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ICC News - In August 2026, three core companies in the North American optical communication industry chain—Lumentum, Applied Optoelectronics (AOI), and Coherent—successively released their latest quarterly earnings reports. Despite differences in their scale, product structure, and development stage, a highly consistent industry landscape emerges from these reports: the demand for optical interconnects in AI data centers is expanding at a pace that exceeds the existing plans of all participants. The ceiling for growth lies not in the order side, but in the manufacturing side.
Whether it is Lumentum's quarterly revenue breaking the $1 billion mark for the first time with a historic gross margin surpassing 50%, AOI setting records for five consecutive quarters and turning profitable, or Coherent's annual revenue reaching $7 billion with a single quarter exceeding $2 billion, the management teams of all three companies are telling the same story with different numbers: optics is becoming a hard constraint for AI computing power expansion, and whoever runs faster in capacity expansion will take the initiative in this round of competition.
Overloaded Demand: The Shared Capacity Anxiety of the Big Three
Lumentum CEO Michael Hurlston stated frankly during the earnings call that the company has achieved over 20% quarter-over-quarter revenue growth for the third consecutive quarter, and this growth rate is achieved under the premise of a continuously expanding base. Its fourth-quarter revenue surged 109% year-over-year to $1.01 billion, and the midpoint guidance for the next quarter is as high as $1.25 billion, reaching this target a quarter ahead of the original plan. Even so, Hurlston emphasized that the company is "substantially sold out" across multiple product lines, especially in pump lasers and high-power laser chips. The demand gap has not narrowed but is instead widening.
AOI's statement is more straightforward. Founder and CEO Thompson Lin and CFO Stefan Murry repeatedly emphasized, "Short-term revenue is almost entirely constrained by capacity and the availability of key components." AOI's 800G products doubled quarter-over-quarter in Q2, and Q3 guidance indicates a nearly five-fold sequential increase, but the company still clearly stated that actual customer demand is 20% to 40% higher than current capacity. The company's full-year revenue target for 2026 is approximately $1.1 billion, but the upper limit of this figure is entirely determined by the pace of capacity expansion, not market demand. Murry stated, "If we can produce more, we can sell more."
Coherent is also in a state of supply falling short of demand. CEO Jim Anderson pointed out that the company's Q4 revenue growth rate significantly accelerated to 42%, with annual revenue breaking through $7 billion, and "almost every data center and communications product line faces supply constraints." Anderson specifically emphasized that the company's backlog fully covers fiscal year 2027 and is beginning to extend into 2028, with long-term agreements locked in through the end of 2029. Customer demand shows "no signs of attenuation," and the only constraint the company faces is the release speed of internal Indium Phosphide (InP) capacity.
The core bottleneck pointed out by the three companies is highly consistent: Indium Phosphide (InP) laser chips. Lumentum is simultaneously expanding production at two wafer fabs in Japan, Coherent is advancing 6-inch production lines in Texas, Sweden, and Zurich, and AOI is rapidly expanding its wafer fabrication and transceiver assembly capabilities in the Houston area. This capacity race centered around InP constitutes the most fundamental competitive axis of the current AI optical supply chain.
Table 1: Comparison of Key Data from the Latest Earnings Reports of the Three Companies
Data Source: Earnings reports of each company, compiled by ICC Industry Research Institute
CPO/NPO: The Integrated Optics Route Moving from Divergence to Resonance
Regarding the technical routes of Co-Packaged Optics (CPO) and Near-Package Optics (NPO), the statements from the three companies show a rare convergence trend. During the earnings call, Lumentum spent a lot of time responding to market "doubts" about CPO delays: the production plans of its leading CPO customers are proceeding entirely on schedule, demand signals are further strengthening, and the company has secured its first External Laser Source (ELS) module order, expected to be delivered in the second half of 2027. Meanwhile, NPO is clearly defined as a purely incremental opportunity—most customers are prioritizing NPO as a transitional form, and Lumentum's medium-power and high-power laser product families can cover both architectures simultaneously.
Jim Anderson of Coherent gave a more resolute response: "We have not seen any pushback in CPO demand; on the contrary, we are seeing accelerating demand, with customers requesting early delivery." Coherent plans to launch the integrated optics platform PhotonLink in September, covering the entire chain from light generation to electrical signal conversion, to serve both CPO and NPO customers with a one-stop solution. Anderson emphasized that for Coherent, CPO and NPO are "just different mounting locations, with highly comparable content value." The company has deep customer engagement in both routes, and initial revenue is expected to be reflected in the December quarter.
AOI's position in the CPO field is relatively more prudent, but the direction is equally clear. Thompson Lin pointed out that AOI's high-power lasers have been recognized by multiple major CPO customers, but current capacity must prioritize the laser supply for its own 800G and 1.6T transceivers. As laser capacity expands, AOI's ELSFP modules will enter the stage of large-scale shipment in Q3-Q4 2027, at which time the gross margin is expected to reach 50%-65%. Lin also specifically responded to the catch-up by Chinese manufacturers, believing that under 300mW-class CPO lasers and next-generation Dense Wavelength Division Multiplexing (DWDM) specifications, it will take Chinese competitors at least two to three years to achieve large-scale mass production with "reasonable yields and no performance issues."
The consensus of the three companies can be summarized as follows: CPO is the ultimate endgame of the technical route, but NPO is entering the market at a faster implementation speed. The two are not in a substitution relationship, but rather two parallel entry points in the process of optics penetrating the copper interconnect territory. Whoever can simultaneously provide laser chips, external laser source modules, and complete optical links will be able to capture the largest value share in both architectures.
Table 2: Comparison of CPO/NPO Layout and Timelines of the Three Companies
OCS and Optical Switching: The Second Curve Moving from Demonstration to Mass Production
Optical Circuit Switch (OCS) officially entered the stage of large-scale delivery from proof of concept in this round of earnings season. Lumentum announced that its OCS business will achieve "three-digit" million-dollar level (i.e., $100 million) revenue for the first time in the next quarter, and has already achieved a doubling of shipments quarter-over-quarter in Q4. The company is also expanding its product portfolio with higher and lower port counts and has initiated contract manufacturer capacity. Hurlston specifically emphasized that Lumentum is currently the only pure commercial OCS supplier with mass production track record, thus possessing a first-mover advantage in acquiring new opportunities.
Coherent has also made substantial progress in OCS. Q4 OCS revenue grew quarter-over-quarter, and management expects OCS revenue to grow significantly in fiscal year 2027 as capacity ramps up at its two production sites. Anderson anchored the potential market space for OCS at over $4 billion, covering three types of applications: data center interconnects, Scale-out, and Scale-up, with expanding customer engagement. Coherent's dual-site capacity expansion strategy contrasts with Lumentum's "in-house fab + contract manufacturing" path, but both jointly verify that OCS is moving away from the early sample stage and entering a true cycle of large-scale volume production.
AOI did not focus on OCS during the earnings call, but its layout in CPO/ELSFP forms a differentiated offensive route compared to the OCS expansion of Lumentum and Coherent: AOI chooses to cut in from lasers and external laser source modules, while the latter two are simultaneously focusing on system-level optical switching and integrated optics platforms. This reflects the three companies' clear understanding of their respective resource endowments.
800G and 1.6T: The Speed Race in Generational Transition
In the transceiver field, the data from the three companies collectively outline a steep generational transition curve. Lumentum's Q4 800G shipments set a record, and 1.6T modules have started production. Management expects the 1.6T transition to significantly accelerate starting next quarter and continue throughout 2027. Coherent's 800G maintained strong year-over-year growth in the 2026 calendar year, while the 1.6T ramp is "even faster than expected three months ago." Anderson explicitly stated that 1.6T demand continues to strengthen, and the company is accelerating capacity release. AOI's 800G revenue grew more than ten-fold year-over-year and doubled quarter-over-quarter in Q2. The first 1.6T product is expected to complete final customer validation within weeks, with a Q4 single-quarter 1.6T revenue target exceeding $70 million, and it is expected to achieve more than double growth in Q1 next year.
The statements from the three companies regarding the pace of the 1.6T transition all point to "acceleration" rather than "delay." Lumentum emphasized the first-mover advantage of its signal integrity team in 1.6T design, Coherent pointed out that the strengthening speed of 1.6T demand exceeded expectations, and AOI corroborated this trend with quantitative data of "$200M in backlog orders + Q4 target of $70M+". Contrary to previous market concerns, 1.6T has not slowed down due to technical complexity or supply chain bottlenecks; instead, it has become the common core of revenue increment for the three companies in the coming quarters.
Table 3: Comparison of OCS and 800G/1.6T Layouts of the Three Companies
Financial Performance and Guidance: Collective Signals of Operating Leverage Release
The three companies also show commonalities in the improvement of their financial structures. Lumentum's Q4 non-GAAP gross margin reached 50.4%, an increase of 1,260 basis points year-over-year; operating margin was 36.6%, an increase of 2,160 basis points year-over-year. Coherent's Q4 gross margin was 40.2%, and full-year was 39.4%, with an operating margin of 20.5%. Its gross margin improved quarter-over-quarter in eight of the past nine quarters. Although AOI's gross margin is relatively lower (29.8%), management explicitly stated that with the increase in the proportion of 1.6T shipments and the subsequent volume ramp of related CPO products, the gross margin will evolve towards the long-term target of 32%-33% or even higher.
At the guidance level, the certainty of the three companies all stems from the same foundation: the locking in of backlog orders and long-term agreements. Lumentum's midpoint revenue guidance for the next quarter is $1.25 billion, with an operating margin of 39.5%-40.5%; Coherent's next quarter revenue is $2.2 billion-$2.4 billion, and it expects a single quarter to break through $3 billion by the end of fiscal 2027; AOI's next quarter revenue is $255 million-$290 million, maintaining approximately $1.1 billion for the full year. The common characteristic of these figures is that they reflect the pace of capacity release, rather than demand fluctuations.
Conclusion: Capacity as Competitive Barrier, Platformization as Future Strategic Direction
The earnings reports of the three companies combined constitute the clearest cross-section of the current stage of the AI optical supply chain: the certainty of demand is no longer debatable, and the core of competition is shifting from "who owns the technology" to "who owns the capacity." Lumentum relies on its first-mover mass production advantage in laser chips and OCS, Coherent relies on its full-spectrum optoelectronic platform and the scale cost advantage of 6-inch InP, and AOI relies on its U.S. domestic manufacturing and vertical integration advantage of in-house lasers, each building barriers in different dimensions. The intensive advancement of new platforms such as CPO/NPO, OCS, and 1.6T means that this round of optical super cycle has not yet reached its peak, and true structural changes are still brewing.