The setup is strong: AI infrastructure is pulling forward optical demand, and the company has credible manufacturing and qualification advantages. The return profile is still gated by whether revenue growth can outrun expected multiple compression.

AI clusters are becoming bandwidth- and power-limited; Lumentum can compound content via higher-speed lasers/components plus optical switching and selective attach, scaling revenue materially while the stock rerates down to a more normal optics multiple—still leaving room for roughly ~2x EV growth by 2031 if execution holds.

Photonics is a hard bottleneck for AI scale (power-per-bit, reliability, density); Lumentum’s vertical laser manufacturing and hyperscaler qualification create durable relevance, but it remains a supplier (not a platform) with customer-cycle exposure.

The non-linear upside is not one SKU; it’s stacking (more ports, higher lane speeds, higher dollars per port, and a gradual shift toward optical fabrics). Lumentum’s advantage is shipping-grade photonics (device physics + yield + qualification trust) and the ability to expand constrained laser capacity. The key dampener is that today’s valuation already assumes a prolonged AI upcycle, so even with strong revenue growth, returns likely come from earnings catching up while the multiple compresses toward peer-like levels.

The dominant risk is valuation + customer-cycle coupling: if AI networking spend pauses or customers multi-source/insource, Lumentum can grow units yet still see margin and multiple compression. Secondary risks are capex utilization (overbuild/underbuild), export-control friction across its global footprint, and execution quality during rapid ramps of new platforms like optical switching and next-gen laser architectures.

Slight uplift driven by stronger near-term run-rate/guidance and better visibility into multiple growth vectors (components + switching), while still assuming de-rating by 2031.

$268.43