Since the start of 2026, shares of Lumentum Holdings (NASDAQ: LITE) have had a significant year, rallying from about $400 to more than $1,085. Now back to $820.59, it’s still an attractive opportunity.
Fueling the latest round of momentum, the company, which makes technology that moves data quickly, reported much better-than-expected results. That’s because AI requires significant amounts of computing power. Companies such as NVIDIA are building powerful computer systems that can handle AI workloads. But there is another important piece of the puzzle: those computers need to move large amounts of data between each other.
That is where Lumentum comes in.
Lumentum makes optical and photonic products that help move data using light, which is becoming increasingly important as AI data centers get larger and more powerful. Considering that AI needs faster ways to move data, optical networking can provide that speed.
All of which benefits stocks like Lumentum.
In fact, Lumentum’s latest results show how much demand is growing. The company reported adjusted earnings of $3.23 per share for its fiscal fourth quarter. That was much higher than the 88 cents per share it reported a year earlier. It also beat Wall Street’s expectations. Analysts were expecting earnings of about $2.97 per share.
The company also reported $1.01 billion in revenue, up 109% from the same period last year. Analysts had expected about $988 million. The company also became more profitable. Its adjusted operating margin increased to 36.6%, compared with 32.2% in the previous quarter and 15% a year ago.
NVIDIA Is a Major Partner
One of the biggest reasons why investors are excited about Lumentum is its relationship with NVIDIA (NASDAQ: NVDA). In March, NVIDIA announced a $2 billion, multi-year agreement involving Lumentum.
The goal is to help speed up the development and use of advanced optical technology.
In addition, NVIDIA CEO Jensen Huang has said that NVIDIA and Lumentum are working together on advanced silicon photonics technology. The goal is to help build the next generation of massive AI data centers. This is a big deal because NVIDIA is one of the most important companies in the AI industry. As NVIDIA sells more powerful AI chips, customers also need better networking technology to connect those chips.
The Optical Networking Market Could Explode
The potential market for optical networking is substantial.
Goldman Sachs (NYSE: GS) estimates that the total market could grow from about $15 billion in 2026 to nearly $154 billion by 2028. That would be a massive increase in just two years.
The reason is the rapid growth of AI.
AI companies are building data centers with thousands of GPUs. These chips need to communicate with each other extremely quickly. Traditional copper cables may not be able to handle the amount of data these systems need to move. Optical connections can help solve that problem by using light to transmit information.
What This Means for Investors
Lumentum is becoming an important part of the AI infrastructure story. Most investors think about AI and immediately think of companies making AI chips or software. But AI also needs the equipment that connects all those computers. That equipment is becoming increasingly important as AI data centers grow.
Lumentum is one company that should continue to benefit from this trend. Its latest earnings were strong; revenue more than doubled from a year ago, and its partnership with NVIDIA gives the company an important connection to the AI industry. Plus, the optical networking market could also become much larger over the next few years.
With LITE, the picture is clear: AI needs fast data connections, and Lumentum is helping provide them. If AI spending continues to grow, demand for optical networking could grow with it. That could make Lumentum an important company to watch as the AI boom continues.
