Photonics for AI data centres and optical networks. COHR / LITE. Run 23 September 2026. Built from both companies' FY2024 to FY2026 Forms 10-K (COHR filed 14 Aug 2026, LITE filed 17 Aug 2026), earnings calls and conference transcripts through 9 Sep 2026, 8-Ks, and cited web sources. Events swept through 23 Sep 2026; most recent event checked: Coherent's PhotonLink launch at ECOC, 21 Sep 2026; for Lumentum, the fiscal 2028 "$40 of earnings power" target given 27 Aug 2026 and the AXT substrate agreement of 29 Jul 2026. Figures in US dollars as reported (both report in USD; no FX conversion). Fiscal years end 30 Jun (COHR) and 27 Jun 2026 (LITE). Not a valuation and not a recommendation.
Three cells carry Lumentum's next five years, and each has a named driver. Merchant lasers: 200G EMLs sell at roughly twice the 100G price, were over 25% of EML revenue in the June quarter and should be most of the volume by mid-2027, with EML units guided up more than 50% year on year by December 2026 (Q4 FY26 call; DB conference). Optical circuit switches: above $90m in year one, a first $100m-plus quarter guided for September 2026, and management's fiscal 2028 "$40 of earnings power" target is tied mainly to OCS orders from its largest customer (FY26 10-K; DB conference 27 Aug 2026). Scale-up light sources for CPO and NPO: shipping now, about $50m a quarter by end-2026 (Q4 FY26 call). Coherent grows by more dollars (Q1 FY27 guide $2.2 to 2.4bn, +46% year on year, against Lumentum's $1.225 to 1.275bn, +134%), driven by doubling its 6-inch InP output again by end-2027, but that output goes mostly into transceivers, where Chinese assemblers set the price.
Lumentum, and through mix. Two thirds of its revenue is components (66.5% in FY26), it "did reprice a little bit" on select products, and 29% of its FY26 gross-margin dollar gain came from mix toward higher-margin parts (FY26 10-K; Q4 FY26 call). Coherent's gross margin rose too, to 37.5% GAAP, on input costs, yields, 6-inch InP and "pricing optimization" (FY26 10-K), but it sells mostly finished transceivers and warns that large customers seek price concessions, and it carries 2.7 to 2.9 times Lumentum's SG&A dollars. The Cost Engine tab shows the catch: on three-year averages Coherent looks better (34.5% against 29.4% gross margin) because Lumentum fell to 18.5% in FY24. Lumentum is the better converter at volume, and the more volatile one.
Lumentum's exposure is operating leverage on a concentrated customer base: 54% of its FY26 gross-margin dollar gain came from higher factory utilization, headcount went from 7,257 in FY24 to 13,757, two customers were 41.6% of revenue and one was 30.4% of receivables, and most customers buy on purchase orders without volume commitments (FY26 10-K; FY24 10-K). It has done this before: FY24 EBIT margin was -31.9%. Coherent's exposure is cash rather than earnings: FY26 operating cash flow was $80m against $1,103m of capex, inventory reached 212 days of cost of goods, purchase commitments total $11.8bn, and the Lasers reporting unit carries $3.1bn of goodwill with about 8% headroom (FY26 10-K). In a downturn Lumentum's profit falls first and furthest; Coherent's broader revenue and industrial tail slow the fall, but its balance sheet has less slack to absorb it (net debt about $1.2bn against Lumentum's net cash of about $1.1bn, before Lumentum settles $757.8m of convertible principal in cash).
These six cells carry nearly all of both companies' revenue. Geography is mostly one market for both, US hyperscaler demand assembled in Asia and Mexico, so each cell names its customer base; every score is argued in the tabs below.
| Cell (product x region) | Coherent | Lumentum | Why (one clause, sourced) |
|---|---|---|---|
| Merchant InP laser chips (EML, CW), sold to module makers worldwide | 0 | 5 | Coherent sells no InP lasers externally and sees no near-term ability to (CEO, Q4 FY26 call); Lumentum and Broadcom are the two large 200G EML suppliers and Lumentum repriced select products (DB conference 27 Aug 2026; Q4 FY26 call). |
| AI pluggable transceivers, US hyperscalers (assembled in Asia and Mexico) | 4 | 3 | Coherent datacenter revenue +41% FY26 and +66% y/y in Q4, lasers increasingly in-house (Q4 FY26 call); Lumentum cloud transceivers +173% but its CEO says module margin trails Innolight and Eoptolink (FY26 10-K; DB conference). |
| Scale-across, DCI and telecom (global NEMs and hyperscalers) | 4 | 4 | Coherent communications +54% FY26 with ZR/ZR+ and multi-rail from 1H CY2027 (Q4 FY26 call); Lumentum pumps sold out, narrow-linewidth +130% y/y, LTAs with all major NEMs at higher prices (Q4 FY26 call; Citi 9 Sep 2026). |
| Optical circuit switches, US hyperscalers | 2 | 4 | Coherent OCS still capacity-limited, revenue not disclosed (Q4 FY26 call); Lumentum above $90m in FY26 and guiding its first $100m-plus quarter (FY26 10-K; Q4 FY26 call). |
| CPO and NPO light sources (NVIDIA and NPO customers) | 3 | 4 | Coherent UHP CW revenue starts in the Dec-26 quarter with NVIDIA as anchor (Q4 FY26 call; ECOC 2026); Lumentum already shipping UHP lasers, about $50m a quarter by end CY2026, plus a first ELS module order (Q4 FY26 call). |
| Industrial lasers and materials, global | 3 | 1 | Coherent Industrial is 26% of revenue, roughly flat pro forma, semicap bookings strengthening (FY26 10-K; Q4 FY26 call); Lumentum Industrial Tech fell 38% then 15% in FY24 and FY25 (FY25 10-K). |
Scores are anchored to the exhibits in the three tabs and are not summed. The three lenses get their verdicts in the Three Answers above.
Neither company's reporting lines up with the other's. Coherent reports two segments, Datacenter & Communications and Industrial, and gives only growth rates for its datacenter and communications businesses inside the first (FY26 10-K Note 20; Q4 FY26 call). Lumentum moved to one segment in FY26 and splits revenue only into Components and Systems (FY26 10-K). The comparable grain is therefore two normalized cells, optical communications and industrial and consumer, with Lumentum's FY26 split inferred: its 10-K attributes all FY26 growth to laser chips, data transport, cloud transceivers and OCS, so industrial and consumer is held flat at the FY25 $234m.
Geography cannot be reconciled. Coherent reports by customer headquarters (North America 65%, Europe 11%, China 11%, Japan 5%, rest of world 7%); Lumentum by ship-to location (Asia-Pacific 58%, Americas 36%, EMEA 6%), which it says reflects contract manufacturers' factories rather than end demand (FY26 10-Ks). The honest reading is that both sell mainly into US hyperscaler demand, with China domestic about a tenth of each.
| Cell (FY26) | Coherent rev | Growth | Lumentum rev | Growth | Leader, why |
|---|---|---|---|---|---|
| AI datacenter transceivers | ND | +41% | ND | +173% | Coherent on scale and in-house lasers; Lumentum from a small base |
| Merchant InP laser chips and assemblies | ~0 external | n/a | ND; ~$694m of growth (inferred: 78% of $889m Components growth) | ND | Lumentum, uncontested by Coherent |
| Scale-across, DCI, telecom | ND | +54% | ND; ~22% of Components growth | ND | Even; both supply-limited |
| Optical circuit switches | ND | rising | >$90m | new | Lumentum, first merchant at scale |
| Industrial and consumer | $1,844m (26%) | -10% | ~$234m (inferred, 8%) | ~0% | Coherent; higher gross margin than its D&C |
| Total | $7,118m | +22.5% | $3,014m | +83.2% |
Indium phosphide wafer capacity is the binding input for both. Coherent: "indium phosphide capacity continues to be our primary constraint"; internal output capacity doubles year on year by September 2026 and more than doubles again by end-2027, on 6-inch lines in Sherman, Texas and Jarfalla, Sweden, with Zurich from 1H 2027; June-quarter InP laser output was about 80% higher than a year earlier (Q4 FY26 call). Lumentum: EML units up more than 50% by December 2026, two Japanese InP fabs expanding, high-power lasers added in San Jose and the UK, and the Greensboro fab converting from gallium arsenide to InP with first revenue in early 2028 (Q4 FY26 call; Citi 9 Sep 2026). Coherent's capacity path is larger and earlier; Lumentum's output is worth more per wafer because it is sold as chips at a premium.
Both sell directly to hyperscalers, network equipment makers and module makers; neither relies on distribution in optics. The difference is the layer. Lumentum repriced select products into the shortage and signed pump-laser LTAs with all major equipment makers at higher prices to fund capacity (Q4 FY26 call; Citi 9 Sep 2026). Coherent's 10-K says its large customers "have in the past sought price concessions from us, and we expect that they will continue to do so", even as it reports pricing gains. Lumentum's own module business shows the same ceiling: its CEO says its transceiver margins trail Innolight and Eoptolink (DB conference 27 Aug 2026).
| Input | Coherent | Lumentum |
|---|---|---|
| InP substrate | Bought from third parties; "secured the substrates" for the 2027 ramp | Bought from a Japanese supplier; AXT long-term agreement added 29 Jul 2026 after high-power demand surged |
| Wafer size | 6-inch InP at two sites, third in 2027; claims half the cost of 3-inch | Converting to "larger wafer sizes", size not disclosed; Greensboro InP from 2028 |
| Captive components | Isolator garnet, PM fibre, SiPh PICs, ICs, TECs in-house | Lasers and PICs in-house; relies on Chinese suppliers for substrates, isolators and other materials |
| China footprint | Long-lived assets in China $969m, up from $403m | China PP&E $130m; China's export limits to Japan "affected our substrate supply chain globally" |
Chinese assemblers, led by Innolight and Eoptolink, make about 70% of the transceivers sold into the US market (Lumentum CEO, DB conference). In 200G EMLs the merchant field is Lumentum and Broadcom (same source). In high-power CPO lasers Lumentum names Coherent as "the one competitor" (Citi 9 Sep 2026). In OCS, Lumentum says it is the only merchant shipping at $100m a quarter, while its largest customer keeps an internal version (Q4 FY26 call). Market-share figures: ND in the sources used.
Merchant lasers, Lumentum's best cell, erode if supply loosens: silicon-photonics transceivers cut the EML share from 70 to 80% at 800G to 40 to 50% at 1.6T by its own estimate, Chinese CW makers are entering at lower power, and Coherent could turn merchant (DB conference; Coherent Q4 FY26 call). Transceivers, Coherent's largest cell, are priced by Chinese assemblers. OCS, Lumentum's new engine, depends on one large customer with an internal alternative. Industrial, Coherent's diversifier, carries the goodwill with 8% headroom.
6-inch InP process scale: two lines producing EMLs, CW lasers and photodiodes with yields above its 3-inch lines, a third site in 2027, and about half the cost per device (Q3 and Q4 FY26 calls); a $50m CHIPS preliminary award for Sherman (FY26 10-K). Durability medium-high. Breadth from isolators to fibre to PICs is real but shows up as supply access, not margin. A US footprint of more than 20 plants is optional value if Chinese transceivers are restricted (CEO, Q4 FY26 call; inferred).
Merchant laser design plus process: one of two large 200G EML suppliers, a year-long NVIDIA qualification behind it, and a premium price customers accept because tighter laser specs raise their transceiver yields (DB conference; Citi 9 Sep 2026). Durability high while lanes stay on InP; its engineers argue InP regains share at 400G per lane (Citi). OCS merchant lead: medium durability. Pump and narrow-linewidth LTAs with every major NEM: medium-high.
Coherent: two customers were 20% and 12% of FY26 revenue; LTAs "extend through the end of the decade" and orders into 2028, and its LTAs typically carry customer capex funding plus a minimum demand commitment (FY26 10-K; Q3 and Q4 FY26 calls). Lumentum: two customers were 26.6% and 15.0% (41.6%, up from 31.4%), one was 30.4% of receivables, and most customers buy without volume commitments; the CEO has named Google as the largest customer (FY26 10-K; DB conference). Both received $2bn from NVIDIA on 2 Mar 2026 with a multibillion-dollar purchase commitment, as common stock at Coherent and convertible preferred at Lumentum (FY26 10-Ks; NVIDIA releases).
Coherent buys InP substrates, ICs and DSPs outside and has historically bought materials on purchase orders, but makes much of the rest itself and carries $11.8bn of purchase commitments to lock supply (FY26 10-K). Lumentum depends on a few specialized suppliers, some sole-source, with advance payments but few long-term agreements; it added AXT in July 2026 and relies on Chinese sub-component suppliers (FY26 10-K; DB conference). Neither quantifies input-cost pass-through.
| Cell | Route control | Pocket price | Continuity | Outcome (share / margin) | Confirming KPI |
|---|---|---|---|---|---|
| AI transceivers | Both direct; Chinese assemblers set the market price | Coherent faces concession demands; Lumentum below Chinese leaders on margin | Coherent stronger (captive lasers, US plants) | Coherent share up, margin flat to up; Lumentum share up from a small base, margin below its average | Coherent datacenter growth above 80% y/y in the Sep-26 quarter, as guided |
| Merchant InP lasers | Lumentum direct to module makers; Coherent absent | Lumentum above market | Lumentum supply-limited, EML gap unchanged since May | Lumentum share and margin up until supply loosens | Lumentum EML units +50% y/y by the Dec-26 quarter |
| Scale-across, DCI | Both direct, under LTAs | Parity; Lumentum raised pump prices under LTAs | Both expanding | Both up; Lumentum margin edge in pumps (inferred) | Coherent multi-rail revenue in 1H CY2027 |
The tension: Coherent grows fastest, in dollars, exactly where it has the least pricing power. Lumentum grows fastest where it has the most, and its weakest cell is also growing fast.
Three causes explain most of the difference. Layer position, major: Coherent could close it by selling lasers externally once capacity doubles again, which its CEO says is not near term, so 18 to 36 months at best (inferred). Weight of the cost base, moderate: 51,000 staff against 13,757, revenue per employee $140k against $219k (FY26 10-Ks); only a further Industrial divestiture would move it quickly. Buyer concentration, moderate and against Lumentum: 41.6% against 32% from the top two; Lumentum can dilute it only by winning NPO customers and growing NEM LTAs.
Both report by function under US GAAP, with year-ends a week apart. Lumentum's COGS here includes the amortization of acquired developed technology it shows as a separate line, so its gross margin matches its reported figure. Coherent's COGS and SG&A include parts of $280m of intangible amortization, split not disclosed. EBIT is revenue less COGS, R&D, SG&A, restructuring and held-for-sale impairments, before gains on business or facility sales (Coherent FY26 $124m, Lumentum FY25 $35m). All ratios are clean on this basis; none is ND.
| % of sales, 3y avg (FY24 to FY26) | Coherent | Lumentum | Gap (L minus C) | What drives it |
|---|---|---|---|---|
| COGS | 65.5 | 70.6 | +5.2 | Lumentum's FY24 under-utilization; reversed in FY26 (58.3 vs 62.5) |
| R&D | 10.1 | 17.5 | +7.4 | Lumentum's near-fixed R&D on swinging revenue |
| SG&A | 16.3 | 18.7 | +2.4 | Same; Lumentum fell to 12.1 in FY26, below Coherent's 14.7 |
| Gross margin | 34.5 | 29.4 | -5.2 | Averages hide the FY26 crossover (41.7 vs 37.5) |
| EBIT margin | 6.0 | -9.2 | -15.2 | Lumentum's FY24 and FY25 losses |
| % of sales | C FY24 | C FY25 | C FY26 | L FY24 | L FY25 | L FY26 |
|---|---|---|---|---|---|---|
| Revenue ($m) | 4,708 | 5,810 | 7,118 | 1,359 | 1,645 | 3,014 |
| COGS | 69.1 | 64.8 | 62.5 | 81.5 | 72.0 | 58.3 |
| R&D | 10.2 | 10.0 | 10.2 | 22.2 | 18.5 | 11.8 |
| SG&A | 18.1 | 15.9 | 14.7 | 22.9 | 21.2 | 12.1 |
| Gross margin | 30.9 | 35.2 | 37.5 | 18.5 | 28.0 | 41.7 |
| EBIT margin | 2.0 | 5.0 | 10.9 | -31.9 | -13.1 | 17.4 |
The most persistent gap is the shape of the cost base, not a ratio level. In every year from FY24 to FY26 Coherent spent 1.6 to 2.0 times Lumentum's R&D dollars and 2.7 to 2.9 times its SG&A dollars, while Lumentum's R&D and SG&A rose only 18% and 17% as its revenue rose 122%. That is why Lumentum's EBIT margin swung from -31.9% to +17.4% in two years and Coherent's moved only from 2.0% to 10.9%. It confirms the power map: the company with price power at the scarce layer shows it in gross margin at volume (50.4% against 40.2% non-GAAP in the June quarter), and Coherent's integration shows up as steadier, lower margins rather than higher ones. The contradiction worth flagging is the one in the averages: they reward Coherent for the last cycle and say little about the next.
Cash confirms the gap at today's volume: FY26 operating cash flow $80m at Coherent against $751m at Lumentum, capex $1,103m against $451m, free cash flow -$1,023m against +$300m (FY26 10-Ks). Coherent's inventory rose 80% to $2,581m, 212 days of COGS, against 144 days at Lumentum.
| Metric | Threshold | By when | If it hits, it favors | Where published |
|---|---|---|---|---|
| Coherent non-GAAP gross margin | >= 42% | Jun-27 quarter (reported Aug 2027) | Coherent | Coherent earnings release |
| Coherent operating cash flow vs capex | OCF above capex for FY27 | FY27 10-K, Aug 2027 | Coherent | Cash flow statement |
| Lumentum largest-customer share | <= 30% (above 35% favors Coherent) | FY27 10-K, Aug 2027 | Lumentum | 10-K customer note |
| Lumentum OCS revenue | > $100m in the Sep-26 quarter and rising each quarter of FY27 | Through Jun-27 quarter | Lumentum | Earnings calls |
| Lumentum non-GAAP gross margin | >= 48% in every FY27 quarter | Through Jun-27 quarter | Lumentum | Earnings release |