixnine months endedDecemberMarch28,29,2024,2025, primarily due to a$12.0$14.2 million increase in our cash incentive compensation due to higher revenue and profitlevels,levelsasandwellpriorasyear annual incentive plan was mostly stock-based, a$11.9$9.4 million increase instock-basedemployeecompensation,benefits and taxes primarily driven by equity-related taxes, a$7.5$7.7 millionimpairmentlosscharge to write-down assets held foron saletoofitsourfairtwovaluecommercialless cost to sellbuildings and a$4.6$5.8 million increase in legal fees. These increases were partially offset by a$7.5decrease of $12.9 milliondecreasein amortization ofacquiredintangibleintangiblesassets as certain assets were fullyamortized.amortized, a decrease of $8.4 million in stock-based compensation driven by equity award modifications as well as $5.2 million of severance and sign-on payments, all related to executive employee transitions incurred in the prior year period, and a $3.4 million reduction in bad debt expense.
Cash from operating activities wassee in full comparison$63.9$62.3 million during thesixnine months endedDecemberMarch28,29,2024,2025, which reflects a net loss of$143.3$187.4 million, offset by non-cash items of$209.1$309.4 million and changes in operating assets and liabilities of$1.9$59.7 million. Changes in operating assets and liabilities were primarily driven by an increase in accounts payable of$38.7$44.9 million primarily due to higher inventory purchases and capitalexpendituresexpenditures, an increase of $6.9 million in accrued payroll and related expenses mainly driven by our accrual on employee annual incentive plan, and an increase in income tax liabilities of$28.5$16.8 million primarily due to income tax provision for thesixnine months endedDecemberMarch28,29,2024,2025, offset by an increase in accounts receivable of$15.0$64.4 million mainly driven by higher revenue, an increase of $25.7 million in inventories driven by inventory builds to support market demand, an increase of $21.7 million in prepayments and other current and non-current assets related mainly to value-added-tax receivables driven by higher recent capital expenditures and inventorypurchases,purchases and a decrease of$19.9$15.3 million in accrued expenses and other current and non-current liabilitiesprimarilydrivendue toby payment of the net settlement amount of the Oclaro mergerlitigation.litigation and restructuring related payments.
“SG&A expense increased by $19.8 million, or 26.0%, during the three months ended December 27, 2025 compared to the three months ended December 28, 2024, primarily due to a $7.5 million impairment charge to write-down assets held for sale to its fair value less cost to sell, a $6.1 million increase in our cash incentive compensation due to higher revenue and profit levels, a $5.0 million increase in stock-based compensation as well as a $2.9 million increase in employee benefits mainly due to payroll taxes on share-based compensation. …”see in full comparison
“In the three months ended March 29, 2025, we completed the sale of our net assets in an entity in Shenzhen, China and received net proceeds of $47.8 million, which was net of cash of $17.6 million and direct selling costs of $1.1 million. The net assets sold consist primarily of building, building improvements and land rights as of December 17, 2024 with a net carrying value of $12.9 million, and were used for manufacturing and research and development activities. …”see in full comparison
Full comparison: every changed paragraph (60)
This Quarterly Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements relate to, among other things, our markets and industry, products and strategy, the impact of import and export regulation changes, the expected benefits of our acquisitions, macroeconomic conditions, including supply chain conditions and inventory management by our customers, instability and uncertainty in the banking and financial services markets, and tightening credit markets on our business and results of operations, sales, gross margins, operating expenses, capital expenditures and requirements, liquidity, product development and research and development efforts, manufacturing plans, litigation, effective tax rates and tax reserves, our corporate and financial reporting structure, our plans for growth and innovation, our expectations regarding U.S.-China relations, market and regulatory conditions, trends and uncertainties in our business and financial results, and are often identified by the use of words such as, but not limited to, “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “project,” “seek,” “should,” “target,” “will,” “would,” “contemplate,” “predict,” “potential” and similar expressions or variations intended to identify forward-looking statements. These statements are based on the beliefs and assumptions of our management, which are in turn based on information currently available to management. Such forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section entitled “Risk Factors” included under Part II, Item 1A of this Quarterly Report. Furthermore, such forward-looking statements speak only as of the date of this report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.
Through fiscal year 2024, we experienced significant fluctuations in demand as customers delayed projected shipments or built up inventory in response to supply shortages and then brought down inventories as supply chain constraints eased. Our revenue fluctuated in response to these changes in demand and our margins were adversely impacted as we were not able to fully recover costs, such as underutilized manufacturing capacity. However, beginning in the first quarter of fiscal year 2025, network equipment manufacturers normalized inventory levels and we have seen increasing demand from AI and cloud customers as they continue to expand their data centers. In fiscal year 2026, we have continued to experience increasing demand, driven in part by the continued advances in cloud and AI infrastructure. This demand is outpacing our current supply which has ledrequired us to make decisions on supply allocation. We are investing in manufacturing capacity, both internally and with contract manufacturers, to meet demand.
Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in Part II, Item 7 of our Annual Report on Form 10-K for our fiscal year ended June 28, 2025 provides a complete discussion of our critical accounting policies and estimates. There have been no changes to these policies during the three and sixnine months ended DecemberMarch 27,28, 2025,2026, except as noted below:
Financial data for the three months ended DecemberMarch 27,28, 20252026
Net revenue increased by $383.2 million, or 90.1%, during the three months ended March 28, 2026 compared to the three months ended March 29, 2025, driven by a $232.5 million increase in Components products and $150.7 million increase in Systems products.
Net revenue increased by $263.3 million, or 65.5%, during the three months ended December 27, 2025 compared to the three months ended December 28, 2024, driven by a $180.0 million increase in Components products and an $83.3 million increase in Systems products. Approximately three-quarters of the increase in Components products relates to our ramp of laser chip and laser assembly product shipments to support strong, broad-based demand across intra-data center, data center interconnect, and long-haul applications. Additionally, a slight increase in average selling prices of laser chip products contributed to the increase in Components revenue driven primarily by a shift to 200G lane speeds. The remaining approximately one-quarter of Components revenue growth was due to an increase in shipment volume of data transport products, encompassing line subsystems solutions for long-haul terrestrial networks and charge pump products used in sub-sea network installations.
Nearly all of the increase in our Systems products was driven by our cloud transceiver product lines due to an increase in shipment volume, which was partially offset by lower pricing across multiple transceiver lines. We also continued the initial phase of optical circuit switch shipments, which contributed more than $10.0 million in revenue during the three months ended December 27, 2025, and we remain on track for manufacturing expansion over the coming quarters to support future growth.
Net revenue increased by $460.2 million, or 62.3%, during the six months ended December 27, 2025 compared to the six months ended December 28, 2024, driven by a $327.8 millionThe increase in Components products andwas aprimarily $132.4driven million increase in Systems products. Approximately three-quarters ofby the increase in Components products relates to our ramp of laser chip and laser assembly product shipments to support strong, broad-based demand across intra-data center, data center interconnect, and long-haul applications. Additionally, a slight increase in average selling prices of laser chip products contributed to the increase in Components revenue driven primarily by a shift to 200G lane speeds. The remaining approximately one-quarter12% of Components revenue growth was due to an increase in shipment volume of data transport products, encompassing line subsystems solutions for long-haul terrestrial networks and charge pump products used in sub-sea network installations.
Nearly all of theThe increase in our SystemSystems products was primarily driven by our cloud transceiver product lines which increased by more than $137.0 million due to an increase inhigher shipment volume, which was partially offset by lower pricingaverage acrossselling multiple transceiver lines.prices. We also continued the initial phase of optical circuit switch shipments, which contributed more than $10.0$25.0 million ofin revenue during the sixthree months ended DecemberMarch 27,28, 2025,2026, and we remain on track for manufacturing expansion over the coming quarters to support future growth.
Net revenue increased by $843.4 million, or 72.4%, during the nine months ended March 28, 2026 compared to the nine months ended March 29, 2025, driven by a $560.3 million increase in Components products and a $283.1 million increase in Systems products.
The increase in Components products was primarily driven by the ramp of laser chip and laser assembly product shipments to support strong, broad-based demand across intra-data center, data center interconnect, and long-haul applications. Additionally, a slight increase in average selling prices of laser chip products contributed to the increase in Components revenue driven primarily by a shift to 200G lane speeds. The remaining approximately 19% of Components revenue growth was due to an increase in shipment volume of data transport products, encompassing line subsystems solutions for long-haul terrestrial networks and charge pump products used in sub-sea network installations.
The increase in our System products was primarily driven by our cloud transceiver product lines which increased by more than $268.0 million due to an increase in shipment volume, partially offset by lower average selling prices. We also continued the initial phase of optical circuit switch shipments, which contributed more than $38.0 million of revenue during the nine months ended March 28, 2026.
During the three months ended DecemberMarch 27,28, 2025,2026, two customers individually accounted for 26% and 12% of our total revenue, respectively. During the nine months ended March 28, 2026, two customers individually accounted for 24% and 17% of our total revenue, respectively. During the six months ended December 27, 2025, two customers individually accounted for 23% and 19%16% of our total net revenue, respectively. We had no other customers that represented 10% or greater of our total net revenue.
For the three and sixnine months ended DecemberMarch 27,28, 2025,2026, net revenue from customers outside the United States, based on customer shipping locations, represented 78.3%77.0% and 80.1%78.9% of net revenue, respectively.
Gross margin for the three months ended DecemberMarch 27,28, 20252026 increased to 36.1%44.2% from 24.8%28.8% for the three months ended DecemberMarch 28,29, 2024,2025, primarily driven by the positive impact of higher revenue from our laser chip, laser assembly, and data transport products. Approximately 60%46% of the gross margin increase was driven by lower manufacturing costs as a percentage of revenue, primarily due to higher internal factory utilization, partially offset by an increase in warranty expense associated with Cloud Light legacy products.utilization. Additionally, 20%37% of the gross margin increase was driven by a mix shift to higher average selling prices of our higher-margin laser chipmargin products. The remaining 20%17% increase in gross margin relates to the decrease in amortization of acquired intangibles as certaina assetspercentage wereof fully amortized.revenue.
Gross margin for the sixnine months ended DecemberMarch 27,28, 20252026 increased to 35.2%38.8% from 24.0%25.8% for the sixnine months ended DecemberMarch 28,29, 2024,2025, primarily driven by the positive impact of higher revenue from our laser chip, laser assembly, and data transport products. Approximately 70%57% of the gross margin increase was driven by lower manufacturing costs as a percentage of revenue, primarily due to higher internal factory utilization, partially offset by an increase in warranty expense associated with Cloud Light legacy products.utilization. Additionally, 10%23% of the gross margin increase was driven by was driven by a mix shift to higher average selling prices of our higher-margin laser chipmargin products. The remaining 20% increase in gross margin relates to the decrease in amortization of acquired intangibles as certaina assetspercentage wereof fully amortized.revenue.
R&D expense increased by $5.9$14.7 million, or 8.0%19.4% for the three months ended DecemberMarch 27,28, 20252026 compared to the three months ended DecemberMarch 28,29, 2024,2025, primarily due to a $6.3$6.8 million increase in our cash incentive compensation due to higher revenue and profit levels and $2.6prior year annual incentive plan was mostly stock-based, $5.3 million increase in charges related to new R&D programsprograms, and $2.9 million in employee benefits and taxes driven by higher headcount. This was partially offset by a $2.1$1.8 million decrease in stock-based compensation.compensation as prior year as prior year annual incentive plan was mostly stock-based.
R&D expense increased by $13.0$27.7 million, or 8.8%12.3% for the sixnine months ended DecemberMarch 27,28, 20252026 compared to the sixnine months ended DecemberMarch 28,29, 2024,2025, primarily due to a $11.6$18.3 million increase in our cash incentive compensation due to higher revenue and profit levels.levels and prior year annual incentive plan was mostly stock-based, and a $7.2 million increase in payroll related expenses primarily driven by equity-related taxes. In addition, incremental investments related to new R&D programs were almost completelypartially offset by a decrease in stock-based compensation.
SG&A expense decreased by $21.2 million, or 18.9%, during the three months ended March 28, 2026 compared to the three months ended March 29, 2025, primarily due to a decrease of $20.4 million in stock-based compensation driven by equity award modifications as well as $5.2 million of severance and sign-on payments, all related to executive employee transitions that occurred in the three months ended March 29, 2025. In addition, we also recognized a $3.1 million bad debt expense during the three months ended March 29, 2025. We did not have similar transactions and no similar charges were incurred during the three months ended March 28, 2026. These decreases were partially offset by a $6.2 million increase payroll related expenses in the three months ended March 28, 2026 driven by our cash incentive compensation due to higher revenue and profit levels and equity-related taxes.
SG&A expense increased by $19.8 million, or 26.0%, during the three months ended December 27, 2025 compared to the three months ended December 28, 2024, primarily due to a $7.5 million impairment charge to write-down assets held for sale to its fair value less cost to sell, a $6.1 million increase in our cash incentive compensation due to higher revenue and profit levels, a $5.0 million increase in stock-based compensation as well as a $2.9 million increase in employee benefits mainly due to payroll taxes on share-based compensation. These increases were partially offset by a $3.2 million decrease in amortization of acquired intangibles as certain assets were fully amortized.
SG&A expense increased by $28.6$7.4 million, or 18.7%,2.8%, during the sixnine months ended DecemberMarch 27,28, 20252026 compared to the sixnine months ended DecemberMarch 28,29, 2024,2025, primarily due to a $12.0$14.2 million increase in our cash incentive compensation due to higher revenue and profit levels,levels asand wellprior asyear annual incentive plan was mostly stock-based, a $11.9$9.4 million increase in stock-basedemployee compensation,benefits and taxes primarily driven by equity-related taxes, a $7.5$7.7 million impairmentloss charge to write-down assets held foron sale toof itsour fairtwo valuecommercial less cost to sellbuildings and a $4.6$5.8 million increase in legal fees. These increases were partially offset by a $7.5decrease of $12.9 million decrease in amortization of acquiredintangible intangiblesassets as certain assets were fully amortized.amortized, a decrease of $8.4 million in stock-based compensation driven by equity award modifications as well as $5.2 million of severance and sign-on payments, all related to executive employee transitions incurred in the prior year period, and a $3.4 million reduction in bad debt expense.
During the three and nine months ended DecemberMarch 27,28, 2025,2026, we recorded a net reversal to our restructuring and related charges of $0.4$1.1 million attributable to lower than previously recorded employee severance and wind-down$9.0 charges.million, Duringrespectively, the six months ended December 27, 2025, we recorded $7.9 million of restructuring and related chargesprimarily related to a reduction in force during the period in order to enhance operational efficiency and realign our investments toward the most critical initiatives.
Gain on Sale of Facility
In the three months ended March 29, 2025, we completed the sale of our net assets in an entity in Shenzhen, China and received net proceeds of $47.8 million, which was net of cash of $17.6 million and direct selling costs of $1.1 million. The net assets sold consist primarily of building, building improvements and land rights as of December 17, 2024 with a net carrying value of $12.9 million, and were used for manufacturing and research and development activities. As a result, we recognized a gain on sale of facility of $34.9 million, which was recorded in our condensed consolidated statements of operations for the three and nine months ended March 29, 2025. We paid $4.4 million of withholding taxes on this sale transaction, which is recorded as part of the income tax provision for the three and nine months ended March 29, 2025. We also incurred $0.4 million and $0.7 million of indirect selling expenses related to this transaction, which was recorded as part of selling, general and administrative expenses in our condensed consolidated statements of operations for the three and nine months ended March 29, 2025.
On November 7, 2023, we completed the acquisition of Cloud Light Technology Limited (“Cloud Light”). In accordance with a definitive merger agreement, dated as of October 29, 2023, between the Company and Cloud Light, cash consideration included $75.8 million of cash held in an escrow fund to support Cloud Light’s indemnification obligations and customary adjustment for working capital. In November 2025, the Company and the former shareholders of Cloud Light mutually agreed to settle outstanding indemnification claims for $27.5 million and signed a settlement agreement releasing the balance of the escrow fund to the former Cloud Light shareholders and releasing them of their indemnification obligations. Since the measurement period has expired, we recorded the settlement amount of $27.5 million as other income, net in our condensed consolidated statements of operations duringfor the three and sixnine months ended DecemberMarch 27,28, 2025.2026.
For the three months ended DecemberMarch 27,28, 20252026 and DecemberMarch 28,29, 2024,2025, we recorded interest expense of $6.3$6.2 million and $5.6$5.7 million, respectively. The increase in interest expense for the three months ended DecemberMarch 27,28, 20252026 is mainly due to the issuance of the 2032 Notes in September 2025.
For the sixnine months ended DecemberMarch 27,28, 20252026 and DecemberMarch 28,29, 2024,2025, we recorded interest expense of $12.0$18.2 million and $11.1$16.8 million, respectively. The increase in interest expense for the sixnine months ended DecemberMarch 27,28, 20252026 is mainly due to the issuance of the 2032 Notes in September 2025. Interest expense is primarily driven by the amortization of the debt issuance costs of our convertible notes.
Other income, net for the three months ended DecemberMarch 27,28, 20252026 decreasedincreased by $3.9$11.3 million compared to the three months ended DecemberMarch 28,29, 20242025 primarily due to an increase of $7.1 million in interest and investment income driven by the $2.0 billion proceeds from issuance of Series A Convertible Preferred Stock, which was invested in money market funds, and a decrease in net foreign exchange gainsloss of $6.5$4.4 million as the U.S. dollar strengthened against the Japanese Yen, which is the underlying currency for our term loans. This was offset by an increase of $2.6 million in interest and investment income mainly due to the $2.0 million interest income from the Cloud Light escrow settlement.
Other income, net for the nine months ended March 28, 2026 increased by $2.9 million from the nine months ended March 29, 2025 primarily due to an increase of $8.9 million in interest and investment income driven by the $2.0 billion proceeds from issuance of Series A Convertible Preferred Stock, which was invested in money market funds, and a $2.0 million interest and investment income related to the Cloud Light escrow settlement. This was offset by a $5.9 million inducement expense related to the partial repurchase of 2026 Notes.
Other income, net for the six months ended December 27, 2025 decreased by $8.4 million from the six months ended December 28, 2024 primarily due to a $5.9 million inducement expense related to the partial repurchase of 2026 Notes and a decrease in net foreign exchange gains of $4.3 million mainly driven by the Japan term loans denominated in Japanese Yen offset by an increase of $2.0 million in interest and investment income related to the Cloud Light escrow settlement.
We recorded a tax provision of $18.3$39.6 million and $19.3$58.9 million for the three and sixnine months ended DecemberMarch 27,28, 2025.2026. Our tax provision for the three months ended DecemberMarch 27,28, 20252026 includes a discrete tax expensebenefit of 1.17.3 million primarily related to the tax expense associated with income from a claim settlement, partially offset by the tax benefit from the revaluation of deferred tax balances, a windfall in connection with stock-based compensation vested during the quarter, and currency re-measurement of certain tax-related accounts. Our tax provision for the six months ended December 27, 2025 includes a discrete tax expense of $0.5 million, primarily related to the tax expense associated with income from a claim settlement, currency re-measurement of certain tax-related accounts, and interest accrual on uncertain tax positions, partially offset by the tax benefit from a windfall in connection with stock-based compensation vested during the periods,quarter and return-to-provision differences, partially offset by the tax expense related to the remeasurement of certain tax-related accounts. Our tax provision for the nine months ended March 28, 2026 includes a discrete tax expense of $6.8 million, primarily related to the tax benefit from a windfall in connection with stock-based compensation vested during the period, return-to-provision differences and the revaluation of deferred tax balances, partially offset by the tax expense associated with income from a claim settlement, the currency remeasurement of certain tax-related accounts, and foreigninterest returnaccruals toon provisionuncertain differences.tax positions.
Our estimated effective tax rate for the sixnine months ended DecemberMarch 27,28, 20252026 differs from the 21% U.S. statutory rate primarily due to the income tax expense from foreign income inclusions in the U.S., current year valuation allowance change, and changes in unrecognized tax benefits, partially offset by the income tax benefit from foreign rate differential and various income tax credits.
We regularly assess our ability to realize our deferred tax assets on a quarterly basis and will establish a valuation allowance if it is more-likely-than-not that some portion of the deferred tax assets will not be realized. As of DecemberMarch 27,28, 2025,2026, we maintain a full valuation allowance on U.S. federal and state and certain foreign deferred tax assets. Due to cumulative losses over recent years and based on all available evidence, we determined that it is more likely than not that our U.S. deferred tax assets will not be realized. However, given our current and anticipated future earnings, we believe there is a reasonable possibility that within the next severaltwelve quarters,months, sufficient positive evidence may become available to support a release of all or a significant portion of the U.S. valuation allowance. The release of the valuation allowance would result in the recognition of certain deferred tax assets and a decrease to income tax expense for the period in which the release is recorded. The exact timing and amount of the valuation allowance released are subject to change and are based on the level of profitability that we are able to achieve and can reasonably forecast, as well as other positive and negative evidence.
As of DecemberMarch 27,28, 20252026 and June 28, 2025, our cash and cash equivalents were $657.7$2,617.8 million and $520.7 million, respectively. As of DecemberMarch 27,28, 20252026 and June 28, 2025, our short-term investments of $497.6$554.5 million and $356.4 million, respectively, were all held in the United States. Cash equivalents and short-term investments are primarily comprised of money market funds, treasuries, agencies, high quality investment grade fixed income securities, certificates of deposit, and commercial paper. Our investment policy and strategy provide for diversification of investments and is focused on the preservation of capital and supporting our liquidity requirements.
The total amount of cash held by the non-United States entities as of DecemberMarch 27,28, 20252026 and June 28, 2025 was $397.7$375.2 million and $398.3 million, respectively, which was primarily held by entities incorporated in the United Kingdom, Japan, Hong Kong, China, Switzerland, China, and Thailand. Although cash currently held in the United States, as well as cash generated in the United States from future operations, is expected to cover our normal operating requirements, a substantial amount of additional cash could be required for other purposes, such as capital expenditures to support our business and growth, including costs associated with increasing internal manufacturing capabilities, strategic transactions and partnerships, and future acquisitions.
Our intent is to indefinitely reinvest funds held outside the United States. Except for the funds held in the Cayman Islands, the British Virgin Islands, Hong Kong and Japan, our current plans do not demonstrate a need to repatriate them to fund our domesticU.S. operations. However, if in the future, we encounter a significant need for liquidity domestically or at a particular location that we cannot fulfill through borrowings, equity offerings, or other internal or external sources, or the cost to bring back the money is not significant from a tax perspective, we may determine that cash repatriations are necessary or desirable. Repatriation could result in additional materialtaxes taxes.that are material. These factors may cause us to have an overall tax rate higher than other companies or higher than our tax rates in the past. Additionally, if conditions warrant, we may seek to obtain additional financing through debt or equity sources. To the extent we issue additional shares, it may create dilution to our existing stockholders. However, any such financing may not be available on terms favorable to us or may not be available at all.
Beginning in fiscal year 2023, the Tax Cuts and Jobs Act of 2017 requires taxpayers to capitalize research and development expenditures and amortize domestic expenditures over five years and foreign expenditures over fifteen years. The One Big Beautiful Bill Act (“OBBBA”) enacted in July 2025 eliminates capitalization of domestic research and development expenditures for taxable years beginning on or after January 1, 2025, but retains the requirement to amortize foreign research and development expenditures over 15 years. In addition, the OBBBA permits all taxpayers who paid or incurred domestic research and development expenses in tax years beginning on or after January 1, 2022 and before January 1, 2025 to elect to deduct any remaining unamortized amount over a one-year period or ratably over a two-year period (at the taxpayer’s election), accelerating the benefit of such expenses. We have evaluated these changes during the three and sixnine months ended DecemberMarch 27,28, 2025,2026, and the impact to our tax provision during these periods is not material.
We believe that our cash and cash equivalents as of DecemberMarch 27,28, 2025,2026, available borrowing capacity under our Credit Agreement, and cash flows from our operating activities will be sufficient to meet our liquidity and capital spending requirements for at least the next 12 months.
The following table summarizes our contractual obligations as of DecemberMarch 27,28, 2025,2026, and the effect such obligations are expected to have on our liquidity and cash flow (in millions):
(1) The amounts of operating lease liabilities do not include any sublease income nor do they include payments for short-term leases or variable lease payments. As of DecemberMarch 27,28, 2025,2026, we expect to receive sublease income of approximately $1.9$1.7 million over the remaining sublease periods.
(4) The amounts related to convertible notes include principal and interest on our 0.50% Convertible Senior Notes due 2026 (the “2026 Notes”), principal and interest on our 0.50% Convertible Senior Notes due 2028 (the “2028 Notes”), principal and interest on our 1.50% Convertible Senior Notes due 2029 (the “2029 Notes”), and principal and interest on our 0.375% Convertible Senior Notes due 2032 (the “2032 Notes”). The 2026 Notes have a maturity date of December 15, 2026, the 2028 Notes have a maturity date of June 15, 2028, the 2029 Notes have a maturity date of December 15, 2029, and the 2032 Notes have a maturity date of March 15, 2032. The principal balances of our convertible notes are reflected in the payment periods in the table above based on their respective contractual maturities, which may be accelerated if the holders elect to convert the notes prior to maturity. The principal amounts of all of our outstanding convertible notes must be settled in cash. The actual cash settlement may be higher if we decide to settle the conversion value in excess of the principal amounts in cash, rather than issuing shares of common stock. Refer to “Note 9. Debt” and “Note 17. Subsequent Event” for further details.
During the three months ended December 27, 2025, the last reported sale price of the Company’s common stock was at least 130% of the applicable conversion price of each series of our convertible notes, which includes 2032 Notes, 2029 Notes, 2028 Notes, and 2026 Notes (collectively referred to as the “Notes”) for at least 20 trading days during the 30 consecutive trading-day period ended on December 27, 2025. Therefore, the Notes are convertible at the option of the holders, and we are required to satisfy the conversion obligation with respect to any such converted series of Notes by paying cash equal to the principal amount of such converted series of Notes, and paying or delivering, as the case maybe, cash, shares of common stock or a combination of cash and shares of common stock, at our election, with respect to any conversion value in excess thereof. Accordingly, pursuant to ASC 470-20 under U.S. GAAP, although the applicable contractual maturity dates of these Notes extend beyond 12 months from the balance sheet date, we are required to classify our 2028 Notes, 2029 Notes and 2032 Notes, that have an aggregate carrying value of $2,714.2 million, as current portion of long-term debt as of December 27, 2025. Only the 2026 Notes with carrying value of $468.3 million mature within the next 12 months.
The 2028 Notes, 2029 Notes and 2032 Notes are held by more than 60 unique holders and no holders had individual aggregate principal values greater than $505.0 million at December 27, 2025. To the extent Note holders elect to convert all or a significant portion of the Notes within a short period of time, our liquidity would be adversely impacted, and the Note holders’ ability to exercise their conversion right raises a substantial doubt that we could continue as a going concern. If we receive a significant number of requests for early conversion of Notes, we would utilize existing cash, cash equivalents and short-term investments, together with available borrowings under our existing revolving credit facility, cash flows from operations, and proceeds from one or more potential new financings to settle the principal amount of such converted Notes in cash, with any excess conversion value thereof to be settled in cash, shares of common stock, or a combination of cash and shares of common stock, at our election.
However, the fair value of the Notes, which would be the estimated value the holders would receive if they sell their Notes in the bond market, is generally higher than the value the holders would receive upon early conversion. The fair value is generally higher than the conversion value due to the embedded call option in the Notes which has time left until the Notes mature. Conversion also requires a holder to be subject to a holding period in which they are subject to further volatility. Therefore, historically, the holders’ requests for early conversion of our Notes have not been significant prior to the three-month period immediately preceding maturity. For additional information, refer to Part II Item 1A “Risk Factors”.
(1) Since the closing price of our stock was at least 130% of the applicable conversion price for each series of Notes for 20 of the last 30 trading days of our second quarterand third quarters of fiscal year 2026, all of our Notes becameremain convertible at the option of the holders during the thirdfourth quarter of fiscal year 2026. The outstanding Notes are recorded as short-term debt, which is presented as current liabilities in our condensed consolidated balance sheets as of DecemberMarch 27,28, 2025,2026, net of unamortized debt issuance costs. If the Notes are converted by holders, we are required to satisfy our conversion obligations with respect to each series of converted Notes by paying cash equal to the principal amountamounts of such series of converted Notes and paying or delivering, as the case may be, cash, shares of common stock, or a combination of cash and shares of common stock, at our election, with respect to any conversion value in excess thereof. The outstanding Notes are recorded as convertible notes, non-current in our consolidated balance sheets as of June 28, 2025, net of unamortized debt issuance costs.
As of April 30, 2026, we have received early conversion requests totaling $500.8 million aggregate principal amount of the Notes, which will be settled in cash and the conversion value in excess thereof will be settled in shares of common stock in accordance with Indenture governing the applicable series of Notes. In the three and nine months ended March 28, 2026, the aggregate principal amount of the Notes settled in cash was $0.1 million and $0.2 million, respectively.
On April 7, 2026, we entered into privately negotiated exchange arrangements with certain holders of our 2026 Notes and 2029 Notes. Pursuant to these agreements, we issued an aggregate of approximately 5.7 million shares of our common stock in exchange for approximately $264.8 million and $209.8 million aggregate principal amount of the 2026 Notes and 2029 Notes, respectively, and the related conversion value in excess of the principal amounts thereof. The issuance of common stock in the exchange transactions resulted in incremental dilution of approximately 0.6 million shares of common stock related to the principal amounts. Refer to “Note 17. Subsequent Event” for further details.
The principal amount outstanding of our Japan Term Loans are as follows for the periods presented (in millions):
As of December 27, 2025, the Company had $83.3 million in principal amount outstanding on our SMBC Term Loans, of which theThe short-term portion of $52.0the millionJapan Term Loans is recorded as current liabilities while the long-term portion of $31.3 million is recorded as long-term debt in the Company’s condensed consolidated balance sheets.
As of December 27, 2025, the Company had $21.5 million in principal amount outstanding on our Mizuho term loan, of which the short-term portion of $5.7 million is recorded as current liabilities while the long-term portion of $15.8 million is recorded as long-term debt in the Company’s condensed consolidated balance sheets.
On December 19, 2025, the Companywe entered into a Credit Agreement providing for a senior secured revolving credit facility in an aggregate principal amount of $400.0 million, including a $23.0 million sublimit for the issuance of letters of credit. As of DecemberMarch 27,28, 2025,2026, there were no borrowings outstanding under the revolving credit facility. For additional information regarding the Credit Agreement, refer to “Note 9. Debt”, in the condensed consolidated financial statements included in Part 1, Item 1 of this Quarterly Report on Form 10-Q. For additional information, refer to “Part IIII. Item 1A1A. “Risk Factors”.
As of DecemberMarch 27,28, 20252026 and June 28, 2025, our other non-current liabilities include unrecognized tax benefit for uncertain tax positions of $60.4$67.6 million and $55.6 million, respectively. We are unable to reliably estimate the timing of future payments related to uncertain tax positions.
Our balance of cash and cash equivalents increased by $137.0$2,097.1 million from $520.7 million as of June 28, 2025 to $657.7$2,617.8 million as of DecemberMarch 27,28, 2025.2026. The increase in cash and cash equivalents during the sixnine months ended DecemberMarch 27,28, 20252026 was due to cash from operating activities of $184.6$388.4 million and cash from financing activities of $251.6$2,189.8 million, offset by cash used in investing activities of $299.2$481.1 million.
Cash from operating activities was $184.6$388.4 million during the sixnine months ended DecemberMarch 27,28, 2025,2026, which reflects a net income of $82.4$226.6 million and non-cash items of $229.5$335.9 million, offset by changes in operating assets and liabilities of $127.3$174.1 million. Changes in operating assets and liabilities were primarily driven by an increase in accounts payable of $79.9$109.4 million primarily due to higher inventory purchases and capital expenditures, an increase of $27.4$51.8 million in accrued payroll and related expenses mainly driven by our accrual onfor employee cash bonuses and outstanding payroll taxes mainly related to stock-based compensation, and an increase of $21.8$28.2 million in accrued expenses and other current and non-current liabilities driven by contractual liabilities and increase in provision for warranty reserves, and increase in income tax liabilities by $17.9 million primarily due to income tax provision for the nine months ended March 28, 2026, offset by an increase in accounts receivable of $126.7$191.5 million mainly driven by higher revenue, an increase of $102.5$165.2 million in inventories driven by inventory builds to support market demand and an increase of $27.4$22.5 million in prepayments and other current and non-current assets primarily driven by increase in value-added-tax receivables due to higher capital expenditures and inventory purchases and deferredan financingincrease costsin relatedinterest toreceivables ourdriven revolvingby creditthe facility.$1,999.7 million of net proceeds from the issuance of Series A Convertible Preferred Stock, which was invested in money market funds.
Cash from operating activities was $63.9$62.3 million during the sixnine months ended DecemberMarch 28,29, 2024,2025, which reflects a net loss of $143.3$187.4 million, offset by non-cash items of $209.1$309.4 million and changes in operating assets and liabilities of $1.9$59.7 million. Changes in operating assets and liabilities were primarily driven by an increase in accounts payable of $38.7$44.9 million primarily due to higher inventory purchases and capital expendituresexpenditures, an increase of $6.9 million in accrued payroll and related expenses mainly driven by our accrual on employee annual incentive plan, and an increase in income tax liabilities of $28.5$16.8 million primarily due to income tax provision for the sixnine months ended DecemberMarch 28,29, 2024,2025, offset by an increase in accounts receivable of $15.0$64.4 million mainly driven by higher revenue, an increase of $25.7 million in inventories driven by inventory builds to support market demand, an increase of $21.7 million in prepayments and other current and non-current assets related mainly to value-added-tax receivables driven by higher recent capital expenditures and inventory purchases,purchases and a decrease of $19.9$15.3 million in accrued expenses and other current and non-current liabilities primarilydriven due toby payment of the net settlement amount of the Oclaro merger litigation.litigation and restructuring related payments.
Investing Cash Flow
Cash used in investing activities of $299.2$481.1 million during the sixnine months ended DecemberMarch 27,28, 20252026 was attributable to capital expenditures of $159.8$284.5 million andmillion, net payments from sales or maturities of short-term investments of $139.5$198.2 million and payment for acquisition of a business of $38.0 million, offset by $0.1$39.6 million proceeds from sale of assets.
Cash used in investing activities of $77.8$24.7 million during the sixnine months ended DecemberMarch 28,29, 20242025 was attributable to capital expenditures of $114.3$177.1 million, offset by net proceeds from sales or maturities of short-term investments of $36.3$104.3 million, $47.8 million of proceeds from sale of facility, net of cash transferred and selling costs, and proceeds from sales of property and equipment of $0.2$0.3 million.
Cash from financing activities of $251.6$2,189.8 million during the sixnine months ended DecemberMarch 27,28, 20252026 was attributable to $1,999.7 million of net proceeds from the issuance of Series A Convertible Preferred Stock, $1,254.7 million of net proceeds from the issuance of our 2032 Notes, $47.9 million of proceeds from SMBC term loans and $8.7$9.2 million of proceeds from employee stock plans, offset by payments for the partial repurchase of the 2026 Notes of approximately $843.1 million, payments for the 2032 Capped Call Options of $102.0 million, tax payments related to net share settlement of restricted stock of $107.4$164.2 million, $5.1$9.2 million of principal payments on term loans, $2.0$2.4 million payments for financing costs related to our revolving credit facility, and $0.1$0.8 million of payments for Notes conversions.
Cash used in financing activities of $56.9$42.1 million during the sixnine months ended DecemberMarch 28,29, 20242025 was attributable to $76.5 million of proceeds from SMBC and Mizuho term loans and $8.1$8.3 million of proceeds from employee stock plans, offset by tax payments related to net share settlement of restricted stock of $23.8$36.3 million, payment for an intangible asset acquisition holdback of $1.0 million and $2.9$5.4 million of principal payments on term loans.
LITE insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 31 filings (9 insiders, 38 trade dates, 140,756 shares, about $129.4M; 28 of these filings say the sales were made under a Rule 10b5-1 trading plan). Net open-market shares: -140,756 (purchases minus sales); net value about -$129.4M.Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-10-01 | Ali Wajid |
Open-market sale |
24,542 | $1048.50 | $25.7M |
| 2026-09-29 | Wupen Yuen |
Open-market sale |
307 | $945.00 | $290.1K |
| 2026-09-28 | Wupen Yuen |
Open-market sale |
500 | $948.50 | $474.2K |
| 2026-09-25 | Wupen Yuen |
Open-market sale |
500 | $935.75 | $467.9K |
| 2026-09-24 | Wupen Yuen |
Open-market sale |
500 | $921.07 | $460.5K |
| 2026-09-23 | Wupen Yuen |
Open-market sale |
500 | $946.56 | $473.3K |
| 2026-09-22 | Wupen Yuen |
Open-market sale |
500 | $935.55 | $467.8K |
| 2026-09-21 | Wupen Yuen |
Open-market sale |
500 | $959.27 | $479.6K |
| 2026-09-18 | Wupen Yuen |
Open-market sale |
500 | $920.00 | $460.0K |
| 2026-09-17 | Wupen Yuen |
Open-market sale |
500 | $933.45 | $466.7K |
| 2026-09-16 | Wupen Yuen |
Open-market sale |
500 | $856.83 | $428.4K |
| 2026-09-15 | Wupen Yuen |
Open-market sale |
500 | $841.51 | $420.8K |
| 2026-09-14 | Wupen Yuen |
Open-market sale |
500 | $862.14 | $431.1K |
| 2026-09-11 | Wupen Yuen |
Open-market sale |
500 | $944.41 | $472.2K |
| 2026-09-10 | Wupen Yuen |
Open-market sale |
500 | $961.44 | $480.7K |
| 2026-09-09 | Wupen Yuen |
Open-market sale |
500 | $978.54 | $489.3K |
| 2026-09-08 | Wupen Yuen |
Open-market sale |
500 | $895.99 | $448.0K |
| 2026-09-04 | Wupen Yuen |
Open-market sale |
500 | $860.00 | $430.0K |
| 2026-09-03 | Wupen Yuen |
Open-market sale |
500 | $870.01 | $435.0K |
| 2026-09-02 | Wupen Yuen |
Open-market sale |
500 | $864.49 | $432.2K |
| 2026-09-01 | Wupen Yuen |
Open-market sale |
500 | $901.04 | $450.5K |
| 2026-08-31 | Wupen Yuen |
Open-market sale |
500 | $895.00 | $447.5K |
| 2026-08-28 | Wupen Yuen |
Open-market sale |
500 | $940.95 | $470.5K |
| 2026-08-27 | Hurlston Michael E. |
Open-market sale | 548 | $958.66 | $525.3K |
| 2026-08-27 | Wupen Yuen |
Open-market sale |
500 | $958.66 | $479.3K |
| 2026-08-26 | Wupen Yuen |
Open-market sale |
500 | $882.15 | $441.1K |
| 2026-08-25 | Hurlston Michael E. |
Grant/award | 7,941 | — | — |
| 2026-08-25 | Wupen Yuen |
Grant/award |
5,138 | — | — |
| 2026-08-25 | Retort Vincent |
Open-market sale |
2,302 | $860.05 | $2.0M |
| 2026-08-25 | Retort Vincent |
Open-market sale |
188 | $858.82 | $161.5K |
| 2026-08-25 | Retort Vincent |
Open-market sale |
3,511 | $857.95 | $3.0M |
| 2026-08-25 | Retort Vincent |
Open-market sale |
4,676 | $856.71 | $4.0M |
| 2026-08-25 | Retort Vincent |
Open-market sale |
800 | $855.84 | $684.7K |
| 2026-08-25 | Retort Vincent |
Open-market sale |
3,486 | $854.89 | $3.0M |
| 2026-08-25 | Retort Vincent |
Open-market sale |
2,465 | $853.62 | $2.1M |
| 2026-08-25 | Retort Vincent |
Open-market sale |
3,711 | $852.60 | $3.2M |
| 2026-08-25 | Retort Vincent |
Open-market sale |
4,426 | $851.68 | $3.8M |
| 2026-08-25 | Retort Vincent |
Open-market sale |
3,017 | $850.66 | $2.6M |
| 2026-08-25 | Retort Vincent |
Open-market sale |
1,528 | $849.71 | $1.3M |
| 2026-08-25 | Retort Vincent |
Open-market sale |
1,102 | $848.66 | $935.2K |
| 2026-08-25 | Retort Vincent |
Open-market sale |
2,121 | $847.52 | $1.8M |
| 2026-08-25 | Retort Vincent |
Open-market sale |
2,073 | $846.44 | $1.8M |
| 2026-08-25 | Retort Vincent |
Open-market sale |
631 | $845.63 | $533.6K |
| 2026-08-25 | Retort Vincent |
Open-market sale |
1,053 | $844.61 | $889.4K |
| 2026-08-25 | Retort Vincent |
Open-market sale |
1,213 | $843.60 | $1.0M |
| 2026-08-25 | Retort Vincent |
Open-market sale |
360 | $842.22 | $303.2K |
| 2026-08-25 | Kim Jae |
Open-market sale |
815 | $857.96 | $699.2K |
| 2026-08-25 | Kim Jae |
Open-market sale |
570 | $845.96 | $482.2K |
| 2026-08-25 | Kim Jae |
Open-market sale |
456 | $847.00 | $386.2K |
| 2026-08-25 | Kim Jae |
Open-market sale |
491 | $847.94 | $416.3K |
| 2026-08-25 | Kim Jae |
Open-market sale |
600 | $849.14 | $509.5K |
| 2026-08-25 | Kim Jae |
Open-market sale |
600 | $850.44 | $510.3K |
| 2026-08-25 | Kim Jae |
Open-market sale |
205 | $842.39 | $172.7K |
| 2026-08-25 | Kim Jae |
Open-market sale |
280 | $843.68 | $236.2K |
| 2026-08-25 | Kim Jae |
Grant/award |
1,635 | — | — |
| 2026-08-25 | Kim Jae |
Open-market sale |
732 | $860.04 | $629.5K |
| 2026-08-25 | Kim Jae |
Open-market sale |
40 | $858.64 | $34.3K |
| 2026-08-25 | Kim Jae |
Open-market sale |
360 | $844.66 | $304.1K |
| 2026-08-25 | Kim Jae |
Open-market sale |
1,679 | $856.70 | $1.4M |
| 2026-08-25 | Kim Jae |
Open-market sale |
273 | $855.89 | $233.7K |
Well-known investors holding LITE (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| Millennium Management (Israel Englander) | 2026-06-30 | 0 | $841.9M | — | Sold out |
| D. E. Shaw & Co. | 2026-06-30 | 668,011 | $573.2M | 0.35% | Added 4669% |
| AQR Capital Management (Cliff Asness) | 2026-06-30 | 400,737 | $343.5M | 0.12% | Added 5% |
| Two Sigma Investments | 2026-06-30 | 240,226 | $206.1M | 0.16% | Reduced 39% |
| Millennium Management (Israel Englander) | 2026-06-30 | 0 | $173.3M | — | Sold out |
| Renaissance Technologies | 2026-06-30 | 199,640 | $171.3M | 0.24% | Reduced 2% |
| Two Sigma Investments | 2026-06-30 | 0 | $170.3M | 0.13% | No change |
| Point72 Asset Management (Steve Cohen) | 2026-06-30 | 0 | $167.4M | — | Sold out |
| Soros Fund Management | 2026-06-30 | 0 | $119.3M | 1.56% | No change |
| Tiger Global Management (Chase Coleman) | 2026-06-30 | 136,800 | $96.1M | — | Sold out |
| Soros Fund Management | 2026-06-30 | 0 | $88.3M | 1.16% | No change |
| Citadel Advisors (Ken Griffin) | 2026-06-30 | 102,604 | $88.0M | 0.05% | Reduced 27% |
| D. E. Shaw & Co. | 2026-06-30 | 0 | $69.2M | 0.04% | No change |
| Millennium Management (Israel Englander) | 2026-06-30 | 64,178 | $55.1M | 0.04% | Reduced 47% |
| Bridgewater Associates | 2026-06-30 | 18,629 | $16.0M | 0.07% | Added 220% |
| Gotham Asset Management (Joel Greenblatt) | 2026-06-30 | 8,353 | $7.2M | 0.02% | Reduced 16% |
| Point72 Asset Management (Steve Cohen) | 2026-06-30 | 4,159 | $3.6M | 0.01% | Reduced 95% |
| Polen Capital Management | 2026-06-30 | 243 | $208.5K | 0.0% | New position |
| Baillie Gifford | 2026-06-30 | 6 | $5.1K | 0.0% | New position |
| Duquesne Family Office (Stanley Druckenmiller) | 2026-06-30 | 6,963 | $4.9K | — | Sold out |