Accelerated Optical Circuit Switch (OCS) Revenue Recognition and Capacity Expansion
Lumentum received its first revenue from optical circuit switches (OCS) in the quarter, with shipments to two hyperscale customers, and a third customer committed for 2026.
The company expects significant revenue contributions from OCS in the first half of 2026, with a more meaningful inflection point in the second half.
In-house OCS manufacturing capacity is being expanded rapidly to meet high demand, with a focus on 300x300 form factors that offer volume advantages.
The largest single purchase commitment in company history was received for ultra-high-power lasers supporting CPO, indicating strong strategic emphasis on this emerging technology.
Investments are underway in U.S.-based wafer fab to support CPO, positioning the company for a revenue ramp in the second half of 2026.
Management highlighted that OCS is expected to be significantly above company average margins and highly accretive as volume scales up.
Gross margin improved to 33.3% in Q4, up 120 basis points from prior year, driven by favorable revenue mix and efficiencies.
Healthcare division sales declined in Q4, negatively impacting consolidated growth but with plans for improvement.
Net interest expense decreased to $7.2 million due to lower debt levels and favorable convertible notes impact.
Operating expenses were well controlled with SG&A at 14.8% of sales and R&D increased to 3.7% of revenues reflecting investment in innovation.
Optoelectronics division set a new Q4 record with $113 million in revenues including intercompany sales.
Q4 revenues increased 5% year-over-year to $505 million, driven by a 28% increase in Security division service revenues and 10% growth in Optoelectronics division revenues.
Record Q4 non-GAAP adjusted EPS of $3.24, the highest quarterly adjusted EPS in company history.
Security division revenues in Q4 were $367 million, up 7% year-over-year, with a 50% growth excluding Mexico contracts and acquisitions.
Nutanix's Strategic Expansion into External Storage Support
Nutanix announced support for external storage hardware, including Dell PowerFlex and Pure Storage, marking a strategic shift to accommodate existing storage investments.
This new capability allows customers to run HCI and external storage simultaneously, broadening the platform's flexibility and appeal.
The support for Dell PowerFlex was a key win, with initial deals with two North American global 2000 companies, indicating early traction.
Management highlighted that this approach addresses customer needs for risk management during industry M&A and infrastructure modernization.
The company expects the Dell PowerFlex support to contribute to FY 2026 revenue, though it remains in early stages of adoption.
Photronics' US Expansion and Advanced Capabilities Investment Strategy
Photronics is expanding its cleaning facility in Texas to support increased demand for U.S. midrange nodes, reflecting a strategic shift towards geographic diversification.
The company is elevating its leading-edge production capabilities in Idaho with a new multi-beam mask writer to serve high-end semiconductor markets.
These US projects align with broader industry trends of reshoring semiconductor manufacturing to the United States, positioning Photronics to benefit from this reshoring movement.
Management emphasized leveraging a strong balance sheet to reinvest in capacity and technology, aiming to drive future revenue and earnings growth.
The US expansion and advanced capability investments are part of a multi-year strategic plan, with CapEx expected to remain elevated for about three years due to end-of-life tool replacements and new technology rollouts.
Dafinchi