Lumentum Holdings Inc. ($LITE)

We're going to get started in about 2 minutes. Just a brief advertisement. If you want to have WiFi, we didn't pay for extra WiFi here. So you can use the OFC one and the password is on the back of your badge for OFC. So we're being economical here at Lumentum as always. Everyone quieted down really quickly there. So I guess we can go ahead and get started. So my name is Kathy Ta. I'm the Vice President of Investor Relations here at Lumentum. Really, really glad to see you all here, see a lot of familiar and friendly faces. And as expected, a packed room with everyone sitting around the periphery. I don't see anyone standing just yet, but I think that will happen as people leave to some of the other events. So today, we're going to be talking with you about illuminating the networks of tomorrow. I'm super excited to be doing this event right after yesterday's event at NVIDIA. I'm sure you all have questions about what you heard at the GTC keynote. I think we'll be able to clarify a lot of those questions in today's presentation, especially in Wupen's presentation. So a few brief remarks. I won't read this whole thing, but I need to read part of it. Today's presentation will include forward-looking statements that are being made under the safe harbor of the Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties that are set forth in our filings with the SEC and are based on our reasonable beliefs and expectations as of today, and we undertake no obligation to update or revise these statements. So as I mentioned, we will have Wupen Yuen as one of our speakers. But first, we will have Michael Hurlston take the stage and introduce our topics for today and give us a state of the union on the industry. Then we'll have Wupen talk about all things CPO and OCS. Then we'll have Wajid at the end, so make sure to stay until the very end, the last slide should be exciting as well. And then after our prepared presentation, we will have a Q&A session. At that time, it will be about an hour from now. I'll invite people to line up behind this center microphone here and then you can state your name and your firm and ask your question. So we'll all in all, take about 1.5 hours of your time. And with that, I would like to invite Michael to the stage.

Thank you very much. How is everybody doing? Everybody is good. Everyone is going to have to sit through Wupen and I to get to the last slide. That's what Kathy basically said. We're filler. Wupen, did you know that? We're filler. We're just waiting for Wajid. Is that true? Okay. Well, Wajid, it's all up to you, Buddy. The model, that's anybody ever cares about. All right. Look, we want to just give you some sense of where we are as a company. I think that there are sort of 4 building blocks that often don't get recognized. Of course, we have a deep networking knowledge. What we have done with our products, if you think about it, is we've evolved. We've taken technology that started in telecom from our telecom heritage, and we've now evolved those into data center and hyperscaler applications. So we've really upped the ante and taken existing technology and evolved it. And that's why I think we have a really big lead because we've spent years and years perfecting these technologies. And now here we are in a position to ship them to hyperscalers in different ways, shapes and forms. And that's given us, I think, a pretty big defensible moat. Of course, lasers, right, we're going to spend a lot of time and Wupen is going to talk a lot about our laser technology. This is something very fundamental to us. Most of our business is component-driven, semiconductor-driven. And as such, we expect to continue to evolve our margins towards semiconductor-like margins. One area that's a big example of this evolution of our technology is the optical circuit switch. And Wupen is going to describe this in detail in his remarks. But if you think about the OCS, it's really based fundamentally on a WSS block that we've perfected for years in our telecom applications, right? That is something very, very much that we've done, and we've taken that and reapplied that to the OCS. And then finally, we've got indium phosphide capacity. We probably have more capacity than any company on the planet. So as we think about these various ramps that we're going to talk about, EMLs, CW lasers, ultra-high-powered lasers for scale-up and scale-out, it's coming on the backs of a capacity that we've built and we've continued to build upon during the 10 and 15 years that Lumentum has been in existence, okay? So that's kind of the basis of our company. Speaking of the indium phosphide capacity, Kathy went back and looked at this for us. And the first data point that she gave was sometime in 2023, where we were still a little bit in the doldrums of this telecom crisis. We were sort of bottoming out, probably coming down in terms of revenue as a company. And we gave our first data point on EML capacity, okay? Since that time, since FY '23, we've increased our EML output by 8x. We've been very, very successful and continue to be successful in terms of ramping our indium phosphide capability. If you look at this metric, right, which is a new data point, we are saying that we are going to increase -- further increase our indium phosphide output by 50% as measured from the last quarter of the calendar '25 until the last quarter of calendar '26, we will be up by another 50%, which is a remarkable achievement. We've talked about 40% over the last 3 quarters. We're now up in the ante to say we are going to increase this indium phosphide capacity by an additional 50% on top of what's already the industry's largest base, okay? Despite that, despite that and despite our ability to continue to evolve our indium phosphide capacity, we are still undershipping the market. And frankly, that gap is growing as this chart shows. So we see the lanes increasing by 85% on a compounded basis. Our output is increasing something less than that. So even as we talk about additional adds to our indium phosphide capacity, we are falling further behind. The demand is significantly outstripping our ability to supply. We've given the figure of merit that we are undershipping the market today by about 25% to 30% and as I say, we see that gap growing considerably over the next couple of years, primarily driven by the demand on our ultra-high-powered lasers for optical scale-out and optical scale-up, as we'll talk about here in a minute. So we're increasing our capacity. We're doing everything we can from a leadership position, the leader in indium phosphide capacity, but we are still undershipping the market significantly. Okay. So we've talked about this repeatedly. Wajid, Wupen and I have been on the road with Kathy, and we've talked about our 4 growth drivers that exist in Lumentum that are sort of separate from what's happening in the hyperscaler market in general. These 4 drivers are cloud transceivers, our optical circuit switch, our scale-out, CPO for scale-out and CPO for scale-up. These are the 4 major drivers. And I'm going to try to update all 4. So on our cloud transceiver business, we do feel like we've turned the corner. If you look out on the floor, we are one of the very few companies that's showing a 400G per lane demo, an optical transceiver that is capable of doing 3.2T, 8x400. We are in the lead pack now of transceiver companies delivering 1.6T. So we feel like we're ahead, and we're now executing very well from an engineering standpoint. Our profit margin is improving. This has been a real struggle for us. We've actually not done a great job with this business, as I've told you many times, but we're now starting to really see cash flow coming out of the business. Our 1.6T shipments start this summer. So we'll start seeing our first 1.6T shipments, which we expect to see improved gross margin on. And then our vertical integration, bringing our own lasers to help with the margin will start happening in the summertime. So we're starting to see a lot of good signs. From an engineering perspective, we're executing a lot better than we have. And from a manufacturing side, we're starting to turn the corner. We're really starting to execute and see better margins, better deliveries and improved revenue generally coming from our cloud transceiver business. The second growth driver, and this is an important update. We've talked to you guys about $400 million of revenue shipping in the back half of the calendar year. We just closed yesterday a new multi-year, multibillion-dollar agreement with a large OCS consumer. We are really excited about this. We believe that this will lead to multiple years of revenue growth and revenue enhancement on our OCS line. Our OCS line has been something that we think is performing remarkably well. We're well ahead of competition, as we've said, particularly on the 300x 300, the high-radix switch. This is another proof point that we lead here. Our revenues are coming up, and we're seeing now engagements and LTAs we'll be able to fashion by virtue of the position that we have in our OCS market. We are very much on track to be shipping this $400 million of backlog in the second half of this calendar year. We like where we are from a reliability standpoint. Our MEMS-based solution that Wupen will go into some detail, we think is field hardened and has given us a competitive advantage, a moat that is going to be very difficult for competition to overcome. We think our design, right? If you open our box as opposed to other boxes that might be shipping, we feel that we have, by far, the most elegant manufacturable design that leads to better margins that ultimately will lead to better throughput on the manufacturing line. And then one thing that Kathy put down is it's important to recognize our solution is future-proof because we can ship -- we're agnostic to any wavelength. It simply mirrors. All we're doing is reflecting light. So any wavelength that comes in can go right back out. And that is important as people think about different bands that they may want to use the OCS product in. Okay. Our capacity, right? We're going to talk a little bit more about this, particularly on UHP. So there's been tons of discussion. There was discussion yesterday from NVIDIA around optical scale-up. We'll go into that in some detail. I guess Alexis was talking a little bit about it today. Rafik was just showing me a slide. It does seem like there's a lot of conversation now on scale-up. But in order to meet that opportunity, we really have to build capacity. And what you're going to see from us in the next couple of slides is what's the plan? How are we going to actually get there? The first thing that we're doing is we're ramping our UHP lasers in our San Jose fab, and that actually is going well. We're already shipping, as I reported many times, we're actually shipping our UHP lasers for optical scale-out applications. Then in 2027, we expect another step-up in capacity for our UHP lasers as we start shipping out of our United Kingdom fab in Caswell. And we will continue to build that, as it says, and I'll describe that in the next slide. And right now, one of the things we're doing, we obviously had this engagement with NVIDIA. You saw the output of working to presell this capacity. We had a $2 billion investment from NVIDIA. We are going out, Wupen, Wajid, I don't know if John Bagatelos is here, our sales guy, Sri, who runs this business, are now working with other customers to sign up long-term agreements and capacity arrangements whereby we would sell the rest of our capacity. I mean we are already close to sold out on all of our UHP in spite of the fact that NVIDIA basically took almost everything that we can make. We still have a little bit of room, and we're trying to figure out how to go and sell that. To help the project, we're announcing today, we finally closed our fifth indium phosphide fab. This indium phosphide fab is in Greensboro, North Carolina. It's an old Qorvo fab that we just closed literally this morning. The agreement was closed this morning. That will up our capacity very, very significantly and allow us, we think, to be able to meet the demand that we see from NVIDIA and from our other customers on optical scale-up and optical scale-out. So we expect to be shipping out of this Greensboro fab by 2028, right? That's when -- how long it's going to take. It's a nice fab and the fact that it's a brownfield. It's already staffed. It's already operational. In fact, the trick we're going to have is move out some of the Qorvo products that they're shipping out of that fab and bring in our own reactors, our own epi reactors and bring it online for what we need for indium phosphide. But the great news is there's already a clean room there, already fully staffed, already fully operational, which gives us a running start into being able to produce in 2028. So this is a really big step for us, a commitment that we're going to continue to invest in our indium phosphide capacity. Okay. Optical scale-out, right? As I say, we are already shipping optical scale-out product. Jensen talked a lot about it yesterday at GTC. We're doing extremely well. We're sole sourced at the moment. We expect competition to come in. But the reality is this market is huge. This market is very, very significant. We have set expectations that we'll have our first $100 million revenue quarter in the end of 2026, calendar 2026 and then deliver on this multi-hundred-million-dollar commitment that we talked about in our last earnings call in early 2027. So we really see some good things. It's been a surprise to us how well the optical scale-out product from NVIDIA has done and how well customers are receiving it. It's been a pleasant surprise, surprise enough to us that we got additional backlog, and we believe that we'll be able to execute to that and deliver incremental revenue in the first half of '27. Similar to what you'll see here in a minute on optical scale-up, one of the important vehicles we have is this external light source, being able to pull together a turnkey package to enable customers beyond our lead customer. That's a critical tool because there's just not the optical engineering that you see anywhere else NVIDIA, Google, these 2 companies have incredible optical engineering departments. The rest of the market, not so much. So in order to engage them, we need something a little more turnkey, and this is what this ELS does, right? And that will give us about 2x the top line that we see today. For every ELS that we ship, it's about 2x the revenue. Margins come down a bit, but it's still very, very profitable above our gross margin, above the gross margin target that Wajid is going to share with you in a minute. And we really like it because strategically, it's an enabler. It really enables us to engage the rest of the customer base. Okay. Optical scale-up, right? This is the big story, I think, and there's a lot of debate around optical scale-up. It's definitely happening. Does it mean that copper goes away? No, of course, not. It doesn't mean that. And I think Jensen said that yesterday. You're going to see a hybrid environment starting the second half of '27, we will be shipping our optical scaleup solution, and it won't be entirely at the expense of copper or retin copper. You're still going to have hybrid environments. It's across the longer runs, as I think Kathy and I have described to you, 3-meter cables and up will use optics inside a cluster and then for shorter runs, you're still going to use copper. So it's not a winner take all. I think Matt Murphy was talking about that yesterday. You're going to have a blended environment. But what it represents for us in the optics industry is pure incremental upside. We have never been in this position before. We have never shipped optics inside a cluster. We believe that as you go on this copper wall, which Wupen is going to describe in a minute in his slides, as you start moving down the copper wall, there's going to be increasing opportunity to ship optics. We will have optics inside the rack as well as across racks inside a cluster. This is going to be nothing but upside for the optics industry. And we can see every customer, not just NVIDIA, every customer moving along this vector with the possible exception of Google, who has their own architecture by virtue of the OCS, which does almost the same thing. It enables optical scale-up. Every other customer is interested in some way, shape or form in what's happening with our co-packaged optics solution and our ultra-high-powered lasers. Again, similar to what we talked about, we will enable this ELS, this turnkey module such that we can engage customers that don't have the optical engineering expertise that our primary customers do. And this is a real vehicle for us to engage the broader market. Okay. So just to kind of finish up and then turn it over to Wupen, we're still just a warm-up act. You realize that. We're just a warm-up act. Okay. Okay. All right. We're just a warm-up act. Cloud transceivers, we talked about the sort of $1 billion cap that we were going to have. Obviously, we're blowing through that. Our business is improving dramatically, still a gross margin headwind. We have work to do to improve the margins in this business, but we are improving it from an engineering execution standpoint, getting into the lead pack, which is really good. OCS, right? We have this new multiple multibillion-dollar order or commitment that we received. This is super good. We expect it to be ramping beyond $1 billion in calendar '27. So building on the $400 million that we've described in the back half of '26 and accelerating. Some people have asked us, is that just a bubble of sort of an order seed? The answer is no. We would expect to see significantly more business across calendar '27 on the OCS. On optical scale-out, right, our first instantiation that was talked about last year at GTC. We've -- we're shipping. We're already in business on that one. We've got this multi-hundred-million-dollar order that we need to fulfill in the first half of 2027. So things are going extremely well. And then the big opportunity clearly is scale-up. The first instantiation of scale-up, which is, again, sort of moving across links inside a rack, we estimate to be 3 to 4x larger than the initial scale-out CPO. So a big, big bump. And then as we get inside the rack, which inevitably will happen, it's a 10x larger in terms of the number of lanes that we see. We are now unlocking a new indium phosphide fab to meet all this capacity. And still, as I said many times, we're undershipping this market. We're still vastly undershipping where we think we can be given the demand we see, forget about the rest of the industry, the demand we see is so very, very high. We cannot build these things fast enough. We're sold out, as I said many times, through calendar 2027 even as we bring on all this additional capacity. Okay. Dr. Y, you're going to give the -- you're going to wow the audience with the technical aspect. Is that true?

My goal is to ramp it up.

Ramp it up. Okay, okay.

Ready for Wajid. That's my goal.

Okay. This is perfect. Okay. All right. Thank you, guys.

So good morning. Here, that's a picture before the AI tornado. I think my hair is getting gray and less. So let me start with the GTC yesterday. I don't know how many people went to GTC. But the GTC, there's one very, very clear message is that the agentic AI is going to change the world and the amount of token generated is going to skyrocket, right? And we see that. We actually feel it. All these numbers that Michael just talked about, the laser numbers, I mean, just to give you one example, some customers are asking for 1 billion lasers a year, starting with a B. It used to be in the millions, now it's in the billions, right? So the amount of scale is just unimaginable. But you think about this -- what's driving all this really is the agentic AI, when you are still creating the intelligence, when you're serving intelligence at scale, and we're actually allowing the agents to do a lot of work for you automatically, it's a big deal, right? Just last week, we had a dinner with hyperscalers. They're telling us to say, hey, we're hiring new people now. Their job is to work with 5 or 6 of agents every day. Their job is composed of working with agents. All these agents are AI agents, right? Just imagine when consumers and moreover enterprises start to take on this kind of approach to work, I sound like Jensen Huang a little bit now, it's crazy, right? So actually, this time, it is very different. It used to be the case where in telecom so-called bubble fundamentally was for communications. Communications fundamentally, it depends on how many people you have in the world and how much time you can spend on YouTube. That's fundamental, right? But this time, we are actually creating intelligence and serving intelligence at scale. I don't think anybody can say we can go back to pre-AI anymore. I think that era is over, right? So going forward, and this has a lot of implications on optical networking, right? Because it used to be optics is a way for communicating, now optics power compute. The AI does not scale purely full spot without optics, right? So there's a few very important things. First of all, now all the traffic generated in data centers by machines, not by humans. And that actually drives a lot of so-called east-west traffic in a very, very big way. And the features are, #1, you need to have all these networking elements become non-blocking, meaning you don't want your AI to be stuck, right, at a node, at a switch or something like that. Therefore, low latency, non-blocking is a key feature. Why is that important? Because it used to be the cloud networking, there's not so-called aggregation, right? The more aggregation you do, the less bandwidth there is. But in the AI networking, there is no aggregation per se. You have to be making non-blocking to reduce time, right? So that's a very, very big change from what it has to be. And then also to achieve that, then you need to have the highest bandwidth connectivity possible, both so-called scale-out, which is connecting the GPU or TPU clusters and also scale-up, which is connecting all the xPUs at its full line rate, right? You just have to optimize and maximize the bandwidth as much as possible, which is a really big change. Finally, it's also one thing that matters as well is that now the traffic flow is not really in terms of small packets or so-called mice flows. It's called elephant flows. The flows are actually huge, right? What does that mean actually that now it opens the door for a circuit switching rather than a packet switch. And this is where optical circuit switching, the OCS comes into play, right? So these features of how the traffic pattern is changing, how the traffic amount is different from the past is actually creating this new opportunity for optics fundamentally. And I have to tell you, famous last words, this time is different. Okay. And for that reason, you see this huge ramp, right, of the CapEx. Frankly, this number when it showed up, right, a couple of months ago, it wasn't really a big surprise. You hear in the news that Anthropic, OpenAI, all these are saying, hey, if I had more compute, I would have more revenue, period, right? And you see all the agentic work, you see all the Claude Code, now what's called OpenClaw yesterday talked a lot about now it has become a thing, a phenomenon now in -- at least in Asia. People talk about feeding my lobster, right? That's a term now in Asia, right? All these things is driving. And therefore, this huge ramp of the CapEx from the top 4 hyperscalers really is not a surprise. And then if you look at all these hyperscalers, they're investing in securing capacity, most famously on HBM, committing all the way through 2028, you see it in the news everywhere. And you look at the TSMC talked earlier this year in their earnings call, they say, hey, we are seeing our AI semiconductor growth rate CAGR to go from mid-40s to high -- mid- to high 50s over the next 5 years. I'm frankly not surprised at all, right? Because again, these -- the paradigm shift, using this as a cliche, the partnership of serving -- generating and serving the intelligence at increasing the scale is driving all this. So a lot of confidence in terms of not just '26, '27 and '28 and beyond. And this is why Michael talked about we're investing so much into the fab capacity and still not nearly enough to serve all the demand that we're seeing, okay. This is a complicated slide, so let me slow down a little bit. There's been a lot of discussion on up to scale-up, scale-out. What does that all mean? Let me start with something very fundamental, right? The lowest line there is most fundamental, really is what's driving all this, right? So fundamentally, right, to scale AI, to scale the compute, you are now -- you want to package more and more of compute and memory together, right? That's the first unit you talk about, right? And then therefore, you see more of the CoWoS from 1 single die reticle to 2 reticles to go to 4 reticles to panel scale. People are talking about how can I pack more compute and more memory on a single so-called chip. That's not a chip anymore, a single package, right? And second thing you want to do, you want to actually form a large so-called coherent domain of these xPUs and then connect them at a full native rate, whether it's NVLink 5, 6, 7, 8 or whatever, things like that. And that number is going up, too, because the compute is increasing and the bandwidth needed to bring out the data is also increasing at the same time, right? And therefore, there's a very, very strong need to go to say, okay, can I increase my bandwidth per lane, okay? So today, we're at a 200G per lane. At 200G per lane, you can still do inside the rack, inside the rack with copper, right? So yesterday, Jensen Huang showed this huge cartridge of cables. That's all copper. At 200 per lane, copper works going to the middle plane, right? It probably doesn't go the full 2 meters, but going from the servers on the top to the middle of the rack, it still works, right? And that's what we call the first phase. So today, the Phase 0 is that we keep all that copper, right? But the scale-out portion of the network, we start to use CPO. We call the CPO Phase 0, okay? And in this network, we also use OCS. The OCS is used at a higher aggregation level, whether it's called spine or super spine. And this is part of our business today we're shipping to. Actually, another part of the business we're shipping too, which is a big one, is optical scale-up. That's for a very specific customer. So that's actually today. That brings us from today, 2026 into 2027, okay? Now the next phase, you stay at 200 per lane of copper, but now you want to, again, keep in mind, largest coherent domain possible. So now you want to scale your xPUs across multiple racks. How do you do that? Copper doesn't go that far anymore. right? So then you want to use optics in between these racks, carry the full traffic of the entire -- the xPU traffic. That's when we see a major bump up of the optical demand. We estimate about 3 to 4x depending on how much traffic is diverted, right, over optical. We also see that opportunity for OCS, we call it low dimension OCS, roughly 60, 70, 80 x 80, 60 to 80 x 60 to 80. That size of OCS, that will be a good complement into this call it Phase 1 scale-up world, okay? Finally, it's Phase 2. Phase 2 is when the copper even inside the rack become very challenged. either it's very expensive or it's very power hungry or it doesn't go very far or all of the above. And that's when optics will go all in and to replace more and more of the copper and then fiber runs all over, not just across the rack, but now inside the rack and across the data center, right? At that point, then you need to use -- again, use large radix of OCS to switch and to route the traffic, right? So like Michael said, which is really, really important, today, optics has 0 share, 0 share in scaled-up. Any uptick, any share increase of optics in that huge volume space is a huge deal for optics, right? And therefore, we look at it as a total -- is incremental gain for us and for our peers rather than a loss of any sort, right? And this is how we're looking at this Phase 0 today through 2027, probably the next phase, '28, '29, '30-ish, maybe late '29, '30, go to the next phase. For the next 5 years, you're going to see a continued increase of optical content in scale-up paired with increasing use of optical switch to connect all these fibers and route traffic. So if you then pull out a little bit, right, now we'll look at the whole evolution of optics. We identified 4 key elements that will -- that's not Lumentum specific, but Lumentum happens to be well positioned in all 4 of them, right? First one is CPO. CPO is the ultimate interconnect. Nothing beats CPO, right? As data rate goes high, you just have to use CPO to get you scalable, low-cost, low-power consumption connectivity. Second thing is optical transceivers, right? Transceiver is going to be complementary to CPO. CPO is not completely overnight replace transceivers. There's no way. Nothing change that fast, right? And the transceivers has the advantage of being to provide a more granular units of bandwidth. You can plug on the servers. You can plug on some other different places, give you an instantaneous actually upgrade of speed because it is actually easier or less challenging to implement the latest optical technology into a transceiver as one unit, right? Then you can use that to scale the network much faster. Sometimes you also want to maximize the bandwidth per fiber. The transceiver also give you the opportunity there by providing you a design flexibility, right? So transceiver will be there for many years to come. Third piece, which we didn't talk about yet so far is high-speed lasers. Today, Lumentum is the largest EML laser supplier in the world, 100G, 200G, working on 200G right now. In this OFC, we're going to demo, as Michael talked about, a 400G differential EML, right? Again, the high-speed lasers is, again, instantaneous, the fastest path to increase the bandwidth per connectivity unit, right? So we're going to demonstrate this module for the first time using a differential EML. And we believe that the high-speed lasers will continue to be really, really important as a co-evolution of the CPO technologies. Finally, is OCS. We believe that OCS is fundamental to the evolution of AI networking. It will be there. It will be there to route traffic to be able to provide the connectivities at a very high scale from scale-up to scale-out to spine, super spine, to protection. And all these applications will find OCS being a very useful tool to -- for implementation. So this is a chart that this has been a lot of debate, right? I want to say here really is that there is roughly a physical line between the optics and the copper. And that line depends on whether you use so-called direct attached copper, pure copper cable with nothing on it, which is the lowest cost, lowest power. Unfortunately, it doesn't go very far anymore, right? It runs to a limit about 1 meter or so at 200G per lane and at 400G per lane probably doesn't go very far, right? And then -- but then you have the ACC, which has a retimer inside, you have the AEC, which has a DSP inside. The more compensation and capability you add to the link, the more power it consumes, the more latency it generates and also the more power and cost will go up as well, right? So there's a blurry line over there, but we believe that at 400G per lane, copper will run into a big deal, big challenge. Despite the best technologies, TSMC and analog world can produce, it's going to be very challenging to really have a highly reliable 400G per lane copper. People are definitely trying, right? Last week, Broadcom talked about they are trying to make this a PAM-4, PAM-6. I think we recognize that. But still too broadly apply the copper at 400G per lane is going to be challenging. Therefore, we see in that world, there will be a mix of the copper and optics inside the rack depending on the quality level required and also, frankly, depending on how much volume the CPO world can actually supply, right? But overall, what we see this is that a 1.6T is intra-rack copper, intra-rack optical; at 3.2T or 400G per lane, you're going to see intra-rack copper probably mixed with optics. And certainly in between the racks, you'll be optics. Again, it's all net up for optical components. And let me spend a few words a little bit here on the high-speed lasers. We talk about a little bit, right? Why is EML laser, as investors know, so attractive? Because the laser includes a light source and a modulator. So when we take it, fully yielded, that laser, you know it works. That's super attractive and compare that with silicon photonics today. Sometimes today, you have to get a so-called CW laser and launch into an array of silicon photonics chip. And the trick is that you have to make sure all the lanes yield at the same time. Whereas EMLs, you put one at a time. You know every single one works, right? So that's why people always use EML when they go to a new speed node because they know that thing works. That thing doesn't require to yield the whole solution at the same time, right? Another thing also EML does really, really well is unless you want to have many bandwidth and many wavelengths to put a lot of bandwidth into a single fiber. With silicon photonics, it will be challenging because now you have to put all these lasers, all different color of lasers, align them together. Hopefully, they all work together, whereas you use EMLs, you can have all the wavelengths put into the module and then you know it's going to work, right? So these are the reasons why the EMLs are attractive and always be the first to market, first to volume for a new speed node. And frankly, we don't see that changing. Now a 400G per lane can be even more interesting, right? Again, we're going to demonstrate a 4x 400G module with differential EML. This can be a little more interesting because silicon photonics has a challenge at 400G per lane, right? The physical property of silicon doesn't easily lend itself a very high speed. And therefore, a lot of people trying to work on different tricks, different solutions to address the silicon photonics. So far, we've not seen a very compelling manufacturable solutions. And therefore, people are talking about different materials, barium titanate or thin film lithium niobate, right? But these things do not have a proven supply chain, do not have a proven deployment, reliable track record, right? It will take time for them to develop into a solution that people can really count on, right? And therefore, we believe that the EML remain to be a very attractive solution at 400G per lane. And again, I'm going to do a little bit of advertisement here. Please come to our booth and see it. This is the world's first 400G EML demonstration in a pluggable module. And then Lumentum's pedigree in this regard has been lasting in the last 20, 25 years. Again, you don't achieve this milestone such a feat overnight, right? The design and the process manufacturability all tied together is what enables us to be not only able to design something, but also be able to instantaneously ramp the product, right? And we're confident that we'll be ready with 3.2T era is arriving upon us, we'll be able to scale our 400G EMLs to the scale that's needed to support our customers. And for that reason, we continue to see the penetration of indium phosphide into the data centers increasing its market share, right? And it's now very, very clear. I think last time when we met here at OFC, we see a lot of discussion about is multimode going to survive, going to last for a long time. Now we see here is that our customers and customers' customers have made a decision that they will holistically use single-mode fiber because single-mode fiber is much more scalable in terms of how much bandwidth we can put into single-mode fiber. And they want to have an infrastructure that is scalable, sustainable going forward, right? And for that reason, we see indium phosphide market share continue to increase in those high-speed areas and also in the CW laser areas or UHP for CPO applications like that, that indium phosphide will be the horse to bet on. And again, that's why Lumentum is investing so much into the indium phosphide world. So on the cloud transceivers, I want to add some colors to what Michael just talked about, right? Some of the customers are really, really driving to increase the bandwidth per fiber, right? We see people talk about a lot of high-radix connectivities, but some customers are trying to drive up the bandwidth per fiber to scale their AI clusters. And our modules are designed very well to fit that application. And then definitely 1.6T with Tomahawk 6 switch now coming to the market, and we're now shifting our production over to 1.6T, which is challenging to do, which we're actually now early to market, and we are going to ramp our production up, and that will carry a higher gross margin and better economics for us. And finally, we want to talk about really is that the -- not only we're going to integrate our lasers into our 1.6T modules, but also silicon photonics that use in some of those modules are also for internal. And this is the reason why we understand the trade-off between silicon photonics and indium phosphide EML lasers. We understand that trade-off very, very well. But we're integrating our componentry also into our modules for 2 reasons. One is, of course, it gives us a better gross margin, but also secondarily, really important is it secures our supply. Today, people are coming, knocking on the door, try to buy modules also because you have your own lasers, and that makes a difference to them. OCS, this is super exciting. The Lumentum history of OCS starts in year 2000. Our first generation of so-called wafer-based active switch used the MEMS technology that's fundamental to our OCS today. Through all these years, there have been a lot of products deployed in the field. Lumentum has always been a leader in WSS until today. And there are lots and lots of these MEMS devices deployed in the field. Every single problem that any of us have ever seen on MEMS devices, we've seen it. We've solved it. We've overcome them, right? And then that 20 years of -- 25 years of experiences, know-how, the processes control, manufacturability and equally important is that our WSS scale has already exceeded the OCS scale our customers want us to ramp to. What does that mean? That means we know what it looks like. This is a very, very important thing because before you know what it looks like, you don't know what to expect, what to anticipate, where the traps can be, where the yield shortfall can be, where the process problems can be. We have seen all that stuff already, right? So now for us is really, okay, let's go scale the supply chain, let's go scale the machines. Let's go scale the training. But for us, we know what it looks like to scale the OCSs, and we have field data to prove how reliable the MEMS mirrors are in the field. So there's a lot of very attractive features of OCS. To summarize, I would say the MEMS-based OCS is as transparent as you can get from an optical box point of view, right? What can you -- what do you want out of the optical switch? Really, you want to switch the traffic without paying any bit of optical penalty. That's what you want, right? I think MEMS mirror comes closest to that. Our insertion loss is very, very low. For a large 300x300 OCS is less than 1.5 dB. Our return loss with light doesn't come back. It goes one direction doesn't come back, very important for certain applications. It's extremely low. It's scalable, right? It's transparent to wavelengths, data rate, nothing bothers it. It's the same switch. And then another thing on latency, unlike a packet switch, which depending on the route it takes, congestion or not, this switch has a fixed and low latency, right, in the tenth of nanosecond, basically how much time the light takes to travel between those 2 mirrors and in and out. And then power consumption. This is a passive -- kind of passive. There is no transceivers on a switch. Light goes in, got switched, light comes out, right? So power consumption of the switch #1 is fixed, doesn't scale with data rate. And #2, it's less than 1/10 of that of packet switch. As packet switch goes higher and higher speed, that difference is going to become bigger and bigger. It's proven reliability. We know how to make it. And first of all, and furthermore, you can address wide range of radix from very small to very large, right? The MEMS design and optical design is all scalable, right? So again, we see a lot of opportunities for OCS, and we believe that our technology strength built on 20 years of evolution experiences and manufacturing scale will enable us to be able to capture this market pretty uniquely in this market space. And then we think that in a few very important applications, right? So today, we all know one of the biggest application is particular approach to optical scale-up, right? In that case, what we do see is a 1.5:1 of attach rate, right? So meaning one of this xPU will require 1.5 x of the optical port for that application, right? That is really to enable certain topology, certain connectivity to scale the AI. The second thing here, we call it optical scale-up. Now this depends a lot on how the cluster is designed, how much traffic is coming out of this. There's a wide range. Our estimation is that the port to xPU attach rate is roughly 2:1 to 10:1. Actually, some number go even higher. If you go with a pure DR optics, this can be 20:1, right? It depends on how much bandwidth you put per fiber, and that will change this -- the OCS demand drastically, right? So again, as we see more optical scale-up, we're going to get a better visibility and better certainty on this -- for the attach number, but it's high. It's a lot higher than today. Finally, at the spine, super spine scale of cross level, it's roughly between 0.2:1 and 1:1. That we see today, right, in another applications. So overall, again, we see a wide range of OCS use scenarios or use cases, and we see a wide range of the attach rate and overall added together, again, it goes from a very small base or a 0 external market base to something very meaningful. It's all upside for Lumentum. And for that reason, we talked about OCS ramp. We just talked about this multibillion-dollar deal that we just made with a customer, and we now have visibilities into the -- for the next couple of years, and this is all pre -- use the word xPU scale-up. And then when we add all this together, I think this line has a multiyear runway. Again, we think this will complement the packet switches and is uniquely suitable for AI clusters and AI networking. And with all the story all tied together, so we're really bullish on the market, right? So this year, roughly, we have an $18 billion TAM across all the products that we can cover. In 5 years, I think we're going to go to $90 billion plus. You're going to see a very large growth of scale-across, huge growth of scale-out from 0 to nothing in scale-up and huge ramp on OCS, right? If you hear our story about everything from 0 to something, right? The OCS is almost from 0 to something, scale-up from 0 to something, scale-up -- scale-out already today, but with compute scaling like this, you need a huge amount of scale-out still, right? And don't forget that blue bar there, which is scale-across, there's one important rule to keep in mind, how much compute put in data center, you need that much of -- you need to have a proportional amount of networking to connect data centers. So while data center is growing like crazy, the networking is also going to go like crazy, right? And Lumentum has a bunch of products that well suited in that market. So I would say if you look at this whole pie chart, a whole bar chart, Lumentum is really, really well positioned in all these different areas, scale-across, scale-out, scale-up and also in OCS. And we do see that increasing in 5 years, we're going to see about more than -- about half of the traffic will start to go into the scale-up domain that optics can cover. So a little bit advertisement, these things actually matters. I want to spend some time on the demonstration we're going to do at the booth. So please swing by to take a look. First of all, there are 2 demos that we're working with NVIDIA on. One is to use our UHP laser for so-called CPO, but using optical module, okay? Each such laser carries four 200G lanes. So each 1.6T module will take two UHP lasers, okay? There's a module from NVIDIA in our booth using our laser inside. That's one demo. Second demo also for NVIDIA is our 200G EML put inside, 8 of them for 1.6T modules, right? These are 2 demos that we'll work with NVIDIA on. The next one is what we just talked about. It's a 400G per lane, the world's first 400 per lane differential EML module, right? This is going to be the next standard, we believe, for the 3.2T module generation. And the next 2 things are for scale-up. There is VCSEL -- potentially VCSEL-based scaled-up applications for certain more of an inter-chip connectivity kind of application that we are demoing. And also, we're looking at a higher power of the lasers that can actually cover even more optical lanes or a WDM-based laser that can now enable the next generation of optical scale-up technologies up to 800G, 1.6T per fiber or more. And finally, on the last column, we also have 2 scale-across, multi-rail scale-across demonstrations. One is a coherent optical channel monitoring. Now you want to monitor all the rails at the same time. Second thing is it's called the digital game equalizer, again, multi-rail ready, right? So again, we're going to show you technologies covers scale-out, scale-up and scale-across. These are new technologies that will continue to drive our revenue going forward and then enable us to capture increasing amount of TAM, the big bar that we just showed you on the previous slide. Thank you very much. Hopefully, I built up enough for Wajid to take over.

My gosh, the pressure. Oh, my God.

No pressure.

No pressure, okay. Good morning, everyone. Thanks again for joining today. It's great to see all of you. Many familiar faces from the Analyst Days that we've had over the last couple of years. And there's been a common theme among the Analyst Days. And that is that it's the company's view that there is a shortage of indium phosphide capacity. And it was even before all of these orders that Michael and Wupen spoke about that we had a thesis around how we should be investing our capital in spite of the fact that we were actually hovering at around $300 million, $350 million a quarter of revenue and barely generating any type of operating profit. But we were going through that transformation, and we had a lot of conviction. Certainly, Wupen convinced us a lot around what the CapEx needs for the company would be. And last year, when we got up, we talked about $500 million a quarter and then eventually a $750 million quarter. One of the reasons we've been able to beat those numbers is because we really leaned in on a lot of the CapEx decisions back in fiscal '23 and fiscal '24 and in fiscal '25. And so -- and that was without a lot of the orders that we have right now. You'll see in the slide or two our backlog is quite robust. I think that would probably be the measured way to talk about it. And again, what you're seeing from us is we're thinking out to '28, '29 and '30. And so the announcement that Michael made about the new facility in Greensboro and the investments that we're going to make in that in order to enable another $5 billion of annual revenue, and those are chip margins. I think all of you are familiar with how chip margins look. That will really, again, provide another pivot for us, another leverage for us to improve the business model of the company. And so we're not going to get off that track. We're going to continue to invest on our front-end capacity to expand our indium phosphide capacity, both at our Rose Orchard fab, which is our San Jose fab, at our fab in Caswell, we're going to be expanding to put in more clean room space and then at our new Greensboro fab as well as well as in Sagamihara as we move around the mix of our lasers, especially with 200G and like Wupen spoke about 400G really ramping up, we're going to have to make investments there as well. So we're going to stick with that strategy. That strategy has been working for us, and we've been able to execute on the financial numbers that we spoke about last year with -- and being able to beat expectations. I think the other thing that's worked very well for us is very early on when Michael joined, he said, hey, guys, you're not going to be able to hit these numbers unless we start investing in our CM partners and so what you'll see is that we are investing across our CM partners really to provide us with scale. And we had an internal management debate, hey, do we give up a little bit of margin? And the decision was made that, no, we're going to get more operational efficiency if we have a number of CM partners, we'll be able to scale with market demand, and we have a number of people rolling in the boat with us. And so you'll see we've made that decision, and that's worked very, very well for us. And especially with the multibillion-dollar deal that both Wupen and Michael spoke about, that's going to help us a lot. That scaled strategy on CM is going to help us a lot as we look to execute to significantly bigger numbers. On our operating margins, so does anybody remember what we showed last year in terms of our operating margins? Anybody? Okay. So we had talked about eventually getting to 20% operating margins. And for fiscal Q3 that will end in March, we've guided to north of 30% operating margins. A lot of that has happened because we were able to execute on DCI demand and EML demand. And with the product mix really working in our favor on both of those product segments, we've been able to improve the gross margins of the company. And I think many of you are now modeling us into the low to mid-40s for gross margins, and we'll give you guys an update on that as well. Capital structure. So up until a couple of weeks ago, our net debt was quite high. And thanks very much to the generosity of NVIDIA and their management team. We've had an investment of $2 billion. I remember when that wire transfer came through. It was a really interesting moment to see the I got an e-mail from our Chief Accounting Officer, and it had a picture, and I was like, wow, that's great. So that was fantastic. Now we've given up a little bit of dilution. So we have 2.9 million more shares out there. So as you're updating your models, you should certainly account for that. But that really gives us the ability -- and we could have done it on our own. We had taken a look at this internally, should we do it on our own or should we invest with someone. And obviously, with the commercial agreement that we have with NVIDIA, that really kind of nailed over to the decision that, hey, let's invest alongside with a leading AI infrastructure partner and really strengthen our balance sheet at the same time. And probably about half of the $2 billion will be investing in strategic CapEx, so even though we've got a great CM strategy for back end in the front end, we will probably be upping our CapEx investments over the next couple of years. So probably about half of that will go into strategic CapEx investments, but then the rest will really allow us to have firepower as we think about how we should vertically integrate from an M&A standpoint. And also, obviously, we're going to need some more working capital to achieve the numbers that I'm going to show you in a couple of slides, okay? So the difference between last year and this year, this slide says it all. Last -- by the way, this is all going to be on our website. So unless you're taking pictures of me, you should -- and I don't think you are. I don't think you are. This will all be on the website, but you're welcome to take pictures. So the difference between last year and this year is last year, we had a forecast. We had Wupen coming into my office and Michael's office saying, hey, this is what customer X told me, this is what customer Y told me. And now it's real backlog. It's real long-term orders. And that really gives us the visibility and the confidence to make the CapEx decisions that we're making, right? And so generally, we like to have our CapEx payback within a year of it being operational. And being able to have this type of backlog from our customers certainly gives us a lot of visibility, allows us to communicate better with our supply chain, and I'll talk about our supply chain in a minute and really invest what we need to from a business standpoint to make sure that we don't miss any opportunities because I think outside of the financials, Michael has allowed me to sit on more customer meetings than in the past. Our customers are really counting on us. And I've seen that firsthand. And so we really can't disappoint them because there are even bigger customers that are counting on them that then count on us. And so this type of visibility really helps, and it allows us to make the right type of decisions from an inventory standpoint, from a headcount standpoint and all of those other things that come along with making decisions under certainty rather than making decisions under uncertainty. So I talked about the CM manufacturers. Actually, Michael and I had dinner with one of our leading CM manufacturers last night, we were talking about how we could continue to expand our business with them. And -- but at the pace that we're growing, we need to have multiple sources of supply from a CM standpoint and really be able to take those steps within the manufacturing process that don't have sensitive IP, right? The parts of the manufacturing process that have sensitive IP, our new leader in Thailand, KW, has got a great pedigree from Jabil, and he's able to really work with the CM manufacturers and say, okay, well, this part of the production process I'll take and then this part of the production process you should take. And that has really helped us from a scale standpoint in order to be able to virtually manage the type of output that we need to because last year at this time, we were delivering $400 million of revenue. We've been able to double in a 12-month period. This is one of the big reasons we've been able to do that. And we expect to continue to grow sequentially as the year passes on during calendar '26 and in calendar '27. And this will be a critical enabler for us in order for us to achieve our customers' expectations that they're setting on us. All right. So probably no surprises here, right? Our current quarter, we've set at a midpoint of $805 million. And in future quarter, we think that we can grow to $2 billion. And this $2 billion quarter is without the Greensboro fab that Michael spoke about earlier. This is the EML capacity that's increasing year-over-year by over 50%, and that's unit capacity. That's not revenue capacity, right? The mix is going to shift more to 200G as the quarters pass on. So that certainly provides us with a nice tailwind. This includes the OCS win that we just got, the multibillion-dollar agreement with a large hyperscaler customer. This includes CPO as well and what we're going to be shipping throughout calendar '27 based on the commitments that we have from our customers as well as an uptick in 1.6T transceiver demand. And the 1.6T transceiver demand, like Michael spoke about earlier, the profitability of that business and that product line has improved quite a bit. And so as that business is growing, where -- earlier, our position was, okay, we want to limit the growth, and we've softened a little bit. And we're still being selective, and we are only taking on business that hit certain thresholds from a margin standpoint because we'd like to manage the overall business model, but that will certainly be a contributor of growth. So the current quarter, those 3 areas, OCS, CPO and transceivers, that's about 25% of our company revenue. Fast forward a number of quarters from now, and we'll talk about the timing in a minute, we expect that those 3 products will drive 60% of the $2 billion number that we have. So you're probably all wondering where EML is. Well, EML is in the balance, right? And so there's a little bit of natural hedge in the model when you take a look at where we are now and where we move to at the $2 billion quarter. So hopefully, no surprises here. All right. So then you take a look at, okay, how much is each one of the growth drivers contributing. You can see it's pretty balanced, right? I mean there's a little bit more OCS than others. But on balance, it's fairly even from a growth standpoint. Now the timing will be a little bit different because you'll see that our gross margins over the next number of quarters will up and go up and down. You'll be like, hey, well, you just hit the top end of your model this quarter, why are you going down a little bit next quarter? And then why are you overachieving? A lot of it will depend on product mix, right? And so the first thing that will come out is 1.6T transceivers. We'll start shipping those in the June quarter. That will start ramping up then Michael talked about, OCS, well then that will layer in next, right? And that has a different margin profile than our cloud transceivers business. So that will give us a little bit of a tailwind. And then when we really ramp in the December quarter and then in the March quarter next year with CPO, that will provide another tailwind again, right? And so it'll be a little bit lumpy but that's really how we're thinking about it, and that's how we'd like all of you to think about it. So then there's the bar to the right, so the $2 billion, right? And so -- and I think this is really important for all of us to understand because we are thinking about the company to the right of the $2 billion, right? How do we go and achieve those opportunities? And so many of the capital deployment decisions we're making now, like the one we announced this morning, on the Greensboro fab are around the box to the right of the $2 billion. And so many of the R&D decisions that we're going to make are going to be focused in on that. And you can see that there is a wide variety of opportunity for us to continue to grow and to really match the market data that Wupen showed in his slides, right? And he showed -- I can't even remember what the number was, but a significant uptick in market growth. Well, how do we go ahead and capture that market growth? Well, it will be with the product -- the diversified product lines that we have that are on the box to the right, and we'll be happy to answer more questions about that in the Q&A. But hopefully, those -- none of those are any surprises. Okay. So the model. So we wanted to make sure, just like last year, we had talked about a $500 million quarter and then we had talked about a $600 million quarter, and we talked about a $750 million quarter and we have put some time lines around that. And so we wanted to make sure that all of you had some perspective around what our very short-term targets are, which is the middle column, and then what our midterm targets are. And so in the very short term, we expect that we'll be able to hit $1.25 billion a quarter with operating margins that hover around 35% and so we just guided to just above 30% for this March quarter. So I'm sure everybody can kind of draw a straight line and figure out how this could also happen. And then when we move to our $2 billion quarter with all of the capacity ramps that we've got going on, we think that we can actually run the company at a 40% non-GAAP operating margin. This is not EBITDA, this is operating margin. And so now, obviously, our share count will be a little bit higher, like I spoke about earlier. But from an operating standpoint, outside of capital structure, this is where we think the operating margins can be. Now from a time line standpoint, and we talked a lot about this internally. So if you take a look at what we internally believe and what our customers are asking for and what we're ramping up our own internal capacity for, and you were to say, okay, how long would it take for us to achieve each one of these targets from a run rate standpoint, we would say 9 months and 9 months. So 9 months from now, we think we can exit at $1.25 billion. And then 9 months after that, we think we can exit at $2 billion. However, I'm sure that everybody's heard about all the supply chain tightness that we've got going on in the market right now. And so we think it is prudent and measured to add 3 months in the range to each one of those targets. So the first target, it will be 9 to 12 months for the $1.25 billion. And then the second target, after we achieve the $1.25 billion, another 9 to 12 months, really with the delta being any type of supply chain surprises or supply chain tightness that we see across all of our product lines. Now obviously, the internal team is doing everything possible to make sure that we beat even the low end of those targets. But since we're communicating out something that is 18 to 24 months from now, we felt that it was prudent to have a bit of a range on that. And again, the capacity for Greensboro is not included in any of these numbers that we're talking about here. And yet the multibillion dollar agreement that we have with NVIDIA requires that Greensboro fab. So none of that potential revenue and capacity is in any of these numbers. And the reason for that is because we're not talking about calendar '28 yet, okay? I think I'm running out of time. All right. So I think I've talked about this before. We're going to keep to the same strategy. We're going to continue to invest in the right R&D programs with the right customers and the right CapEx. We've got a great balance sheet now to help enable and really lean in on some of those decisions. We think that we can drive the company to another 1,000 basis points operating margin improvement from the 30% that we just guided for the March quarter. And we think that we can exit at $2 billion and 40% operating margins anywhere from 18 to 24 months from now. Okay. All right.

Okay. Kathy, you're the MC. You don't need that, no more clicker.

Yes, I'd just like to announce that we have now published the slides on our website. Many of you have asked me for the slides. So they're on our website as of right now. So if you have a question, I would encourage you to step up to the microphone. There's one microphone in the aisle here. And then please state your name and your firm, and we'll just take your questions.

Right. Thanks, Samik.

Thank you. So maybe Wajid and Wupen for you. The first one is you're highlighting sort of the range on the years that your targets are based on the supply chain constraints. But most of the new growth opportunities that you're also highlighting seem to be a bit more under your control going forward. So I'm just wondering, when we think about the growth drivers, how much really seems to be supply chain constrained given most seem to be a bit more in your control. And secondly, for Wupen, more specifically, you mentioned silicon photonics doesn't scale to the 400-gig lane. So are you doing something internally on lithium niobate already?

So like I said, Samik, our -- what we have visibility to, and both from a capacity standpoint and from a supply chain standpoint, enable us to say, okay, look, we think that the targets are 9 months from now, 9 months and 9 months. But we do see surprises in the market, right? And we'll see a certain supplier come short. And the problem is if even one screw is missing, you can't ship the final product. And so because we are setting numbers that are for, call it, the end of this calendar year and effectively the end of next calendar year, we're putting in that 3 months because there is just a lot of volatility in the market. And there are things that come up on a weekly basis that we are able to work through generally, but we want to be measured in terms of the type of range we give on our targets. That's really what I would say.

I would say a couple of things, right? One, OCS definitely is a significant driver over that 9-month period. That does rely on supply chain. So cloud transceivers are going to be in there, where that's actually growing really fast for us, that relies some on supply chain. So 2 of the elements do. I think, on scale-up and scale-out, less so, right? We've got a lot of that under our control. And obviously, as we think about the margins and the mix, those 2 elements are super, super important. But 2 of the 4 are definitely areas where we see supply chain pressure.

Yes. On the indium phosphide or the silicon photonics question, we definitely also, like everybody else, we're looking at different kind of material combination. But we definitely think that indium phosphide, especially with all the investment that industry is going in has a very strong potential to be the so called material of choice at 400-g per lane. We think that actually complements today's silicon photonics really, really well. That's our view.

Thanks. Karl?

Karl Ackerman from BNP Paribas. Wupen, you showed how VCSEL could be used for scale-up CPO. Yet VCSEL, I think, would be just 9% of laser demand despite how you showed later, that scale-up would represent maybe 1/3 of that $90 billion TAM. I guess, why wouldn't VCSEL address a larger part of scale-up versus other technologies, such as EML? And could you discuss your investment priorities to address VCSEL if it does become a larger TAM opportunity?

That's a great question. I think at this point right now, our view is that the customers want to use single mode fiber to scale -- for scale-up, right? And -- but there is a small group of customers say, hey, I want to still leave the options open, right? What if the scale-up -- scaling of scale-up is more challenging than what we thought it would be. So that really is kind of the -- leaving that as an option, right? Second thing is actually, if you're looking about the VCSEL ecosystem, it's well established, right? And therefore, scaling of that laser and chips is not too much of an issue, right? That's why people still say, hey, let me just keep that as an alternative solution, let's see how it goes, right? And that's what we're still investing in. We want to make sure, frankly, we get all the scale-up bases covered.

Karl, I'd say it's a timing issue, too. I think certainly for probably the next 3 to 4 years, it's all going to be indium phosphide. I think what's being discussed is beyond that for very short ranges, and that's where VCSELs work, right? At the very, very short ranges. If you believe in this thesis that we're putting out there that there's going to be a tremendous amount of optical scale-up, you are going to get into a world where you're going to have short runs and in those short runs, VCSELs make some sense. So I think that's where we see applicability. It's certainly not in the next 4 years. It's a 2030 and beyond type of thing, where you really start to see this high penetration of in-rack scale-up.

Simon Leopold, Raymond James. So you gave us a lot of information today, but the one thing I didn't hear much about was really wide area network. So I'm just wondering if you could frame your thoughts of your opportunities for DCI, particularly scale across a number of the OEMs that have talked today have talked about amplifiers being particularly tight, we know you do 980 pumps. But when I look at the chart you put up, DCI looked kind of small relative to everything else. Could you maybe elaborate on this opportunity set for you?

Yes. Look, I mean, we've -- the 3 of us sat in a meeting this morning that was exactly the content you described. We have a big, big share in pump lasers, as you know, and we intend to build on that. So we're actually investing a lot in pump lasers. It's just on a relative basis, it's smaller. I mean at the end of the day, the numbers that we're looking at for these other opportunities are huge. Doesn't mean we're not investing there. It's an important part of the portfolio. We've talked about ITLAs. We've talked about pump lasers. We've talked about WSS. All 3, I think, Wupen and the team are investing in, again, just in a relative order of magnitude perspective, it's smaller.

It looks on the chart like it stays small, but it roughly doubles during that period.

Triples. Yes, we're actually upping our output in some of these areas, 5x. So our output on pumps -- so pumps are super important to us and we're actually upping the output 5x. So we're spending a ton in the capacity there. Again, just a relative order of magnitude, Simon, right? It's just smaller. No less important.

Thanks for hosting the day and congrats on that long-term model. And congrats on the Greensboro purchase as well. So that will probably be my questions. Any other details on the economics there would be great. But I guess, maybe more importantly, is this going to be for 3-inch, 4-inch or 6-inch and then you suggested ultra-high power for ELS modules, but this will, I assume, do all of the EML additional capacity you need as well there.

Yes. Chris, super quick. First, I want to thank you for rescuing this morning, right? I would have been toast without Chris. I was in the wrong hotel apparently. I was in a wrong hotel, going up and down the elevator, but Chris saved me. So thank you, Chris. Look, I mean, I think that as we think about Greensboro, it's going to be very much focused on UHP. Consistent with what we've said, it's a 4-inch, 6-inch compatible line, right? So we are thinking about starting on that particular line on 6-inch but that's a TBD decision. We have the ability to flex both ways. And as we start continuing our experimentation on 6-inch in Caswell and in San Jose, we will look to make a decision on that, but we will have the capability to swing both ways. What we've said and very consistent is San Jose, UHP, Japan is going to be EML. And then as we communicated, I think to you last time, we're thinking about now Caswell because the UHP numbers are so very big, shifting that, which was originally intended for EML and now thinking more about it for the UHP. So we're going to have 3 blocks now of UHP. San Jose Phase 1, Caswell Phase 2, Greensboro Phase III. That's kind of how we're thinking about it.

Excellent. And online in '28, is that...

What's that?

The Greensboro?

2028. So online '28, we should be shipping in 2028. We'll be qualifying next year, right? Again, we have a nice fast run. It's already fully staffed, which is great. And it's a fully operating fab. So it's just a matter of switching out the Qorvo stuff and putting in ours. But that first phase will take a year just to get to the samples and then probably another year for qualification and production.

This is Papa Sylla from Citi. So Wupen, I think you had a very kind of helpful slide around kind of putting everything together in terms of TAM. I was wondering, I guess, for your largest I guess, CPO customer or in general, if you can kind of talk to the content per GPU, I guess, let's say, if you take that customer, how should we think about it for Blackwell and we move to Rubin, Rubin Ultra and Feynman, just kind of any color on dollar content.

Yes, that's a complicated question. So let me think this way. So if we were to implement, right, today, let's say, in the Blackwell generation, you have -- today, it's all scale-up, right, so assume that you go all CPO all scaled out, right? And then you go from Blackwell over to the Rubin generation, there is an increment. I think the scale out bandwidth is becoming bigger, right? So that's probably a, call it a 2x increase, right, of just the scale out based on CPO, right, per GPU, right? Now when you go from that to an inter-rack scale-out, that's probably -- scale-up, that's going to be another probably 2 to 3x. That's why we put a 3 to 4x, right? So that's -- think about Blackwell to Rubin, roughly 2x, from Rubin to Rubin Ultra or something like that, the scale-up happens, that will be another 2 to 3x. So that's kind of how you think about from a UHP content point of view.

I don't know, Papa, that we've actually characterized how much per -- we get asked that all the time, right? You and others have said, hey, how do we measure it per GPU. It's tough for us to measure that, right? what we're looking at is what's the demand on us, what's the backlog that's been placed on us and then trying to give scales relative to what we see for scale-out, initial phase of scale-up and then the second phase of scale-up.

Okay. That makes sense. If I have a quick follow-up on that TAM kind of graph, you had kind of scale-up optics TAM and then you had the scale-out. I assume a lot of that scale-out you have the transceivers in there. But I'm curious if you can, let's say, if you remove out the transceiver and we look at kind of optics from just kind of CPO, is scale-up by 2030 bigger than scale-out? Or at what point should we expect scale-up to start...

I don't have that number. I need to...

You're right. When I saw that graph, I thought the same thing you did. I think that the reality is scale-up is much higher, it's a time frame. I think Kathy put 2030 on the chart. In that time frame, if you just look at UHP, UHP should be significantly higher for scale-up and scale-out. What you see in the mix is transceivers, right? That's what sort of shifting the number a bit.

George Notter, Wolfe Research. I guess my question is just qualitatively, what's embedded here on the $2 billion number in terms of the trade-off between copper and optical in the scale up domain, right? So there's a copper distance radius associated with racks. And I guess I'm just curious how you kind of put your numbers with that copper radius and what's embedded in how you think about your TAM and your sizing?

Yes. I mean, George, I think what we're saying is sort of in the second half of 2027, right, we'll start shipping scale-up and the scale-up is going to be coming sort of switch to switch. You're going to see not in the backplane itself. It's going to be a lot of connections inside the cluster, right? And so to Papa's question, we are sizing that from a magnitude standpoint at 3 to 4x what we're seeing in scale-out, but it's not going inside the backplane. What we said is at the end of '28, we're going to start to see connections inside the backplane. So that's where you start to see it really a significant leg up on CPO. It's not to say that first leg is small. It's pretty significant, and we're going to have to ramp significantly to get there. But to be clear, it's more of a cross-cluster type of connection.

And then the other one I had was just on the NVIDIA relationship. Obviously, they're going to become a very large customer, I think, for you guys as I kind of play this forward. Like how do you walk the balance between NVIDIA soaking up your indium phosphide capacity and other customers that also want that capacity? I expect you're going to say this is not an exclusive arrangement, but again, it probably creates a lot of paranoia, I think, among the other customers. So what's the view?

Yes. I mean it's -- to a certain extent, it's been a good paranoia, right? Because I think people can sort of size it and say, wow, that's a big chunk of the capacity. So what has enabled Wajid and Wupen to go out and do is negotiate with the rest of the guys on very favorable terms, I'd say. So yes, it has created a little bit of a feeding frenzy. Yes, I think that's actually going to end up being a positive for us. But it is nonexclusive, and we intend to ramp this capacity pretty significantly to serve -- I forget, I think it was Wupen that talked about this discussion, yes, with a customer looking for 1 billion, literally 1 billion CW lasers that's outside our current ecosystem that's coming in and saying, we need as much of this capacity as we can get. So it is great to be in the driver seat. I mean, there's no question about it. We really are trying our hands on the wheel and these 2 guys are out negotiating with our -- there's our sales leader in the back, John, these different capacity arrangements, and we expect to be able to talk to those over the next couple of quarters.

This is Vijay from Mizuho. I want to go back to Wupen. Obviously, a very interesting $90 billion chart, I guess, getting a lot of questions on that. When you look at the scale-up and scale-out that you showed, how much of that is the transceiver versus SiPHo in that? You mentioned, as you go to CPO you have some challenges, might be slower, might be there's more transfer. So what is the mix within scale-up and scale-out as you go out ? And 2030? And then on OCS also, when you look at the OCS slide that you showed, is that just one customer? Is that multiple customers? Do you see that in scale-up, scale-out? If you can kind of give us a little color.

Yes. Let me answer the OCS question first. That's an easier one. So the OCS really is multiple customers, multiple applications, right? The bar is big enough to be higher than anything that we know today, right? So it's definitely multiple scenarios, multiple customers. That's for sure, right? On the scale...

I mean, let me just add to that, right? So I think, Vijay, look, we're shipping to 3 guys today. We've been clear on that. This new incremental order is 1 of those 3, right? So to be clear, we expect to add customers. I mean, the use case is that Wupen talked about are varied. We talked about the spine switch, we talked about sort of a scale-up type of approach. And then we talked about sort of a super scale-up going inside the rack and getting to that high ratio of attach. So the OCS opportunity for us is, we think, is the most exciting sort of immediate term, right? And then as you go out, it's certainly to scale up. So it's 3 customers we're shipping to. We expect to add more, 1 of those 3 definitely leaned in with this multibillion dollar incremental order.

Yes, your first question right, I think in that scale-up part -- scale-out part, like Michael said, right, there's a lot of bunch transceiver in there, both EML-based transceivers and SiPHo-based transceivers, right? And then certainly, 400G per lane will be in there, too and in the scale-up part primarily is more of the UHPs and EOS, right? So certainly, the content here -- the volume here is probably more similar, right, than the TAM side because of the -- how much content -- module content is in there in the scale-out area.

Okay. And Wajid, just a quick question for you on the convert side. You have some converts out there, I guess, '28, '29. Any plans on that?

Did the bank send you? So I mean, like I said earlier, we're very comfortable with our capital structure now, not only because of the NVIDIA investment, but the operating profits that we're generating now is really giving us a lot of flexibility. It doesn't mean that we won't go and take a look at the maturity and what makes sense. And we'll take a look at the pricing versus fair value and all that type of stuff. But there's no pressure. I guess that's the way I would position it. There's no pressure.

Meta Marshall from Morgan Stanley. I guess just 2 questions. Any details that you can give around the new OCS order? Just is it scale-up? Is it spine? Is it 300x300, just any details there? And then just a second question. You guys have been using Caswell as you spoke to kind of aid with EML capacity. Just what is that transition time line to kind of move that over to UHP and just -- or UHL? And then just how does that impact kind of the excess capacity you've kind of been able to deliver on the EML side?

Yes. Thanks, Meta. On OCS, we haven't said who the new customer is. It's definitely 1 of the 3 that we're currently shipping to and they are -- have seen our product and really believe in it to the extent that they're willing to commit quite a bit more backlog than they had previously. It is a 300x300, so it's the high-radix where we think we have quite a bit of differentiation. And we expect to build on that. I mean I think right now, if you look at our opportunities, again, sort of intermediate term, this is one that we're super excited about. We're growing our customer base. We're really leaning into that opportunity. And we feel like it's something where we can really add to the revenue profile in late '26 and '27. With respect to Caswell, right, you're 'right. I think that we initially had targeted Caswell as EML overflow. And we are looking at it now saying, look, this UHP opportunity is so significant. We've got to bring extra capacity online for scale-out initially and then scale-up as a second phase. And we think that can kind of carry us through to when Greensboro comes online. What does it mean? It means that we're actually going to rely more on Takao, the second Japanese fab, which is still very underutilized to bring up additional EML capacity. So the basic strategy is now concentrate EMLs in Japan, right? So it takes away a little bit of the diversity that we wanted to have initially, but it helps us get Takao up and running and then concentrate first San Jose, then Caswell, then Greensboro on UHP.

Ryan Koontz with Needham. Thanks for hosting today.

Save the best for last, Ryan. Is that true?

Great. Maybe reflecting on your experience with 800G transceivers and some of the delays you saw, what gives you the confidence in 1.6T? Where are you in qualifications? Maybe any color you can share with us gives you confidence in that quick ramp? That seems like a fast emerging market.

Yes. Look, I mean, 800 gig, we acquired Cloud Light sort of in the middle of 800 gig. Cloud Light was never sort of first to market. They were always a captive Google house, right? We -- that's always to be very clear. And we were always sort of later. It was a silicon photonics. If you look at what Wupen described quite well. Most of the first designs are going to be EML. They're easier. They're more -- they're performance driven, and we have been pigeonholed as silicon photonics providers. So that means we're typically later in the curve. Then when we took over Cloud Light, we actually didn't do particularly well. We got later and later in the design cycle. Our designs were well off the mark relative to timing with Google and other customers. And so we started falling behind. Now we've reconstituted that whole Cloud Light business. We rolled it up under Wupen. He's spending a tremendous amount of time on it. And the last couple of 800 gig opportunities, we were first. We were actually at the head of the curve. Even with silicon photonics, we were able to out-execute the EML guys. And based on what we know on 1.6T, again, we're first to deliver samples. Now that's only half the battle, right? We have to get our production working as well. So you have to go from samples, which we've definitely created a tremendous amount of excitement in terms of our ability to execute on the samples. We have to then roll that into production which is still choppy. I mean, if I'm being honest, we're not perfect in our production, and we've got to get better in terms of getting the margins up and getting our production right. But it definitely looks like we're catching the early part of the curve, which is super important from a margin and revenue standpoint and then provided we can execute on the back end, we should be in pretty good shape.

Great. Maybe a quick follow-up if I could on indium phosphide expansion? I know there's long lead times for those reactors. You guys feel comfortable with the supply there?

Yes. I think we're in pretty good shape with the reactors, it is. You're 100% right. It's a long lead time item. It's probably not the thing that worries me in Greensboro or as we ramp up in San Jose, right? It's really around substrate supply. I mean, there is still tightness. I think we've got that result. We talked to you -- Kathy and I had talked to you about the 7-year agreement that we've been able to work out. We feel pretty good about where we're sitting there but that's probably the thing that keeps me up at night most is substrates, less so sort of reactors and getting the right tools into the fab, although it's not a 0 challenge.

Thanks so much, Ryan. So with that, that's a wrap. I look forward to seeing all of you at our booth, which is #1439. It's smack dab in the middle, biggest booth on the show floor and not that we're competitive at all. But yes, so I look forward to seeing you there. I have predetermined like office hours with our CTO, Matt Sysak, at the booth. So you know if you have an appointment with us. If not, feel free to stop by the booth, especially today, I think, is the least crazy day. So I appreciate all of you attending and thanks so much.

Thank you.

Thank you.