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Note 19. Subsequent Events
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Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
 
(Mark One)
☒  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 27, 2026
 OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
to
                        
 Commission File Number 001-36861
Lumentum Holdings Inc.
(Exact name of Registrant as specified in its charter)
 
Delaware47-3108385
(State or other jurisdiction of
incorporation or organization)		(I.R.S. Employer
Identification Number)
1001 Ridder Park Drive, San Jose, California 95131
(Address of principal executive offices including Zip code)

(408) 546-5483
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of exchange on which registered
Common Stock, par value of $0.001 per shareLITENasdaq Global Select Market

Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. 
Yes ☒    No o    

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes o    No ☒

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☒  No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes ☒  No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer☒Accelerated fileroNon-accelerated fileroSmaller reporting company☐
Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o 
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. o

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ☐  No ☒
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant was approximately $16,469 million, based on the closing sales price of the registrant’s common stock on December 26, 2025 (the last business day of the registrant’s most recently completed second fiscal quarter) of $390.77 per share, as reported on the Nasdaq Global Select Market. Shares of common stock held by officers, directors and holders of more than five percent of the outstanding common stock have been excluded from this calculation because such persons may be deemed to be affiliates.
As of August 14, 2026, the Registrant had 89.7 million shares of common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE
Portions of the information called for by Part III of this Annual Report on Form 10-K are hereby incorporated by reference from the definitive proxy statement for the registrant’s annual meeting of stockholders, which will be filed with the Securities and Exchange Commission not later than 120 days after the registrant’s fiscal year ended June 27, 2026.


Table of Contents
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1
Table of Contents
FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K (this “Annual Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements relate to, among other things, our markets and industry, products and strategy, the impact of export regulation changes, the expected benefits of our acquisitions, macroeconomic conditions, including supply chain conditions and inventory management by our customers, instability and uncertainty in the banking and financial services markets, and tightening credit markets on our business and results of operations, sales, gross margins, operating expenses, capital expenditures and requirements, liquidity, product development and research and development efforts, manufacturing plans, litigation, effective tax rates and tax reserves, our corporate and financial reporting structure, our plans for growth and innovation, our expectations regarding U.S.-China relations, international trade regulation and restrictions (including tariffs, duties, and export controls to be implemented by the U.S. and other countries), market and regulatory conditions, trends and uncertainties in our business and financial results, and are often identified by the use of words such as, but not limited to, “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “project,” “seek,” “should,” “target,” “will,” “would,” “contemplate,” “believe,” “predict,” “potential” and similar expressions or variations intended to identify forward-looking statements. These statements are based on the beliefs and assumptions of our management, which are in turn based on information currently available to management. Such forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section entitled “Risk Factors” included under Part I, Item 1A of this Annual Report. Furthermore, such forward-looking statements speak only as of the date of this Annual Report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.
PART I
ITEM 1.    BUSINESS
General
Overview
Lumentum Holdings Inc. (“we,” “us,” “our”, “Lumentum” or the “Company”) is a global leader in optical and photonic technologies and an industry-leading provider of optical and photonic products based on revenue and market share. Our products are essential to a range of cloud, artificial intelligence and machine learning (“AI/ML”), telecommunications, consumer, and industrial end-market applications. We operate in one reportable segment as a single, integrated enterprise. See “Note 17. Operating Segments and Geographic Information” to the consolidated financial statements.
We disaggregate revenue by type of product, which are Components and Systems, and by geography. A Components product is defined as one of the individual building blocks that goes into creating a larger solution. It is typically not a complete solution on its own but rather a specialized element that enables system functionality. This includes semiconductor laser chips, laser sub-assemblies, line subsystems and wavelength management systems. These are supplied to customers who then integrate them into their own full system solutions. Components represent foundational parts that support or enable that system’s operation and include optical chips and subsystems that are supplied to cloud data center operators, AI/ML infrastructure providers, and network equipment manufacturer customers.
A Systems product is defined as a complete, stand-alone solution that delivers full functionality to the end customer. It is typically self-contained and ready to operate within a customer’s network or application environment. This includes optical modules, optical circuit switches, and industrial lasers such as short-pulse solid-state lasers and kilowatt-class fiber lasers. These products integrate multiple technologies and subsystems into a finished solution that directly addresses a customer’s needs. A system represents the end-product that can be deployed and used independently.
Our products enable high-capacity optical links for cloud computing, AI/ML workloads, and data center interconnect (“DCI”) applications, as well as for communications service provider networks. Our offerings support access (local), metro (intracity), long-haul (intercity and global), and submarine (undersea) network infrastructure. Our products serve enterprise network infrastructure needs, including storage area networks (“SANs”), local area networks (“LANs”), and wide area networks (“WANs”). Demand for our products is fueled by the ongoing expansion of network capacity required to support cloud services, AI/ML processing, streaming video, video conferencing, wireless and mobile connectivity, and the internet of things (“IoT”). In addition, our industrial laser products are used for precision material processing across diverse industries, including semiconductor and microelectronics fabrication, electric vehicle and battery production, metal cutting and welding, and advanced manufacturing that emphasize greater manufacturing precision, flexibility, and sustainability.
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We have a global footprint that enables us to address global market opportunities for our products with employees engaged in research and development (“R&D”), administration, manufacturing, support and sales and marketing activities in various locations worldwide. Our headquarters are located in San Jose, California, and we have manufacturing capabilities and facilities in North America, Asia-Pacific, and Europe.
Lumentum was incorporated in Delaware as a wholly owned subsidiary of JDS Uniphase Corporation (“JDSU”) on February 10, 2015. In August 2015, we were spun off from JDSU and became an independent publicly traded company through the distribution of our common stock by JDSU to its stockholders.
Since our spin-off from JDSU (now Viavi Solutions, Inc., or Viavi), we have completed a number of acquisitions, including Oclaro, Inc. (“Oclaro”) in 2018, NeoPhotonics Corporation and IPG Photonics’ telecom transmission product lines in 2022, and Cloud Light Technology Limited (“Cloud Light”) in 2023. These acquisitions have enhanced our product portfolio, broadened our revenue mix and strengthened our position to meet the evolving needs of our customers.
Our Industry
Our business is driven by end-market applications leveraging the performance advantages of advanced optical and photonic solutions. We operate within global markets characterized by robust, long-term growth trends that are increasing demand for our products and technologies.
The convergence of factors including the growing reliance on data transmission, the rapid adoption of AI/ML, and the increasing digitalization of society is driving expansion in cloud data centers and the demand for higher-bandwidth network solutions. Our products and technologies are at the forefront of these trends, engineered to support increased data volumes and computational loads while meeting the industry's need for advanced network capabilities.
Additionally, the manufacturing industry's pursuit of higher precision, innovative materials, and improved efficiency fuels demand for industrial laser-based solutions. Lumentum is well-positioned to capitalize on this trend through the provision of ultrafast lasers for micromachining and advanced material processing. In addition, we also produce laser emitters for 3D sensing applications in consumer electronics.
While we maintain a positive outlook on the long-term prospects for our products and technologies, we acknowledge the presence of industry and market risks and uncertainties, including fluctuations in supply and demand, that have led to volatility in our business and financial performance.
Industry Conditions
Through fiscal year 2024, we experienced significant fluctuations in demand as customers delayed projected shipments or built up inventory in response to supply shortages and then brought down inventories as supply chain constraints eased. Our revenue fluctuated in response to these changes in demand and our margins were adversely impacted as we were not able to fully recover costs, such as underutilized manufacturing capacity. However, beginning in the first quarter of fiscal year 2025, network equipment manufacturers normalized inventory levels; and since then, we have seen increasing demand from AI and cloud customers as they continue to expand their data centers, driven in part by the continued advances in cloud and AI infrastructure. This demand is outpacing our current supply which has required us to make decisions on supply allocation. We are investing in manufacturing capacity, both internally and with contract manufacturers, to meet demand.
Our supply chain is complex, and we need to manage supply of certain components required to build our products while confronted with fluctuating demand from our customers. From time to time, we experience logistics and supply chain issues and shortages of the types of components we and our customers require in our products, and when we experience these shortages, we have had to incur incremental supply and procurement costs in order to increase our ability to fulfill demands from our customers.
Due to worldwide operations, we and our customers are also subject to risks relating to the global trade environment. We are actively monitoring and assessing the global trade environment, particularly with respect to various proposed and enacted changes in tariff regulations and trade restrictions. The ongoing uncertainty surrounding trading policies, including the potential for additional tariffs, restrictions related to our customers and retaliatory measures by non-U.S. governments, continues to create a volatile environment that could disrupt our operations. The imposition of tariffs on certain imported goods and materials and export controls on critical components may increase our costs and place upward pressure on the cost of goods sold, which, in turn, may reduce our gross margins if we are unable to pass these costs onto customers through price increases.
For more information on risks associated with supply chain constraints and customer inventory, as well as tariffs and other trade restrictions, refer to Item 1A “Risk Factors” of this Annual Report.
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Geopolitical Developments
As a global business with operations spanning diverse geographic regions, we are exposed to geopolitical risks. Fluctuations in the geopolitical landscape, including war, military conflicts, changes in export regulations, the effects of heightened, scheduled, or proposed tariffs, and shifts in national priorities and foreign relations policies, can significantly impact our business. For instance, modifications to trade restrictions and export regulations can adversely affect both product demand and our ability to supply customers, which would harm revenue and profit margins. Moreover, disruptions in our customers' supply chains due to geopolitical events could reduce or delay their demand for our products, ultimately impacting our revenue and operating results.
For more information on risks associated with the change in geopolitical landscape and regulatory actions, refer to Item 1A “Risk Factors” of this Annual Report.
Markets
We maintain leading market positions in our fast-growing optical networking markets through our extensive product and technology portfolio and close relationships with a wide range of market-leading customers. We provide a wide range of optical and photonic components, modules, and subsystems that support high-speed, high-capacity transmission of data over fiber optic links in cloud data centers, AI/ML, enterprise and communications services networking. Our customers include cloud and network service providers, AI infrastructure providers, and network equipment manufacturers (“NEMs”). Within data center and AI/M applications, our products enable high-speed interconnection across networked servers, AI accelerators, storage, and switches. Within communication service provider applications, our products support high-capacity access (local), metro (intracity), long-haul (city-to-city and worldwide) and submarine (undersea) optical networks.
Within the industrial market, our diode lasers serve as pump sources for high-power fiber lasers used in metal fabrication and other demanding applications. Our ultrafast lasers cater to industries such as printed circuit board manufacturing, semiconductor processing, electric vehicle battery production, solar cell production, and flat panel display fabrication, where precise micromachining is essential.
In the consumer electronics market, our laser light sources are integral components of 3D sensing cameras used in smartphones, computers, and other consumer electronics devices. These 3D sensing capabilities enable applications such as biometric identification, augmented and virtual reality, and computational photography.
Trends
The convergence of cloud computing and AI is driving rapid innovation and expansion in optical hardware for hyperscale operators. The immense computational demands of training and running AI models are shifting infrastructure from traditional copper interconnects to high-speed photonics. Concurrently, surging data traffic from video streaming, search engines, e-commerce, and cloud services continues to fuel the data center expansion.
Photonic solutions offer substantial advantages over copper connections, including ultra-fast, high-volume data transmission and reduced electromagnetic interference, enabling data traffic to continue to scale to accelerate AI model training and enhance high-performance computing (“HPC”) efficiency.
To address these challenges, web-scale companies are adopting distinct optical architectures:
•Scale-Out Optical Solutions: Optical hardware connects individual compute clusters, servers, and switches across the broader data center network to manage massive parallel workloads. This includes the adoption of 200G lane speed optical components that double data transfer rates compared to traditional 100G lanes.
•Scale-Up Optical Solutions: High-speed photonics and optical switches are deployed to directly cluster and interconnect GPUs and AI accelerators within the compute fabric, maximizing cluster efficiency and processing speeds.
•Scale-Across DCI Solutions: High-speed data center interconnects (“DCIs”) are constructed to enable seamless, low-latency data exchange across geographically dispersed data center units. This scale-across capability optimizes resource utilization by allowing cloud operators to leverage and balance computing power across multiple disparate locations.
The exponential growth of data across industries also drives the expansion of long-haul, metro, and access networks. Dense wavelength-division multiplexing (“DWDM”) technologies are being leveraged to increase data speeds while reducing costs. High-end networking equipment must now handle both legacy and internet protocol traffic while meeting stringent requirements for bandwidth, scalability, speed, reliability, compactness, and cost-effectiveness.
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Further, the dynamic nature of network traffic demands agile optical networks that adapt to changing conditions. Technologies like Reconfigurable Optical Add-Drop Multiplexers (“ROADMs”), wavelength-selective switches, and tunable transmission products facilitate remote capacity adjustments. This need for capacity expansion across DCIs, metro regional networks, and long-haul networks is further accelerated by the widespread deployment of 5G mobile networks and bandwidth-intensive applications is increasing data speed at the network edge.
The industrial laser market is driven by the pursuit of precision and efficiency in material processing. Fiber lasers have surpassed gas lasers in sheet metal processing and welding due to their superior power, beam quality, power efficiency, and cost-effectiveness. This technology empowers manufacturers across metal fabrication, automotive, and electronics to produce smaller, lighter, and more functional products from advanced materials.
The trend toward miniaturization necessitates precise micromachining with minimal heat impact. Solid-state and ultrafast lasers excel in these tasks, replacing traditional tools for processes like creating vias in circuit boards and singulating wafers. Ultrafast lasers, with their exceptionally short pulses, are particularly adept at the delicate and precise micromachining required in semiconductor, display, solar cell, and EV battery production.
In the consumer market, laser light sources are integral to 3D sensors primarily used in mobile devices. This technology enables real-time depth perception, transforming image capture and granting devices the ability to perceive the world in three dimensions. Applications span biometric identification, computational photography, virtual and augmented reality, and natural user interfaces.
Offerings
Lumentum is a leading provider of high-speed optical transceivers and optical components underpinning modern AI and cloud computing applications. Optical transceivers and data interconnect solutions are essential for connecting servers, switches, and routers within data centers. We also manufacture key components used in optical transceivers and data interconnect solutions, including high-speed laser transmitters, photonic integrated circuits, and photodiodes, high-power laser light sources. For data center interconnects, Lumentum offers both its own coherent pluggable transceivers and the underlying ultra-narrow linewidth laser and coherent components used by transceiver customers.
Beyond standard offerings, we deliver customized solutions tailored to specific customer needs, such as high-power laser sources, compact laser arrays, and advanced packaging schemes enabling co-packaged optics and integrated photonics assemblies.
In metro and long-haul optical networks, Lumentum offers a comprehensive suite of coherent and direct-detect optical transmission components, modules, and optical transport solutions. Our tunable transceivers, transmitter modules, and high-speed coherent components are essential to DWDM systems maximizing fiber capacity and minimizing cost per bit.
For optical transport applications, we offer a broad range of products, including ROADMs, optical amplifiers, and optical channel monitors to efficiently switch, route, and condition optical signals. Our portfolio also includes pump lasers for optical amplifiers and passive components such as switches, attenuators, and wavelength-division multiplexing (WDM) systems. Beyond discrete components, we provide integrated modules, circuit packs, and subsystems for amplification, switching, and wavelength management. Additionally, our transport offerings include optical circuit switches for data center applications, helping to reduce power consumption and improve overall network efficiency.
We also offer a comprehensive range of industrial lasers to address diverse manufacturing needs. Our fiber lasers deliver kilowatt-class output power and excellent beam quality, making them ideal for sheet metal processing and general manufacturing applications. Additionally, high-power, solid-state and ultrafast lasers are used by manufacturers for precision machining tasks like drilling in printed circuit boards, wafer singulation, glass cutting, and solar cell scribing. Our 3D sensing products are primarily laser light sources, including higher-performance vertical-cavity surface-emitting lasers (VCSELs) and VCSEL arrays.
Strategy
In optical networking, we focus on technology leadership through innovation in close partnership with our customers, cost leadership and functional and vertical integration. We align the latest technologies with industry-leading, scalable manufacturing and operations to make us a valuable partner for cloud data center and network operators, AI/ML infrastructure providers, and NEMs. We aim to drive the next phase of data center infrastructure and communication data network scaling with technologies and products that are faster, more energy-efficient, more agile and more reliable.
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Our commitment to innovation, particularly in photonic integration, drives the development of optical products that meet the evolving demands of data centers. Each product generation offers enhanced functionality, reduced size, lower power consumption, and improved cost-effectiveness. By providing a wide range of innovative optical solutions, from components to integrated modules to complete systems, we enable our customers to build the high-performance data center and communication networks of today and engineer those of the future.
In industrial lasers, we leverage our long-term relationships with OEM customers and our broad product and manufacturing technology portfolio to create innovative and valuable solutions that enable our customers to win in their markets.
Customers
During fiscal years 2026, 2025, and 2024, net revenue from a single end customer which represented 10% or more of our total net revenue of the applicable fiscal year is summarized in the table below:
Years Ended
June 27, 2026June 28, 2025June 29, 2024
Customer A26.6 %15.4 %18.9 %
Customer B15.0 %16.0 %11.4 %
International Operations
During fiscal years 2026, 2025 and 2024, net revenue from customers outside the United States based on the geographic region and country where our product is initially shipped to represented 79.2%, 81.0% and 73.8% of net revenue, respectively. Frequently, customers request shipment of our products to their factories, contract manufacturer factories, or other locations in countries that differ from their headquarter location (which in many cases is in the U.S.). Our net revenue is primarily denominated in U.S. dollars, including our net revenue from customers outside the United States based on customer shipment locations as described above. Refer to “Note 17. Operating Segments and Geographic Information” to the consolidated financial statements. For information regarding risks associated with our international operations, refer to Item 1A “Risk Factors” of this Annual Report.
Backlog
Due to possible changes in product delivery schedules and cancellation of product orders, and because our sales often reflect orders shipped in the same quarter in which they are received, our backlog at any particular date is not necessarily indicative of actual revenue or the level of orders for any succeeding period.
Competition
We compete against various public and private companies providing photonic components, modules, and systems. Some of these competitors are also our customers for certain of our products.
Seasonality
Our revenue may be influenced on a quarter-to-quarter basis by customer demand patterns and new product introductions. Some of our products may be incorporated into consumer electronic products, which are subject to seasonality and fluctuations in demand.
Mergers and Acquisitions
We evaluate strategic opportunities regularly and, where appropriate, have acquired and expect to acquire in the future, additional businesses, products, or technologies that are complementary to, or broaden the markets for our products. We believe we have strengthened our business model by expanding our addressable markets, customer base and expertise, diversifying our product portfolio and fortifying our core businesses through acquisitions as well as through organic initiatives.
Refer to “General - Overview” above and “Note 4. Business Combination” to the consolidated financial statements for additional information.
Research and Development
We devote substantial resources to research and development (“R&D”) for the development of new and enhanced products to serve our current markets and attractive new markets for our technology. We also expend significant engineering resources to enhance both product performance and our ability to manufacture products in greater volume and at lower cost.
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We are maintaining our capability to provide leading products throughout the network, while focusing on several important sub-segments. We are making significant investments in next generation optical components for cloud data center and AI/ML applications, including higher speed and higher optical power laser chips for use in high-speed datacom transceivers and data interconnection solutions. We are also investing in the development of new high-speed optical transceiver modules for use in cloud data center, AI/ML, and DCI applications. In addition, we are investing in the emerging optical circuit switching market to enable direct data transmission between fiber optic cables in data centers within the optical plane. We continue to invest in research and development to develop innovative components and modules for telecommunications networks, such as higher capacity ROADMs and tunable laser and coherent components and transceiver modules needed for long-haul and metro applications. We are also responding to market needs for higher levels of integration, including the integration of optics, electronics and software in our modules, subsystems and circuit packs. We continue to develop new solid-state, fiber, and ultrafast short pulse lasers that leverage our technologies. These products are targeted at serving customers engaging in the semiconductor device, solar cell, display, and electric vehicle and battery manufacturing markets as well as broader materials processing and precision micromachining end-markets. We also continue to develop new and enhanced laser diode products with higher performance and efficiency at lower cost, primarily for the consumer end-market.
Intellectual Property
Intellectual property rights that apply to our various products include patents, trade secrets and trademarks. We do not intend to broadly license our intellectual property rights unless we can obtain adequate consideration or enter into acceptable patent cross-license agreements. As of June 27, 2026, we owned approximately 1,000 U.S. patents and 900 foreign patents with expiration dates through 2046 and had approximately 670 patent applications pending throughout the world.
Manufacturing
We use a combination of our own wafer fabrication facilities, or wafer fabs, assembly and test facilities, as well as third-party contract manufacturers to produce our products. Our significant manufacturing facilities are located in the United States, Thailand, China, the United Kingdom, Slovenia, and Japan.
We expanded our manufacturing footprint through our various acquisitions, and in 2026, we continued to add to our footprint by acquiring a manufacturing facility in Greensboro, North Carolina. We have undertaken various initiatives to consolidate and restructure certain of our manufacturing and operational sites, particularly in light of efficiencies and synergies achievable from prior acquisitions, while also expanding overall manufacturing capacity for new and high growth product lines across our global manufacturing footprint.
Our significant contract manufacturing partners are located primarily in Thailand, Taiwan, Malaysia and the Philippines. We rely on the capabilities of our contract manufacturers to plan and procure components and manage the inventory in these locations.
Sources and Availability of Raw Materials
We use various suppliers and contract manufacturers to supply parts and components for manufacturing and support of multiple product lines. Although our intention is to establish at least two sources of supply for materials whenever possible, for certain components we have sole or limited source supply arrangements. We may not be able to procure these components from alternate sources at acceptable prices and quality within a reasonable time, or at all, therefore, the risk of loss or interruption of such supply could impact our ability to deliver certain products on a timely basis. Risks associated with reliance on third parties for the timely and reliable delivery of raw materials are discussed in greater detail in Item 1A “Risk Factors” of this Annual Report.
Human Capital Resources
As of June 27, 2026, we employed approximately 13,757 full-time employees, including approximately 11,916 employees in manufacturing, 1,085 employees in R&D and 756 employees in SG&A. Of the 13,757 employees, approximately 1% are represented by two national collective bargaining agreements with local chapters in Slovenia and two labor unions in China. We believe that our relations with both our union and non-union employees are in good standing.
We believe that our future performance relies on the strength of our employees, and our ability to recruit, retain, develop and motivate the services of executive, engineering, sales and marketing, and support personnel is critical to our success. We strive to meet these objectives by offering competitive pay and benefits in a diverse, inclusive and safe workplace and by providing opportunities for our employees to grow and develop their careers.
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Competitive Pay and Benefits
We provide compensation and benefits packages that we believe are competitive within the applicable market. We use a combination of compensation and other programs (which vary by region and salary grade) to attract, motivate and retain our employees, including semi-annual or annual performance bonuses, stock awards, an employee stock purchase plan, health savings and flexible spending accounts, paid time off, family leave, tuition assistance programs, health and wellness benefits and programs. We review our benefits packages annually, or more frequently as needed, to ensure we remain competitive with our peers and continue to attract and retain talent throughout our organization.

Employee Recruitment, Retention and Development

We are committed to recruiting, hiring, retaining, promoting and engaging a global, diverse workforce to best serve our global customers, suppliers, and partners. We have established relationships with professional associations and industry groups to proactively attract talent, and we partner with universities for our internship program. We believe that our commitment to our internship program and university partnerships contributes to developing the next generation of talent and provides a pipeline of recent college graduates into our talent pool.
Material Government Regulations
Our business activities are international and subject us to various federal, state, local and foreign laws in the countries in which we operate, and our products and services are subject to certain laws and regulations affecting the sale of our products.
Environment
Our R&D, manufacturing and distribution operations involve the use of hazardous substances and are regulated under international, federal, state and local laws governing health and safety and the environment. We apply strict standards for protection of the environment and occupational health and safety to sites inside and outside the United States, even if not subject to regulation imposed by foreign governments. We believe that our properties and operations at our facilities comply in all material respects with applicable environmental laws and occupational health and safety laws. However, the risk of environmental liabilities cannot be completely eliminated, and there can be no assurance that the application of environmental and health and safety laws will not require us to incur significant expenditures. We are also regulated under a number of international, federal, state and local laws regarding recycling, product packaging and product content requirements. The environmental, product content/disposal and recycling laws are gradually becoming more stringent and may cause us to incur significant expenditures in the future.
In connection with our separation from JDSU and trading as an independent public company in 2015, we agreed to indemnify Viavi for any liability associated with contamination from past operations at all properties transferred to us from Viavi, to the extent the resulting issues primarily related to our business. We have not been presented with any claims to date.
Global Trade and Export Controls
As a global business, we operate in many jurisdictions and our products and services are subject to diverse and evolving import and export laws, including international treaties, U.S. export controls and sanctions, customs regulations, and local trade laws. These regulations may delay product launches, restrict our operations in certain regions, or limit dealings with specific entities or individuals, particularly where sensitive or controlled technology is involved. For instance, the U.S. and other governments have imposed restrictions on certain semiconductors and telecommunications products and components, which limit both sales of our products and our access to product components. At the same time, noncompliance with these trade regulations could significantly hinder our ability to operate in some markets or serve particular customers.
For additional information concerning regulatory compliance and a discussion of the risks associated with governmental regulations that may materially impact us, refer to Item 1A “Risk Factors” of this Annual Report.
Available Information
Our website is located at www.lumentum.com, and our investor relations website is located at http://investor.lumentum.com. Copies of our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as amended, are available free of charge on our investor relations website as soon as reasonably practicable after we file such material electronically with or furnish it to the Securities and Exchange Commission (the “SEC”). The SEC also maintains a website that contains our SEC filings at www.sec.gov.
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Investors and others should note that we routinely use the Investors section of our website to announce material information to investors and the marketplace. While not all of the information that we post on our corporate website is of a material nature, some information could be deemed to be material. Accordingly, we encourage investors, the media and others interested in us to review the information that we share on www.lumentum.com. Information in, or that can be accessed through, our website is not incorporated into this Form 10-K.
ITEM 1A. RISK FACTORS
Investing in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with all of the other information in this Annual Report on Form 10-K, including the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes, before making a decision to invest in our common stock. Our business, financial condition, results of operations or prospects could also be harmed by risks and uncertainties not currently known to us or that we currently do not believe are material. If any of the risks actually occur, our business, financial condition, results of operations and prospects could be adversely affected. In that event, the market price of our common stock could decline, and you could lose part or all of your investment.
Risk Factor Summary
Our business operations are subject to numerous risks, factors and uncertainties, including those outside of our control, which could cause our actual results to be harmed, including risks regarding the following:
Risks Related to our Business
•unfavorable economic and market conditions, including trade restrictions, export control laws and customs regulations, and tariffs;
•our reliance on a limited number of suppliers and customers;
•order cancellations, reductions or delays in delivery schedules by our customers or distributors;
•failure of banking institutions and liquidity concerns at other financial institutions;
•our backlog may not be an accurate indicator of our level and timing of future revenue;
•our gross margins and operating margins may vary over time;
•challenges relating to supply chain constraints;
•changes in technology and intense competition;
•our ability to sell to a significant customer;
•higher tariffs and other trade restrictions between the U.S. and other countries, including China and Thailand;
•the impact of a widespread health crisis;
•our international operations structure;
•volatility and maintenance of our real property portfolio;
•our ability to timely procure components needed to manufacture our products;
•our ability to manufacture our products;
•our leverage in negotiations with large customers;
•design and manufacturing defects or quality issues in our products;
•our ability to timely adapt to changes in laws, regulations, administrative procedures and regulators’ expectations, including those related to U.S. and international import laws and export controls;
•our strategic transactions and implementation strategy for our acquisitions;
•restructuring and related charges;
•changes in spending levels, demand and customer requirements for our products;
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•changes in tax laws;
•fluctuations in foreign currency;
•our future capital requirements;
•actual or perceived security or privacy breaches or incidents, as well as defects, errors or vulnerabilities in our technology and that of third-party providers;
•the failure or absence of business continuity plans with respect to our global facilities and operations;
•the unpredictability of our results of operations;
•our ability to protect our product and proprietary rights;
•factors relating to our intellectual property rights as well as the intellectual property rights of others;
•actions taken by suppliers, customers and authorized or unauthorized resellers or distributors that adversely affect our reputation or violate import or export regulations;
•litigation risks, including intellectual property litigation;
•our reliance on licensed third-party technology; and
•our ability to maintain an effective system of disclosure controls and internal control over financial reporting
Risks Related to Our Indebtedness
•our ability to service our current and future debt; and
•our current and future indebtedness, which may limit our operating flexibility or otherwise affect our business
Risks Related to Human Capital
•our ability to hire and retain key personnel;
•the effects of immigration policy on our ability to hire and retain employees; and
•employment related disputes and claims
Risks Related to Legal, Regulatory and Compliance
•our ability to obtain government authorization to export our products; and
•changes in social and environmental responsibility regulations, policies and provisions, as well as government, customer, business partner, investor or other stakeholder demands
Risks Related to Our Common Stock
•the volatility of the trading price of our common stock;
•dilution related to our convertible notes;
•our intention not to pay dividends for the foreseeable future;
•provisions of Delaware law and our certificate of incorporation and bylaws that may make a merger, tender offer or proxy contest difficult;
•exclusive forum provisions in our bylaws;
•the potential impact of the hedging activity of the 2032 Capped Call Counterparties on the market price of our common stock; and
•counterparty risk with respect to the 2032 Capped Call Options
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Risks Related to Our Business
Our operating results may be adversely affected by unfavorable changes in macroeconomics and market conditions and the uncertain geopolitical environment.
Our business and operating results depend significantly on general market and economic conditions. The current global macroeconomic environment is volatile and continues to be significantly and adversely impacted by inflation and a dynamic demand environment. Additionally, instability in the global credit and banking markets, inflation, trade wars, disputes and tariffs, capital expenditure reductions, unemployment, stock market volatility, armed conflicts and geopolitical tensions in many parts of the world (including as a result of the on-going Russia-Ukraine war, ongoing conflicts in the Middle East, including the U.S.-Iran war, political and territorial conflicts in the Western Hemisphere, the conflict between Cambodia and Thailand, and China-Taiwan relations), economic challenges in China and the U.S., including global economic ramifications of Chinese and U.S. economic difficulties, and other disruptions may continue to put pressure on global economic conditions. Further, conditions in the global economy have an inherent degree of uncertainty. As a result, it is difficult to estimate the level of growth or contraction of the global economy as a whole. It is even more difficult to estimate growth or contraction in various parts, sectors, and regions of the economy, including the markets in which we participate. All aspects of our forecasts depend on estimates of growth or contraction in the markets we serve.
Adverse changes to and uncertainty in the global economy have affected industries in which our customers operate and have resulted in decreases in the rate of demand, consumption or use of certain of our customers’ products which, in turn, have resulted in, and may in the future result in, decreased demand for our products, revenue fluctuations, increased price competition for our products, and increased the risk of excess and obsolete inventories as well as higher overhead costs as a percentage of revenue. For example, customers who had built up large inventories when supply chains were tight related to the COVID-19 pandemic brought down inventories as supply constraints eased and, in some cases, these customers delayed projected shipments, which harmed our revenue and profitability. These conditions may recur in the future, and similar losses or delays may harm our results of operations. The impact of economic challenges on the global financial markets could negatively impact our operations by affecting the solvency of our customers, the solvency of our key suppliers or the ability of our customers to obtain credit to finance purchases of our products. Further, supply chain disruptions have led and may continue to lead to increased costs and have harmed and may continue to harm our ability to meet customer demand, adversely affecting our revenue and profitability. If global economic and market conditions, or economic conditions in key markets, remain uncertain or deteriorate, our prospects for growth may be negatively impacted, and we may experience adverse impacts on our business, operating results, and financial condition.
Adverse changes in political, regulatory and economic policies, including the threats of increasing worldwide tariffs for goods imported into the United States and of escalating retaliatory measures, could adversely affect our business and results of operations.
U.S. regulatory activity, such as tariffs, export controls, and economic sanctions laws have in the past, and may in the future, materially limit our ability to make sales to customers in certain regions of the world, including China, and which have in the past, and may in the future, increase our costs and harm our results of operations and financial condition. Throughout 2025 and 2026, the U.S. imposed a series of tariffs on imported goods. These tariffs were generally positioned to have the most significant impacts on goods originating from China, but nearly all countries worldwide were impacted at levels ranging from 15% to stacked tariffs in excess of 100% in some cases. While many of the tariffs and surcharges initially proposed were invalidated or expired, the tariff landscape continues to evolve and, as a result, the full impact of current or future tariff measures on our business is uncertain. U.S. government investigations are currently underway that may result in new tariffs on certain products, including semiconductors, machines, and other products derivative of critical minerals. For example, on April 14, 2025, the Secretary of Commerce initiated an investigation under Section 232 of the Trade Expansion Act of 1962 to determine the effects on U.S. national security of imports of semiconductors, semiconductor manufacturing equipment, and their derivative products, including semiconductor substrates and bare wafers, legacy chips, leading-edge chips, microelectronics, and other components. Similarly, the U.S. government has initiated additional investigations that could result in tariffs or other trade restrictions affecting our operations, supply chain, customers, or markets. These include Section 232 investigations concerning processed critical minerals and their derivative products and robotics and industrial machinery, as well as Section 301 investigations concerning structural excess capacity and production in manufacturing sectors in certain foreign economies that have failed to adopt or effectively enforce forced labor prohibitions. Although these investigations are currently at different stages, they all may result in additional tariffs or trade restrictions, which could adversely impact our business. We may take actions to mitigate the impact of increases in tariffs and changes in trade policies, and any such actions could result in additional costs, manufacturing delays, or other difficulties, as well as additional risks, and may not be effective.
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Any of the effects described in this risk factor could have an adverse effect on our business, results of operations, or financial condition.
Outside of the U.S., geopolitical escalations and retaliatory measures from various countries also have in the past, and may in the future, adversely impact business operations. Such measures include tariffs on imports of U.S. products into countries such as China, as well as China’s export control measures targeting the U.S., Europe and Japan. For example, China imposed new export control measures affecting exports of rare earth metals and other critical minerals, limiting our ability to access these materials, which may limit our ability to produce products, increase our selling and/or manufacturing costs, decrease margins, reduce the competitiveness of our products, reduce customer demand for our products, or inhibit our ability to sell products or purchase necessary equipment and supplies. Similarly, China restricted exports to Japan, which affected our substrate supply chain globally. Future changes to the trade policies of the U.S. and China are impossible to predict, but further changes or escalations impacting global trade policies may continue to affect our business.
Adverse regulatory activity, such as export controls, economic sanctions and the imposition of heightened trade tariffs both globally and between the United States and China specifically carry the risk of negatively impacting overall economic conditions, which could have negative repercussions on our industry and our business. Moreover, to the extent the governments of China, the United States or other countries seek to promote use of domestically produced products or to reduce the dependence on or use of products from each other (sometimes referred to as “decoupling”), they may adopt or apply regulations or policies that have the effect of reducing business opportunities for us. Such actions may take the form of specific restrictions on particular customers, products, technology areas, or business combinations. For example, in the area of investments and mergers and acquisitions, the United States has implemented requirements for approval by the United States government of outbound investments; and the approval by China regulatory authorities is required for business combinations of companies that conduct business in China over specific thresholds, regardless of where those businesses are based. Restrictions may also be imposed based on whether the supplier is considered unreliable or a security risk. For example, the Chinese government adopted a law that would restrict purchases from suppliers deemed to be “unreliable suppliers”. China has also banned the sale of products that it deems to pose security risks to China's information and infrastructure supply chain and national security. Furthermore, imposition of new or additional tariffs or new or revised export or import regulations, trade sanctions, or non-tariff barriers to doing business could cause a decrease in the demand, from customers or end-users located in China, increase the cost for our products, or promote competition from Chinese optical and photonics companies, which would adversely impact our business and results of operations.
We depend on a limited number of suppliers for raw materials, packages and components, and any failure or delay by these suppliers in meeting our requirements could have an adverse effect on our business and results of operations.
We purchase raw materials, packages and components from a limited number of suppliers, who are often small and specialized. Additionally, some of our suppliers are our sole sources for certain materials, equipment and components. We depend on the timely and continued supply and quality of the materials, packages and components that our suppliers supply to us. While we have entered into advanced payments to secure orders from some of these suppliers, we have not entered into long-term agreements with many of these suppliers. We do not have a guarantee of supply from many of these suppliers and, as a result, there is no assurance that we would be able to secure the equipment or components that we require, in sufficient quantity, quality and on reasonable terms. Our business and results of operations have been, and could continue to be, adversely affected by this dependency. Alternative sources to mitigate the risk that the failure of any sole supplier will adversely affect our business are not feasible in all circumstances. If we were to lose any one of these or other critical sources, or if there is an industry-wide increase in demand for, or the discontinuation of, raw materials used in our products, it could be difficult or impossible for us, to find an alternative supplier or raw material, in which case our operations could be adversely affected. We are also subject to risk from increasing or fluctuating market prices of certain raw materials, which are incorporated into our end products or used by our suppliers to manufacture our end products. Supplies for such raw materials have from time to time become restricted, or general market factors and conditions have in the past affected and may in the future affect pricing of such commodities (including, in particular, due to changes in applicable tariffs, inflation, trade restrictions, or other supply chain constraints). For example, China’s export controls affected the availability and price of rare earth metals and other critical minerals for us as well as our supply chain and customers, adversely affecting our operations, margins and sales.
Specific concerns we periodically encounter with our sole suppliers or limited number of suppliers include receipt of defective parts or contaminated materials, stoppages or delays of supply, insufficient resources to supply our requirements, substitution of more expensive or less reliable materials, increases in the price of supplies, and an inability to obtain reduced pricing from our suppliers in response to competitive pressures. Furthermore, supply chain disruptions and labor market constraints have created heightened risk that sole suppliers or limited number of suppliers may be unable to meet their obligations to us. Difficulties in obtaining the materials, or services used in the conduct of our business or additional fees or higher prices to do so, have adversely affected our revenue and results of operations, and further challenges or decisions to seek alternate suppliers to secure supply in order to meet demand would increase our costs and reduce our profitability.
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Our financial results may be adversely affected due to changes in product demand impacted by recessions, increases in interest rates, stagflation and other economic conditions.
Customer demand for our products may be impacted by weak economic conditions, inflation, stagflation, trade wars, adverse changes in tariffs and trade policies, recessionary or lower-growth environments, high interest rates, tightening credit markets, equity market volatility or other negative economic factors in the U.S. or other countries. For example, under these conditions or expectation of such conditions, our customers in the past have canceled orders, delayed purchasing decisions or reduced their use of our services. In addition, adverse economic conditions have in the past, and could in the future, result in higher inventory levels and the possibility of resulting excess capacity charges from our contract manufacturers if we need to slow production to reduce inventory levels. Further, in the event of a recession or threat of a recession our contract manufacturers, suppliers and other third-party partners may suffer their own financial and economic challenges and as a result they may demand pricing accommodations, delay payment, or become insolvent, which could harm our ability to meet our customer demands or collect revenue or otherwise could harm our business. Similarly, disruptions in financial and/or credit markets may impact our ability to manage normal commercial relationships with our contract manufacturers, customers, suppliers and creditors and could cause us to not be able to continue to access preferred sources of liquidity when we would like, and our borrowing costs could increase. Thus, if economic conditions deteriorate or experience a sustained period of weakness or slower growth, our business and financial results could be adversely affected.
Our ability to sell our products to a previously significant customer has been restricted.
In August 2020, the Bureau of Industry and Security of the U.S. Department of Commerce (“BIS”) issued final rules that further restricted access by Huawei Technologies Co. Ltd. and certain of its affiliates (collectively, “Huawei”) to U.S. technology, software and equipment produced domestically and abroad. The final rules prevent us from selling certain products subject to the Export Administration Regulations (“EAR”) to identified Huawei entities without a license issued by BIS. Based on internal review conducted in 2023, we determined that our products may be “subject to the EAR” and consequently restricted for export, reexport, and transfer to Huawei. As a result, we stopped all of our product shipments to Huawei, historically our largest networking customer in China, in the beginning of calendar year 2024. Further, even if we are able to obtain an export authorization to sell certain products to Huawei in the future, Huawei may not be able to source products from other suppliers due to the applicable export restrictions, which could then adversely impact Huawei’s demand for our products. All U.S. companies are dependent on the ability to obtain export authorizations to sell to Huawei. Until such export authorizations are available or the export restrictions are lifted, we are limited in our ability to sell our products.
We submitted voluntary self-disclosures to BIS regarding certain product shipments to Huawei following the adoption of the final rules. In August 2024, we received an administrative subpoena from BIS requesting the production of records in connection with our business with Huawei. We also received a related subpoena from the U.S. Department of Justice (“DOJ”) that also requested information regarding our business with Huawei. We have been, and will continue to, cooperate with BIS and DOJ in responding to the subpoenas and their ongoing reviews. Any failure or alleged failure to comply with export controls laws and policies could have negative consequences, including significant legal costs, penalties, and potentially even denial of export privileges and debarment from participation in U.S. government contracts, any of which could have an adverse effect on our operations, reputation and financial condition.
Under the current regulatory policy and rules, our business with Huawei is now completely restricted. In addition to being unable to supply any products to Huawei, we are also currently unable to work with Huawei on future product developments, or confer any benefit to Huawei, and expect this to continue while Huawei remains subject to the export control restrictions. This cessation of all business activities with Huawei has resulted in our inability to earn revenue from Huawei. Huawei has been required to obtain similar or substitute products from other sources, which may include our competitors that are not subject to these restrictions. Therefore, we may never recover this demand even if such export restrictions ease.
We cannot be certain what additional actions the U.S. government may take with respect to Huawei or other entities in China or other countries, and we are unable to predict the duration and scope of the restrictions enacted in May 2019 and thereafter. BIS continues to add entities to the list of restricted parties and may expand restrictions to other customers or otherwise restrict our ability to ship products. Any further export or trade restrictions that impede our ability to export or sell our products and services could adversely affect our business, results of operations, financial condition and cash flows.
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Inflation and increased borrowing costs could impact our cash flows and profitability.
Prolonged periods of inflation may continue to adversely affect our business, results of operations, financial condition and liquidity by increasing our overall cost structure, particularly if we are unable to achieve commensurate increases in the prices we charge our customers. Inflation has resulted in and may continue to result in higher interest rates and capital costs, supply shortages, increased costs of labor and other similar effects. As a result of inflation, we are subject to risk from increasing market prices of certain components, supplies, and raw materials, which are incorporated into our products or used by our manufacturing partners or suppliers to manufacture our products. These components, supplies and commodities have from time-to-time become restricted, or general market factors and conditions have affected pricing of such components, supplies and raw materials (such as inflation or supply chain constraints), and future restrictions or market conditions impacting pricing may adversely affect our business and results of operations. In addition, higher interest rates and tightening credit markets may impact our customers and partners and their ability to purchase products or pay in a timely manner may be adversely impacted.
Our backlog may not be an accurate indicator of our level and timing of future revenues.
Our backlog may not be a reliable indicator of future operating results. Further, customer behaviors have been changing as a result of worldwide macroeconomic factors, including as a result of changes in the trade policies of the U.S. and its trading partners, such as the effects of heightened, scheduled or threatened tariffs, and which has affected demand and may continue to affect demand for certain of our products and services. If we are not able to respond to and manage the impact of these supply challenges and behavioral changes effectively, or if general macroeconomic conditions or conditions in the industries in which we operate deteriorate, our business, operating results, financial condition, and cash flows could be adversely affected.
We expect our gross margins and operating margins to vary over time.
Our gross margins and operating margins are expected to vary, and may be adversely affected in the future by numerous factors, including, but not limited to:
•an increase or decrease in demand of our products;
•changes in product mix;
•increased price competition in one or more of the markets in which we compete;
•modifications to our pricing strategy to gain or retain footprint in markets or with customers;
•currency fluctuations that impact our costs or the cost of our products to our customers;
•the impact of inflation on costs and on demand for our products;
•increases in material, labor, manufacturing, logistics, warranty costs, or inventory carrying costs;
•issues with manufacturing or component availability;
•issues relating to the distribution of our products, quality or efficiencies;
•increased costs due to changes in component pricing or charges incurred due to the inaccurately forecasting product demand or underutilization of manufacturing capacity;
•warranty related issues;
•factors beyond our control such as natural disasters, climate change, acts of war or terrorism, and pandemics and other public health emergencies;
•changing market, economic, and political conditions, including the impact of changes in the trade policies of the U.S. or its trading partners, heightened, scheduled or threatened tariffs, changes in the applicable trade restrictions, including for certain rare earth minerals, any retaliatory actions in response thereto, and other trade restrictions, regulatory restrictions on imports or exports to withdraw from or materially modify international trade agreements, or
•our introduction of new products and enhancements, or entry into new markets with different pricing and cost structures.
We have also seen, and may continue to see, our gross margins negatively impacted by increases in component costs, logistics costs, elevated inventory balances, and pricing pressure. Failure to sustain or improve our gross margins reduces our profitability and may adversely affect our business, financial condition and results of operations.
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Challenges relating to supply chain constraints, including semiconductor components, could adversely impact our business, results of operations and financial condition.
Due to increased demand across a range of industries, our business and customers’ businesses are experiencing and could, in the future, experience supply constraints due to both constrained manufacturing capacity, as well as component parts shortages. These supply constraints have adversely affected and could further affect availability, lead-times and cost of components, and could increase the likelihood of unexpected cancellations or delays of previously committed supply of key components. These challenges have resulted in extended lead-times to our customers or accelerated ordering for certain of our products that resulted in inventory backlog that was subsequently managed down, resulting in reduced ordering. Ordering patterns may be difficult to predict and we have experienced and may, in the future, experience negative impacts to our revenue and profitability as well as our ability to achieve our forecasts.
Any disruption or delay in the production, delivery or supply of the raw materials, packaging or components used in the manufacture and delivery of our products, including delays and limits associated with heightened, scheduled or threatened tariffs affecting our components or raw materials, or limits on manufacturing availability or capacity, could delay or inhibit our ability to produce finished goods inventory. These supply chain constraints and their related challenges could result in shortages, increased material costs or use of cash, engineering design changes, and delays in new product introductions, each of which could adversely impact our business, results of operations and financial condition.
If we do not anticipate technological shifts, market needs and opportunities, we may not be able to compete effectively and our ability to generate revenues will suffer.
If we are unable to anticipate future technological shifts, market needs, requirements or opportunities, or fail to develop and introduce new products, product enhancements, manufacturing or supply chain capacity, or business strategies to meet those requirements or opportunities in a timely manner or at all, it could cause us to lose customers, substantially decrease or delay market acceptance and sales of our products and services, and significantly harm our business, financial condition, and results of operations. In addition, if we invest in developing products for a market that does not develop, it could significantly harm our business, financial condition, and results of operations. Even if we are able to anticipate, develop, and commercially introduce new products, enhancements or business strategies, any such products, enhancements or business strategies may not achieve market acceptance.
Changing technology and intense competition require us to continuously innovate while controlling product costs, and our failure to do so may result in decreased revenues and profitability.
The markets in which we operate are dynamic and complex, and our success depends on our ability to deliver both our current product offerings and new products and technologies on time and at acceptable prices to our customers. The markets for our products are characterized by rapid technological change, frequent new product introductions and enhancements, substantial capital investment, changes in customer requirements, continued price pressures and a constantly evolving industry. Historically, these pricing pressures have led to a continued decline of average selling prices in certain areas of our business, and we expect that these historical trends will continue. The development of new, technologically advanced products is a complex and uncertain process requiring high levels of innovation and the accurate prediction of technology and market trends. The introduction of new products also often requires significant investment to ramp up production capacity, the benefit of which may not be realized if we are not successful in the production of such products or if customer demand does not develop as expected. Ramping of production capacity also entails risks of delays which can limit our ability to realize the full benefit of new product introductions. We cannot assure you that we will be able to identify, develop, manufacture, market or support new or enhanced products successfully, if at all, or on a timely basis. We also cannot assure you that potential markets for our new products will materialize on the timelines we anticipate, or at all, or that our technology will meet our customers’ specifications. In addition, the markets in which our customers compete experience rapid changes in technology, customer requirements, competitive products, and industry standards, which may impact the demand for our products or products that we are developing. For example, markets driven by AI/ML technology are changing rapidly and creating increased competition from large public companies as well as private companies and start-ups; and therefore, the demand for our products that address these markets may change and is difficult to predict. Our future performance will depend on the successful development, introduction, deployment and market acceptance of new and enhanced features and products that meet our customers’ current and future needs. Future demand for our products is uncertain and will primarily depend on continued technological development and the introduction of new or enhanced products. If this does not continue, sales of our products may decline which could adversely impact our business, results of operations and financial condition.
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The market for optical communications products in particular has matured over time and these products have increasingly become subject to commoditization. Both legacy competitors as well as new entrants, predominantly Asia-based competitors, have intensified market competition in recent years leading to pricing pressure. To preserve our revenues and product margin structures, we remain reliant on an integrated customer and market approach that anticipates end customer needs as requirements evolve. We also must continue to develop more advanced, differentiated products that command a premium with customers, while conversely continuing to focus on streamlining product costs for established legacy products. If we fail to continue to develop enhanced or new products that enable us to increase revenues while maintaining consistent margins, or over time are unable to adjust our cost structure to continue to competitively price more mature products, our financial condition and results of operations could be adversely affected.
We rely on a limited number of customers for a significant portion of our sales; and the majority of our customers do not have contractual purchase commitments.
We have consistently relied on a small number of customers for a significant portion of our sales. We expect that this customer concentration will continue in the future, and we expect that our financial performance in certain business lines and growth prospects will continue to depend in part on a small number of customers. Many of our customers purchase products under purchase orders or under contracts that do not contain volume or long-term purchase commitments. Therefore, these customers may alter their purchasing behavior with little or no notice to us for various reasons, including developing, or, in the case of our distributors, their customers developing, their own product solutions; choosing to purchase or distribute product from our competitors; incorrectly forecasting end market demand for their products; or experiencing a reduction in their market share in the markets for which they purchase our products. As a result, it is difficult to forecast our revenues and to determine the appropriate levels of inventory required to meet future demand. For example, we have from time-to-time experienced excess and obsolete charges due to customer transitions to the next generation of products. We may also experience increased inventory levels and increased carrying costs and risk of excess or obsolete inventory due to unanticipated reductions in purchases by our customers. In addition, customers provide us with their expected forecasts for our products several months in advance, but these customers may decrease, cancel or delay purchase orders already in place, including on short notice, or may experience financial difficulty which affects their ability to pay for products, particularly in light of the global macroeconomic uncertainty, and have done so from time-to-time, and the impact of any such actions may be intensified given our dependence on a limited number of large customers. We cannot accurately predict what or how many products our customers will need in the future. Anticipating demand is difficult because our customers face unpredictable demand for their own products and in recent periods have become increasingly focused on cash preservation and tighter inventory management.

In addition, changes in the business requirements, vendor selection, project prioritization, financial prospects, capital resources, and expenditures, or purchasing behavior (including product mix purchased or timing of purchases) of our key customers, or any real or perceived quality issues related to the products that we sell to such customers, have led to decreased sales to such customers or delays or cancellations of planned purchases of our products or services, which has unfavorably impacted our revenues and operating results, and may continue to impact our business and results of operations. We may also experience pricing pressure with certain of our customers that may adversely affect our revenue and margins, or, if the ongoing relationship no longer benefits us, we may decide to suspend or terminate our relationship with such customers. There are also continuing trade tensions, including an uncertain regulatory environment, in the U.S. and countries in Asia, and in particular, China, which have impacted and could continue to materially impact our sales to key customers in these regions. Further, we may be required to purchase raw materials, increase production capacity or make other changes to our business to accommodate certain large customers. If forecasted orders do not materialize, we may need to reduce investment in R&D activities, we may fail to optimize our manufacturing capacity and incur charges for such underutilization, we may incur liabilities with our suppliers for reimbursement of capital expenditures, or we may have excess inventory. In addition, if we incur expenses in response to forecasted demand and do not have a corresponding increase in revenue, our profitability may suffer. Any of these factors could adversely affect our business, financial condition and results of operations.
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Intense competition in our markets may lead to an accelerated reduction in our prices, revenues, margins and market share.
The end markets for optical products have experienced significant industry consolidation during the past few years. We expect this trend to continue as companies attempt to strengthen or hold their market positions in an evolving industry and as companies are acquired or are unable to continue operations. As a result, the markets for optical subsystems, components and laser diodes are highly competitive and the intensity of such competition is increasing. Our current competitors include a number of domestic and international public and private companies, many of which may have substantially greater financial, technical, marketing and distribution resources and brand name recognition than we have. As we expand into new markets, we face competition not only from our existing competitors, but also from new competitors, including existing companies with strong technological and sales positions in those markets. We may not be able to compete successfully against either current or future competitors, particularly, in light of increasing consolidation. Our competitors may continue to enter markets or gain or retain market share through introduction of new or improved products or with aggressive low pricing strategies that may impact the efficacy of our approach. These competitors may be able to devote greater resources than we can to the development, promotion, sale and support of their products. Additionally, the merger or consolidation of significant competitors have resulted in, and will likely result in, competitors with greater resources, which may enable them to offer a different market approach, or a lower cost structure through economies of scale or other efficiencies that we may be unable to match and which may intensify competition in the various markets. In addition, if we are unable to satisfy customer demand and customers are required to purchase products from our competitors, they may shift immediate and future purchases to such competitors, which could harm our customer relationships and adversely impact our access to certain end markets. Further, our competitors may seek to vertically integrate by buying suppliers that also supply products or components to us, which could enable them to further reduce prices, or could increase our costs. Our current or potential customers may also determine to develop and produce products for their own use which may be competitive to our products. Such vertical integration could reduce the market opportunity for our products. Increased competition could result in significant price erosion, reduced revenue, lower margins or loss of market share, any of which would significantly harm our business.
We are subject to risks arising from our international operations, which may adversely affect our business, financial condition, and results of operations.
We derive a majority of our revenue from our international operations, and we plan to continue expanding our business in international markets in the future. In addition, we have extensive international manufacturing capabilities through third-party contract manufacturers, as well as through our own international facilities, with employees engaged in R&D, administration, manufacturing, support and sales and marketing activities.
As a result of our international operations, in addition to similar risks we face in our U.S. operations, we are affected by economic, business, regulatory, social, and political conditions in foreign countries, including the following:
•adverse social, political and economic conditions, such as inflation, high interest rates and risk of global or regional recession;
•effects of adverse changes in currency rates;
•impacts related to business disruptions and restrictions related to pandemics and endemics, including supply chain disruptions and labor shortages and differential impacts in different regions and geographies;
•changes in general IT spending;
•less effective protection of intellectual property;
•the imposition of government controls, inclusive of critical infrastructure protection;
•changes in or limitations imposed by trade protection laws or other regulatory orders or requirements in the United States or in other countries;
•the restrictions in China on the export of indium, gallium, germanium and other rare earth metals and critical minerals; and other retaliatory responses in the trade policies of the U.S. or foreign governments;
•the imposition of export control measures on customers in China may cause those customers to seek domestic alternatives to our products, including developing alternatives internally, and our customers demand for our products could be impacted by their inability to obtain other materials subject to sanctions;
•varying and potentially conflicting laws and regulations;
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•overlapping, differing or more burdensome tax structure and laws;
•wage inflation or a tightening of the labor market;
•the impact of recessions and other economic conditions in economies outside the United States, including, for example, declines in the manufacturing Purchasing Managers Index as well as the Institute for Supply Management data in the Eurozone;
•tax and customs changes that adversely impact our global sourcing strategy, manufacturing practices, transfer-pricing, or competitiveness of our products for global sales;
•volatility in oil prices and increased costs, or limited supply of other natural resources;
•political developments, geopolitical unrest or other conflicts or wars in foreign nations, and the potential impact such developments or further actions could have on our customers in the markets in which we operate; and
•the impact of the following on service provider and government spending patterns as well as our contract and internal manufacturing: political considerations, changes in or delays in government budgeting processes, unfavorable changes in tax treaties or laws, unfavorable events that affect foreign currencies on an absolute or relative basis, natural disasters, epidemic disease, labor unrest, earnings expatriation restrictions, misappropriation of intellectual property, military actions, acts of terrorism, political and social unrest and difficulties in staffing and managing international operations.
Additionally, our business is impacted by fluctuations in local economies and currencies. Global economic volatility has significantly impacted the foreign exchange markets, and the currencies of various countries in which we operate and have significant volume of local-currency denominated expenses have seen significant volatility. We expect such volatility to continue, which could negatively impact our results by making our non-U.S. operations more expensive when reported in U.S. dollars, primarily due to the costs of payroll.
Moreover, local laws and customs in many countries differ significantly from or conflict with those in the United States or other countries in which we operate. In many foreign countries, particularly in those with developing economies, it is common for others to engage in business practices that are prohibited by our internal policies and procedures or U.S. regulations applicable to us. There can be no assurance that our employees, contractors, channel partners and agents will not take actions in violation of our policies and procedures, which are designed to ensure compliance with applicable U.S. and foreign laws and policies. Violations of laws or key control policies by our employees, contractors, channel partners, or agents could result in termination of our relationships with customers and suppliers, financial reporting problems, fines and/or penalties for us, or prohibition on the importation or exportation of our products, and could have an adverse effect on our business, financial condition and results of operations.
We are also highly dependent on the ability to ship products to customers and to receive shipments from our suppliers. In the event of a disruption in the worldwide or regional shipping infrastructure, including as a result of geopolitical or armed conflicts, our access to supplies and our ability to deliver products to customers would correspondingly be negatively impacted. As a result of shipping disruptions, we have experienced, among other things, increased costs to ship products and delays in receiving components. Any similar disruptions in the future would likely adversely affect our operating results and financial condition.
In addition to the above risks related to our international operations, we also face risks related to pandemics and epidemics. An outbreak of a contagious disease, and other adverse public health developments, particularly in Asia, could have an adverse effect on our business operations. The effects could include restrictions on our ability to travel to support our sites in Asia or other regions or our customers located there, disruptions in our ability to distribute products, and/or temporary closures of our facilities in Asia or the facilities of our suppliers or customers and their contract manufacturers.
In the past, these and similar risks have disrupted our operations and the operations of our suppliers, customers and contract manufacturers and increased our costs, and we expect that they may do so in the future. Any or all of these factors could have an adverse impact on our business, financial condition, and results of operations.
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We are subject to the risks of owning real property.
Our buildings subject us to the risks of owning real property, which include, but are not limited to:
•adverse changes in the value of these properties due to economic conditions, the movement by many companies to a hybrid work environment, interest rate changes, changes in the neighborhood in which the property is located, or other factors;
•the possible need for structural improvements in order to comply with zoning, seismic and other legal or regulatory requirements;
•the potential disruption of our business and operations arising from or connected with a relocation due to moving or to renovating the facility;
•increased cash commitments for improvements to the buildings or the property, or both;
•increased operating expenses for the buildings or the property, or both; and
•the risk of financial loss in excess of amounts covered by insurance, or uninsured risks, such as the loss caused by damage to the buildings as a result of earthquakes, floods, typhoons, tsunamis, fires, and/or other natural disasters.
Changes in demand and customer requirements for our products may be difficult to forecast. We may be unable to increase our manufacturing capacity to meet future demand, or we may experience difficulties in generating and maintaining demand to optimize our manufacturing capacity. If we are unable to align supply with demand, it could have an adverse effect on our business, results of operations, or financial condition.
We operate in a market where demand can fluctuate rapidly and we may not be able to predict or quickly respond to trends in the dynamics of our markets and our customers or changes in customer demand, which could negatively impact our gross margins. Although AI is a relatively new demand driver for our products, it is evolving rapidly, and the expected timing and amount of investments related to AI can change significantly. As a result, it may be difficult to accurately forecast such demand and we may incur costs in anticipation of demand that ultimately does not materialize. We manufacture and purchase or commit to supplies based on forecasts of demand from our customers. If we overestimate demand, or if customers cancel or defer orders, change requirements or choose to purchase from our competitors, we may not be able to utilize on-hand inventory or reduce purchase commitments accordingly. If demand does materialize, but is lower than expected, we may not be able to reduce our costs in response, which would adversely impact our gross margins. We have experienced pressure on margins and profitability due to lower average selling prices, increase prices for certain products, price increase on certain products as a result of our supplier cost increases, inventory write-downs, cancellation penalties, and impairments charges, and may incur similar costs, charges and pressure on margins and profitability in the future.
Our ability to meet demand is influenced by numerous factors, including changes in product development cycles, ramping technologies, and evolving customer requirements. Our ability to increase supply of our products is especially dependent on our ability to increase our manufacturing capacity, both at our own facilities and those of our contract manufacturers. Our ability to increase production is subject to a number of uncertainties inherent in all new manufacturing operations, including ongoing compliance with regulatory requirements, procurement and maintenance of construction, environmental and operational licenses and approvals for additional expansion, clean-room capacity, supply chain constraints, hiring, training and retention of qualified employees, implementing highly complex manufacturing processes, and the pace of bringing production equipment and processes online with the capability to manufacture high-quality products. We may also face difficulties in optimizing our manufacturing capacity, which may result in underutilization of our manufacturing facilities and excess inventory of our manufactured products. If we experience any issues or delays in increasing production capacity in our current or new manufacturing facilities or generating and maintaining demand for our products we manufacture there, our business, prospects, operating results and financial condition may be harmed.
If demand exceeds our forecasts, we may be unable to scale and increase supply sufficiently to meet such demand, which could result in a loss of revenue, decisions about manufacturing priorities, decisions on supply allocation, damage to customer relationships, legal or other disputes, loss of business and market share to competitors, and loss of future opportunities.
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If we are unable to manufacture certain products in our manufacturing facilities or if we or our contract manufacturers and suppliers are unable or fail to meet our production requirements, our business may be adversely affected.
We manufacture some of our finished good products as well as some of the components that we provide to our contract manufacturers in our China, Japan, Thailand, United Kingdom, and San Jose, California manufacturing facilities. For some of the components and finished good products, we are the sole manufacturer. Our manufacturing processes are highly complex, and issues are often difficult to detect and correct. From time-to-time, we have experienced problems achieving acceptable yields in our manufacturing facilities, resulting in delays in the availability of our products and inability to meet customer demand. In addition, if we experience problems with our manufacturing facilities or are unable to continue operations at any of these sites, including as a result of social, geopolitical, environmental or health factors, damage caused by natural disasters, energy shortages or increased energy costs or other problems or events beyond our control, it would be costly and require a long period of time to move the manufacture of these components and finished good products to a different facility or contract manufacturer which could then result in interruptions in supply, and would likely materially impact our financial condition and results of operations. Our business and operations would be severely impacted if there were any future widespread health crisis or related restrictions imposed by governments or private industry in regions we operate.
We also rely on several independent contract manufacturers to supply us with certain products. For many products, a particular contract manufacturer may be the sole source of the finished good products. We depend on these manufacturers to meet our production and capacity requirements and to provide quality products to our customers. There are a number of risks associated with our reliance on contract manufacturers including:
•reduced control over delivery schedules and planning;
•availability of manufacturing capability and capacity, particularly during periods of high demand;
•reliance on the quality assurance procedures of third parties;
•risks associated with data security breaches or cyber-attacks targeting our contract manufacturers, including manufacturing disruptions or unauthorized access to information; and
•potential misappropriation of our intellectual property.
Additionally, if operations at these contract manufacturers are adversely impacted, such as by natural disasters, energy shortages or restrictions due to the impact of a widespread health crisis disruptions or any resulting economic impact to their business, this would likely materially impact our financial condition and results of operations. Our ability to control the quality of products produced by contract manufacturers has and may in the future be impaired by pandemics or widespread health epidemics disruptions, and quality issues might not be resolved in a timely manner. Additionally, if our contract manufacturers continue experiencing disruptions or discontinue operations, we may be required to identify and qualify alternative manufacturers, which is expensive and time consuming. If we are required to change or qualify a new contract manufacturer, this would likely cause business disruptions and adversely affect our results of operations and could harm our existing customer relationships.
Despite rigorous testing for quality, both by us and the contract manufacturers to whom we sell products and from whom we buy products, we may receive and ship defective products. We may incur significant costs to correct defective products which could result in the loss of future sales and revenue, indemnification costs or costs to replace or repair the defective products, litigation and damage to our reputation and customer relations. Defective products may also cause diversion of management attention from our business and product development efforts.
Our manufacturing operations and those of our contract manufacturers may be affected by natural disasters such as earthquakes, floods, typhoons, tsunamis, fires and widespread health crises, changes in legal requirements, labor competition, shortages and turnover, labor strikes and other labor unrest, wars or other conflicts, and economic, political or other forces that are beyond our control. For example, in the past one of our former contract manufacturers experienced a labor strike which threatened the contract manufacturer’s ability to fulfill its product commitments to us and, in turn, our ability to fulfill our obligations to our customers. We are heavily dependent on a small number of manufacturing sites. Our business and operations would be severely impacted by any significant business disruptions for which we may not receive, and regardless of whether we receive, adequate recovery from insurance.
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In addition, for a variety of reasons, including changes in circumstances at our contract manufacturers, restrictions or inability to operate, or regarding our own business strategies, we may choose or be required to transfer the manufacturing of certain products to other manufacturing sites, including to our own manufacturing facilities. As a result of such transfers, our contract manufacturers may prioritize other customers or otherwise be unable or unwilling to meet our demand. There also may be delays with the transfer of manufacturing equipment and successfully setting up that equipment at the transfer sites and training new operators. If such transfers are unsuccessful or take a longer period of time than expected, it could result in interruptions in supply and supply chain and would likely impact our financial condition and results of operations.
Some of our purchase commitments with contract manufacturers are not cancellable which may impact our results of operations if customer forecasts driving these purchase commitments do not materialize and we are unable to sell the products to other customers. We may also incur charges if we do not utilize our allocated manufacturing capacity which would increase our costs and decrease our margins. Alternatively, our contract manufacturers may not be able to meet our demand which would inhibit our ability to meet our customers’ demands and maintain or grow our revenues. Furthermore, it could be costly and require a long period of time to move products from one contract manufacturer to another which could result in interruptions in supply and adversely impact our financial condition and results of operations.
Further, certain of our suppliers are located in China, which exposes us to risks associated with Chinese laws and regulations and U.S. laws, regulations and policies with respect to China, such as those related to export controls, tariffs and retaliatory measures, and risks related to taxation and the treatment of intellectual property. Chinese and U.S. laws and regulations are subject to frequent change, and if our suppliers are unable to obtain or retain the requisite legal permits or otherwise to comply with Chinese and U.S. legal requirements, we may be forced to obtain products from other manufacturers or to make other operational changes, including transferring our manufacturing to another manufacturer or to our own manufacturing facilities. In addition, many of our products are sourced from suppliers based outside of the United States, primarily in Asia. We may continue to face uncertainty with respect to our suppliers’ abilities to supply products due to supply chain and inventory impacts, tax and trade policies, the effects of trade wars, including heightened, scheduled, and threatened tariffs and trade restrictions, and government regulations affecting trade between the United States and other countries. Major developments in tax policy or trade relations, such as the imposition of tariffs on imported products, for example, higher U.S. tariffs on the import of certain products manufactured in Thailand or China (and vice-versa), could increase our product and product-related costs or require us to seek alternative suppliers, either of which could result in decreased sales or increased product and product-related costs. Any such developments could have a material impact on our ability to meet our customers’ expectations and may materially impact our operating results and financial condition.
Changes in demand and customer requirements for our products may reduce manufacturing yields, which could negatively impact our profitability.
Manufacturing yields depend on a number of factors, including the volume of production due to customer demand and the nature and extent of changes in specifications required by customers for which we perform design-in work. Changes in manufacturing processes required as a result of changes in product specifications, changing customer needs, introduction of new product lines and changes in contract manufacturers may reduce manufacturing yields, resulting in low or negative margins on those products. Moreover, an increase in the rejection rate of products during the quality control process, before, during or after manufacturing, results in lower gross margins from lower yields and additional rework costs. Any reduction in our manufacturing yields will adversely affect our gross margins and could have a material impact on our operating results.
If our customers do not qualify our manufacturing lines or the manufacturing lines of our subcontractors for volume shipments, our operating results could suffer.
Certain of our customers do not purchase products, other than limited numbers of evaluation units, prior to qualification of the manufacturing line for volume production. Our existing manufacturing lines, as well as each new manufacturing line, must pass through varying levels of qualification with certain of our customers. Some of our customers require that our manufacturing lines pass their specific qualification standards and that we, and any subcontractors that we may use, be registered under international quality standards. We may encounter quality control issues as a result of setting up new manufacturing lines in our facilities, relocating our manufacturing lines or introducing new products to fill production. We may be unable to obtain, or we may experience delays in obtaining, customer qualification of our manufacturing lines. If we introduce new contract manufacturing partners and move any production lines from existing internal or external facilities, the new production lines will likely need to be re-qualified with our customers. Any delays or failure to obtain qualifications would harm our reputation, operating results, and customer relationships.
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We contract with a number of large OEM and end-user service providers and product companies that have considerable bargaining power, which may require us to agree to terms and conditions that could have an adverse effect on our business or ability to recognize revenues.
Large OEM and end-user service providers and product companies comprise a significant portion of our customer base. These customers generally have greater purchasing power than smaller entities and, accordingly, often request and receive more favorable terms from suppliers, including us. As we seek to expand our sales to existing customers and acquire new customers, we may be required to agree to terms and conditions that are favorable to our customers and that may affect the timing of our ability to recognize revenue, increase our costs and have an adverse effect on our business, financial condition, and results of operations. Furthermore, large customers have increased buying power and ability to require onerous terms in our contracts with them, including pricing, warranties, and indemnification terms. If we are unable to satisfy the terms of these contracts, it could result in liabilities of a material nature, including litigation, damages, additional costs, loss of market share and loss of reputation. Additionally, the terms these large customers require, such as most-favored nation or exclusivity provisions, may impact our ability to do business with other customers and generate revenues from such customers.
Our products may contain defects that could cause us to incur significant costs, divert our attention from product development efforts and result in loss of customers.
Our products are complex, and defects and quality issues are found from time-to-time. Networking products in particular frequently contain undetected software or hardware defects when first introduced or as new versions are released. In addition, our products are often embedded in or deployed in conjunction with our customers’ products which incorporate a variety of components produced by third parties, which may contain defects. As a result, when problems occur, it may be difficult to identify the source of the problem. These problems may cause us to incur significant damages or warranty and repair costs, divert the attention of our engineering personnel from our product development efforts and manufacturing resources, and cause significant customer relation problems or loss of customers, or risk exposure to product liability suits, all of which would harm our business. Additionally, changes in our or our suppliers' manufacturing processes or the inadvertent use of defective materials by us or our suppliers could result in an adverse effect on our ability to achieve acceptable manufacturing yields and product reliability. To the extent that we do not achieve and maintain our projected yields or product reliability, our business, operating results, financial condition and customer relationships would be adversely affected.
If we are unable to successfully identify, acquire and integrate suitable businesses, our operating results and prospects could be harmed, and any businesses we acquire may not perform as expected or be effectively integrated.
We have in the past and expect to continue to seek to expand and diversify our operations with acquisitions of complementary technologies, products, manufacturing facilities, assets and businesses and other strategic transactions. Even if we are able to identify a target for acquisition, we may be unable to complete prospective acquisitions on commercially reasonable terms or for many reasons, including competition from other potential acquirers, regulatory requirements or other reasons. In addition, applicable antitrust laws and other regulations may limit our ability to acquire targets or force us to divest all or a portion of our business or an acquired business. We may expend significant cash or incur substantial debt to finance such acquisitions, and such indebtedness may restrict our business or require the use of available cash to make interest and principal payments. In addition, we may finance or otherwise complete acquisitions by issuing equity or convertible debt securities, which may result in dilution to our stockholders, or if such convertible debt securities are not converted, significant cash outlays.
Negotiations for potential acquisitions or other transactions may result in diversion of management’s time and significant out-of-pocket costs. In addition, we may face risk related to:
•unforeseen expenses, delays or conditions imposed on the acquisition or transaction, including due to required regulatory approvals or consents, or fees that may be triggered upon a failure to consummate an acquisition or transaction for certain reasons;
•the inability to retain and obtain required regulatory approvals, licenses and permits;
•loss of employees, customers, suppliers or partners due to uncertainty of a transaction;
•litigation in connection with transactions, which may be costly; and
•failure to consummate an acquisition resulting in negative publicity and/or negative impression of us in the investment community that could impact our stock price.
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We have in the past, and may in the future, divest or reduce our investment in certain businesses or product lines from time-to-time. Such divestitures involve risks, such as difficulty separating portions from our other businesses, distracting employees, incurring potential loss of revenue, negatively impacting margins, and potentially disrupting customer relationships. We may also incur significant costs associated with exit or disposal activities, related impairment charges, or both.
If we are unable to successfully manage any of these risks in relation to any future acquisitions or divestitures, our business, financial condition and results of operations could be adversely impacted.
In addition, any businesses we acquire may not perform as well as we expect. We may be unsuccessful in implementing our strategy, or integrating acquired companies, businesses or product lines and personnel with existing operations, the integration may be more difficult or more costly than anticipated, or the transaction may not further our business strategy as we expected or we may overpay for, or otherwise not realize the expected return on, our investment. Some of the challenges involved integrating businesses and acquisitions include:
•difficulty preserving relationships with customers, suppliers or partners;
•potential difficulties in completing projects associated with in-process R&D;
•unanticipated liabilities or our exposure for known contingencies and liabilities may exceed our estimates;
•unexpected losses of key employees of the acquired company, inability to attract, recruit, retain, and motivate current and prospective employees or inability to maintain our company culture;
•integrating the acquired business onto our systems and ensuring the acquired business meets our financial reporting requirements and timelines, including integrating Enterprise Resource Planning (“ERP”) systems and other key business applications;
•increasing the scope, geographic diversity and complexity of our operations;
•difficulties in integrating operations across different geographies, cultures and languages and to address the particular economic, currency, political, and regulatory risks associated with specific countries;
•difficulties in integrating acquired technology;
•difficulties in consolidating facilities and transferring processes and know-how;
•temporary loss of productivity or operational efficiency; and
•adverse tax or accounting impact.
In addition, following an acquisition, we may have difficulty forecasting the financial results of the combined company and the market price of our common stock could be adversely affected if the effect of any acquisitions on our consolidated financial results is dilutive or is below the market's or financial analysts' expectations, or if there are unanticipated changes in the business or financial performance of the target company or the combined company. Any failure to successfully integrate acquired businesses may disrupt our business and adversely impact our business, financial condition and results of operations.
Restructuring activities could disrupt our business and affect our results of operations.
We have taken steps, including implementing reductions in force and internal reorganizations, to reduce the cost of our operations, improve efficiencies, or realign our organization and staffing to better match our market opportunities and our technology development initiatives. We may take similar steps in the future as we seek to realize operating synergies, to achieve our target operating model and profitability objectives, or to reflect more closely changes in the strategic direction of our business or the evolution of our site strategy and workplace. These changes could be disruptive to our business, including our research and development efforts, and may result in the recording of special charges, including workforce reduction or restructuring costs. Substantial expenses or charges resulting from restructuring activities could adversely affect our results of operations and use of cash in those periods in which we undertake such actions.
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We may not be able to realize tax savings from our international structure, which could adversely affect our operating results.
During fiscal years 2023 and 2025, we completed international restructurings that included the intra-entity transfer of certain intellectual property and other assets used in the business among various subsidiaries. The structures implemented may be challenged by tax authorities, and if such challenges are successful, the tax consequence we expect to realize could be adversely impacted. If substantial modifications to our international structure or the way we operate our business are made, such as if future acquisitions or divestitures occur, if we or our customers or suppliers change our logistics, if changes in domestic and international tax laws negatively impact the structure, if we do not operate our business consistent with the structure and applicable tax provisions, if we fail to achieve our revenue and profit goals, or if the international structure or our application of arm’s-length principles to intercompany arrangements is successfully challenged by the U.S. or foreign tax authorities, our effective tax rate may increase, which could have an adverse effect on our operating and financial results.
Changes in tax laws could have an adverse effect on our business, cash flow, results of operations or financial conditions.
As a multinational corporation, we are subject to income taxes as well as non-income based taxes, in both the U.S. and various foreign jurisdictions. Significant uncertainties exist with respect to the amount of our tax liabilities, including those arising from potential changes in laws in the countries in which we do business and the possibility of adverse determinations with respect to the application of existing laws. Many judgments are required in determining our worldwide provision for income taxes and other tax liabilities, and we are under audit by various tax authorities, which often do not agree with positions taken by us on our tax returns. Any unfavorable resolution of these uncertainties may have a significant adverse impact on our tax rate.
The Organization for Economic Cooperation and Development (the “OECD”) has proposed changes to existing tax laws, including a proposed global minimum tax of 15%, also known as Pillar Two. Many countries, including European Union member states have adopted or are considering adopting legislation to enact these proposals. The OECD and participating jurisdictions have recently agreed to a “side-by-side” solution that exempts U.S.-parented multinational businesses, like ours, from certain provisions of Pillar Two for fiscal years beginning on or after January 1, 2026. Any of these developments or changes in federal, state, or international tax laws or tax rulings could adversely affect our effective tax rate and our operating results. There can be no assurance that our effective tax rates, tax payments, or incentives will not be adversely affected by these or other developments or changes in law.
On July 4, 2025, H.R.1, the One Big Beautiful Bill Act (“OBBBA”), was signed into law which contains a broad range of provisions affecting businesses including permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions. Our tax provision includes the impact of the OBBBA. We will continue to evaluate the impact of the OBBBA to our income tax provision.
Other countries also continue to enact and consider enacting new laws, which could increase our tax obligations, cause us to change the way we do business or our operations or otherwise adversely affect us. The foregoing items could increase our future tax expense, could change our future intentions regarding reinvestment of foreign earnings, and could have an adverse effect on our business, financial condition and results of operations.
We are also subject to the continuous examination of our income tax and other returns by the Internal Revenue Service and other tax authorities globally, and we have a number of such reviews underway at any time. It is possible that tax authorities may disagree with certain positions we have taken, and an adverse outcome of such a review or audit could have a negative effect on our financial position and operating results. There can be no assurance that the outcomes from such examinations, or changes in tax law or regulation impacting our effective tax rates, will not have an adverse effect on our business, financial condition and results of operations.
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Our operating results may be subject to volatility due to fluctuations in foreign currency.
We are exposed to foreign exchange risks with regard to our international operations which may affect our operating results. Since we conduct business in currencies other than U.S. dollars but report our financial results in U.S. dollars, we face exposure to fluctuations in currency exchange rates. Due to these fluctuations, operating results may differ materially from expectations, and we may record significant gains or losses on the remeasurement of intercompany balances. Although we price our products primarily in U.S. dollars, a portion of our operating expenses are incurred in foreign currencies. For example, a portion of our expenses are denominated in the U.K. pound sterling, Chinese yuan and Thai baht. In addition, we also have term loans denominated in Japanese Yen. Fluctuations in the exchange rate between these currencies and other currencies in which we collect revenues and/or pay expenses could have a material effect on our future operating results. Recently, our exposure to foreign currencies has increased as our non-U.S. manufacturing footprint has expanded. We continue to look for opportunities to leverage the lower cost of non-U.S. manufacturing, including the United Kingdom, China, Thailand, and Japan. While these geographies are lower cost than the U.S. and such concentration will in general lower our total cost to manufacture, this increase in concentration in non-U.S. manufacturing will also increase the volatility of our results. If the value of the U.S. dollar depreciates relative to certain other foreign currencies, it would increase our costs including the cost of local operating expenses and procurement of materials or services that we purchase in foreign currencies, as expressed in U.S. dollars. Conversely, if the U.S. dollar strengthens relative to other currencies, such strengthening could raise the relative cost of our products to non-U.S. customers, especially as compared to foreign competitors, and could reduce demand. Global economic volatility has had a significant impact on the exchange markets, which heightened this risk, and we expect the higher level of volatility in foreign exchange markets will likely continue.
We may require additional capital to support business growth, and this capital might not be available on acceptable terms, if at all.
We intend to continue to make investments to support our business growth and may require additional funds to respond to business challenges, including supporting the development and introduction of new products, addressing new markets, engaging in strategic transactions and partnerships, improving or expanding our operating infrastructure or acquiring complementary businesses and technologies. Investments, partnerships and acquisitions involve risks and uncertainties which could adversely affect our operating and financial results. We have repeatedly taken advantage of opportunities for convertible debt financing and have $1,554.3 million in aggregate principal amount of debt outstanding. In addition, in December 2025, we entered into a credit agreement (the “Credit Agreement”) providing for a senior secured revolving credit facility in an aggregate principal amount of $400.0 million, including a $23.0 million sublimit for the issuance of letters of credit. We may in the future engage in additional equity or debt financings to secure additional funds. If we raise additional funds through future issuances of equity, or equity-linked or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common stock. Any debt financing we may secure in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. In addition, uncertainty in the macroeconomic environment, increasing interest rates and other factors have resulted in volatility in the capital markets and less favorable financing terms. We may not be able to obtain additional financing on terms favorable to us, if at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to support our business growth and to respond to business challenges could be significantly impaired, and our business may be harmed.
If we fail to effectively manage our growth or, alternatively, our spending during downturns, our business could be disrupted, which could harm our operating results.
We expect to appropriately scale our business, internal systems and organization, and to continue to improve our operational, financial and management controls, reporting systems and procedures. Growth in sales, combined with the challenges of managing geographically dispersed operations, can place a significant strain on our management systems and resources, and our anticipated growth in future operations could continue to place such a strain. The failure to effectively manage our growth could disrupt our business and harm our operating results, and even if we are able to upgrade our systems and expand our staff, any such expansion will likely be expensive and complex. Our ability to successfully offer our products and implement our business plan in evolving markets requires an effective planning and management process. In economic downturns, we must effectively manage our spending and operations to ensure our competitive position during the downturn, as well as our future opportunities when the economy improves, remains intact. The failure to effectively manage our spending and operations could disrupt our business and harm our operating results.
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Any failure, disruption or security breach or incident of or impacting our information technology infrastructure or information management systems could have an adverse impact on our business and operations.
Our business depends significantly on effective and efficient information management systems, and the reliability and security of our information technology infrastructure are essential to the operation, health and expansion of our business. For example, the information gathered and processed by our information management systems assists us in managing our supply chain, financial reporting, monitoring customer accounts, and protecting our proprietary and confidential business information, plans, trade secrets, and intellectual property, among other things. In addition, these systems may contain personal data or other confidential or otherwise protected information about our employees, our customers’ employees, or other business partners. We must continue to expand and update this infrastructure in response to our changing requirements as well as evolving security standards and risks.
In some cases, we may rely on third-party providers of hosting, support and other services to meet our information technology requirements. Any failure to manage, expand and update our information technology infrastructure, including our ERP system and other applications, any failure in the extension implementation or operation of this infrastructure, or any failure by our hosting and support partners or other third-party service providers in the performance of their services could harm our business. In addition, we have partnered with third parties to support our information technology systems and to help design, build, test, implement and maintain our information management systems. Our merger, acquisition and divestiture activity may also require transitions to or from, and the integration of, various information management systems within our overall enterprise architecture, including our ERP system and other applications. Those systems that we acquire or that are used by acquired entities or businesses may also pose security risks of which we are unaware or unable to mitigate, particularly during the transition of these systems.
Like other companies, we are subject to ongoing attempts by malicious actors, including through hacking, malware, ransomware, denial-of-service attacks, social engineering, exploitation of internet-connected devices, and other attacks, to obtain unauthorized access to, or acquisition or other processing of confidential or other information or otherwise affect service reliability and threaten the confidentiality, integrity and availability of our systems and information stored or otherwise processed on our systems. Cyber threats have increased in recent years, in part due to increased remote work and frequent attacks, including in the form of phishing emails, malware attachments and malicious websites. Additionally, geopolitical tensions, conflicts and wars, may increase our risks of cyber-attacks. Further, as artificial intelligence (“AI”) capabilities improve and become increasingly commonplace, cyber-attacks leveraging AI are likely to pose increasing threats. These attacks could, for example, leverage AI to directly attack information systems with increased speed and/or efficiency compared to a human threat actor, to identify or exploit security vulnerabilities, or to create more effective phishing emails. In addition, a vulnerability could be introduced from us or our third-party service providers incorporating output of an AI tool, such as AI-generated source code, that includes a threat. While we work to safeguard our internal systems and validate the security of our third-party service providers to mitigate these potential risks, including through information security policies and employee awareness and training, there is no assurance that such actions have been or will be sufficient to prevent cyber-attacks or security breaches or incidents. We have been in the past, and may be in the future, subject to social engineering attacks and other cyber-attacks, and these attacks may become more prevalent with a substantial portion of our workforce being distributed geographically, particularly given the resulting increased remote access to our networks and systems. Further, our third-party service providers may have been and may be in the future subject to such attacks or otherwise may suffer security breaches or incidents. In addition, actions by our employees, service providers, partners, contractors, or others, whether malicious or otherwise, could affect the security of our systems and information. Further, a breach or compromise of our information technology infrastructure or that of our third-party service providers could result in the misappropriation of intellectual property, business plans, trade secrets or other information. Additionally, while our security systems are designed to maintain the physical security of our facilities and information systems, accidental or willful security breaches or incidents or other unauthorized access by third parties to our facilities or our information systems could lead to unauthorized access to, or misappropriation, disclosure, or other processing of proprietary, confidential and other information.
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Despite our implementation of security measures, our systems and those of our third-party service providers are vulnerable to damage from these or other types of attacks, errors, acts or omissions. In addition, our systems may be impacted by natural disasters, terrorism or other similar disruptions. Any system failure, disruption, accident or security breach or incident affecting us or our third-party service providers could result in disruptions to our operations and loss or unavailability of, or unauthorized access or damage to, inappropriate access to, or use, disclosure or other processing of confidential information and other information maintained or otherwise processed by us or on our behalf. Any actual or alleged disruption to, or security breach or incident affecting, our systems or those of our third-party partners could cause significant damage to our reputation, lead to theft or misappropriation of our intellectual property and trade secrets, result in claims, investigations, and other proceedings by or before regulators, and claims, demands and litigation, legal obligations or liability, affect our relationships with our customers, require us to bear significant remediation and other costs and ultimately harm our business, financial condition and operating results. In addition, we may be required to incur significant costs to protect against or mitigate damage caused by disruptions or security breaches or incidents. Our costs incurred in efforts to prevent, detect, alleviate or otherwise address cybersecurity or other security problems, bugs, viruses, worms, malicious software programs and security vulnerabilities could be significant and such efforts may not be successful. All of these costs, expenses, liability and other matters may not be covered adequately by insurance and may result in an increase in our costs for insurance or insurance not being available to us on economically feasible terms, or at all. Insurers may also deny us coverage as to any future claim. Any of these results could harm our financial condition, business and reputation.
Our revenues, operating results, and cash flows may fluctuate from period to period due to a number of factors, which makes predicting financial results difficult.
Spending on optical communication and laser products is subject to cyclical and uneven fluctuations, which could cause our financial results to fluctuate unpredictably. It can be difficult to predict the degree to which end-customer demand and the seasonality and uneven sales patterns of our OEM partners or other customers will affect our business in the future, particularly as we or they release new or enhanced products. We are also subject to changes in buying patterns among our OEM partners and other customers, including unpredictable changes in their desired inventory levels. Further, if our revenue mix changes, it may also cause results to differ from historical seasonality. Accordingly, our quarterly and annual revenues, operating results, cash flows, and other financial and operating metrics have and may in the future vary significantly in the future. We attempt to identify changes in market conditions as soon as possible; however, the dynamics of the market in which we operate make prediction of and timely reaction to such events difficult. Due to these and other factors, the results of any prior periods should not be relied on as an indication of future performance. Quarterly fluctuations from the above factors may cause our revenue, operating results, and cash flows to underperform in relation to our guidance, long-term financial targets or the expectations of financial analysts or investors, which may cause volatility or decreases in our stock price.
If we have insufficient proprietary rights or if we fail to protect our rights, our business could be harmed.
We seek to protect our products, technologies, and product roadmaps in part through a combination of patents, trade secrets, know-how, trademarks, copyrights, and ongoing technological innovation. Our ability to protect our intellectual property is limited, however, because unauthorized use, misappropriation, or infringement of our proprietary rights is difficult, time-consuming, and costly to detect and prevent. The steps we take to protect our intellectual property may be inadequate to prevent third parties from misappropriating our technology or independently developing competing or similar products.
Other companies may be developing technologies that are similar or superior to our own. In addition, there may be existing patents or other intellectual property rights of which we are unaware that could be relevant to our business. Patent applications are often not published until issued or published after a delay, and as such, we cannot be certain that our products do not infringe pending third-party patent applications. Our pending or future patent applications may not result in issued patents, and any patents that do issue may not provide sufficiently broad protection to prevent others from developing, making, using, or selling products similar to ours, or may be challenged, invalidated, circumvented, or deemed unenforceable.
We do not hold intellectual property rights in every jurisdiction in which we sell or distribute our products. As a result, competitors may be able to offer identical or similar products in jurisdictions where we lack patent or other intellectual property protection. Further, intellectual property laws and enforcement mechanisms vary by jurisdiction, and certain regions, including Europe, Asia-Pacific and Latin America, may not protect our intellectual property rights to the same extent as the United States.
We rely on licenses to third-party technologies, and we are obligated to pay royalties under certain of these agreements. If we are unable to maintain these licenses or obtain new licenses on commercially reasonable terms, or at all, we may be unable to use important third-party technologies. This could delay or prevent the development of new products, restrict the sale of existing products, increase our costs, or otherwise adversely affect our operating results. In addition, the use of open-source software in our products may subject us to license obligations that could require us to disclose proprietary source code or otherwise limit our ability to protect our intellectual property.
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We seek to protect our trademarks, including the Lumentum brand, through registration and enforcement efforts in selected jurisdictions. However, we have not registered our trademarks in every country in which we operate, and third parties may be able to use identical or confusingly similar marks in jurisdictions where our trademarks are not registered or enforceable. Even where our trademarks are registered, third parties may challenge, oppose, or seek to invalidate those registrations, and our efforts to maintain and enforce trademark protection may not be sufficient or effective.
A breach or failure of our information technology systems, or those of our third-party service providers, could result in the unauthorized access to, or misappropriation of, our intellectual property, trade secrets, or confidential business information. Any actual or perceived cybersecurity incident or other security breach could damage our reputation, disrupt our operations, and adversely affect our relationships with customers and partners.
In addition, evolving legal and regulatory frameworks governing intellectual property rights related to artificial intelligence (“AI”) may create uncertainty regarding ownership, scope, or enforceability of intellectual property developed using AI-enabled tools. These developments could reduce the value or protectability of intellectual property created through AI-assisted processes and adversely affect our competitive position.
Our products may be subject to claims that they infringe the intellectual property rights of others, the resolution of which may be time-consuming and expensive, as well as require a significant amount of resources to prosecute, defend, or make our products non-infringing.
Our products may be subject to claims that they infringe the intellectual property rights of others. Intellectual property litigation is common in our industry, and we have received, and may continue to receive, infringement claims from third parties. Such claims increasingly arise from (i) operating companies, including customers and competitors, seeking to monetize their patent portfolios, and (ii) non-practicing entities that do not manufacture or sell products. Defending against these claims, regardless of their merit, can be costly and time-consuming and may divert management and technical resources.
If we are unsuccessful in defending against infringement claims, we may be required to pay damages, enter into costly license agreements, redesign products, or cease selling certain products. Licenses may not be available on commercially reasonable terms, or at all. In addition, exclusionary orders or injunctions could limit our ability to manufacture or sell affected products, which could materially and adversely affect our revenues and operating results. We also provide indemnification to certain customers against intellectual property infringement claims and may incur significant costs in connection with defending and indemnifying such claims.
We further face the risk of trademark infringement claims in various jurisdictions, which may increase as a result of acquisitions or expansion into new markets. The resolution of such claims, whether through litigation or settlement, could result in significant liability, significant expense, require changes to branding or product labeling, or prevent us from using certain trademarks, any of which could adversely affect our business, financial condition, and operating results.
We face certain litigation risks that could harm our business.
We are now, and in the future, may become subject to various legal proceedings and claims that arise in or outside the ordinary course of business. The results of legal proceedings are difficult to predict. Moreover, many of the complaints filed against us may not specify the amount of damages that plaintiffs seek, and we therefore may be unable to estimate the possible range of damages that might be incurred should these lawsuits be resolved against us. While we may be unable to estimate the potential damages arising from such lawsuits, certain of them assert types of claims that, if resolved against us, could give rise to substantial damages or restrictions on or changes to our business. Thus, an unfavorable outcome or settlement of one or more of these lawsuits could have an adverse effect on our financial condition, liquidity and results of operations. Even if these lawsuits are not resolved against us, the uncertainty and expense associated with unresolved lawsuits could seriously harm our business, financial condition and reputation. Litigation is generally costly, time-consuming and disruptive to normal business operations. The costs of defending these lawsuits have been significant in the past, will continue to be costly and may not be covered by our insurance policies. The defense of these lawsuits could also result in continued diversion of our management’s time and attention away from business operations, which could harm our business. For additional discussion regarding litigation, refer to “Part I, Item 3. Legal Proceedings,” and “Note 16. Commitments and Contingencies” to the consolidated financial statements.
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Our products incorporate and rely on licensed third-party technology, and if licenses of third-party technology do not continue to be available to us or are not available on terms acceptable to us, our revenues and ability to develop and introduce new products could be adversely affected.
We integrate licensed third-party technology into certain of our products. From time-to-time, we may be required to license additional technology from third parties to develop new products or product enhancements. Third-party licenses may not be available or continue to be available to us on commercially reasonable terms. The failure to comply with the terms of any license, including free open-source software, may result in our inability to continue to use such license. Our inability to maintain or re-license any third-party licenses required in our products or our inability to obtain third-party licenses necessary to develop new products and product enhancements, could potentially require us to develop substitute technology or obtain substitute technology of lower quality or performance standards or at a greater cost, any of which could delay or prevent product shipment and harm our business, financial condition, and results of operations.
If we fail to maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired.
As a public company, we are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, the Sarbanes-Oxley Act of 2002, as amended, or the Sarbanes-Oxley Act, and the Nasdaq Global Select Market (“Nasdaq”) listing requirements. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. In order to maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting, and to integrate our acquisitions into our disclosure controls and procedures and internal control over financial reporting, we have expended, and anticipate that we will continue to expend, significant time and operational resources, including accounting-related costs and significant management oversight.
Any failure to develop or maintain effective controls, or any difficulties encountered in their implementation or improvement, could cause us to delay reporting of our financial results, be subject to one or more investigations or enforcement actions by state or federal regulatory agencies, stockholder lawsuits or other adverse actions requiring us to incur defense costs, pay fines, settlements or judgments. Any such failures could also cause investors to lose confidence in our reported financial and other information, which would likely have a negative effect on the trading price of our common stock and customer perception of our business may suffer. In addition, if we are unable to continue to meet these requirements, we may not be able to remain listed on Nasdaq.
Risks Related to Our Indebtedness
Servicing our existing and future indebtedness, including the 2026 Notes, 2028 Notes, 2029 Notes and 2032 Notes (collectively referred to as the “convertible notes”) and any revolving loans under our Credit Agreement, may require a significant amount of cash, and we may not have sufficient cash flow or the ability to raise the funds necessary to satisfy our obligations under the convertible notes and our Credit Agreement, and our current and future indebtedness may limit our operating flexibility or otherwise affect our business.
Our ability to make scheduled payments of the principal of, to pay interest on or to refinance our indebtedness under the convertible notes, or to make cash payments in connection with any conversion of the convertible notes or upon any fundamental change if holders of the applicable series of the convertible notes require us to repurchase their convertible notes for cash, depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control. During fiscal year 2026, the last reported sale price of our common stock was at least 130% of the applicable conversion price of each of the respective convertible notes in effect for at least 20 trading days during the last 30 trading days in fiscal year 2026; therefore, the convertible notes are convertible at the option of the holders with the principal balance contractually required to be settled in cash. To the extent all convertible note holders elect to convert all or a significant portion of the convertible notes within a short period of time, our liquidity would be adversely impacted, and could adversely impact our ability to continue as a going concern.
Our Credit Agreement contains various customary events of default that include, among others, non-payment of principal, interest or fees, inaccuracy of representations and warranties, breach of covenants, cross default to certain other indebtedness, bankruptcy and insolvency events, material judgments and events constituting a change of control, subject to thresholds and cure periods as set forth in the Credit Agreement. Upon the occurrence and during the continuance of an event of default, the Lenders may terminate their commitments and accelerate our obligations under the Credit Agreement and may exercise certain other rights and remedies provided for under the Credit Agreement, the other loan documents and applicable law. If there were outstanding borrowings under the Credit Agreement that were accelerated, we may not have sufficient cash on hand or be able to borrow sufficient funds to refinance the debt or sell sufficient assets to repay the debt, which could immediately adversely affect our business, cash flows, results of operations, and financial condition.
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Our business may not generate cash flow from operations in the future sufficient to service our indebtedness and make necessary capital expenditures. If we are unable to generate sufficient cash flow to meet our obligations, we may be required to adopt one or more alternatives, such as selling assets, restructuring indebtedness or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations.
Our current and future indebtedness may limit our operating flexibility or otherwise affect our business.
Our existing and future indebtedness could have important consequences to our stockholders and significant effects on our business. For example, our Credit Agreement contains a number of negative covenants that limit our ability and the ability of certain of our subsidiaries to, among other things, incur liens, make investments, incur indebtedness, merge or consolidate with other companies, sell substantially all of our assets, make restricted payments, enter into certain transactions with affiliates and make certain prepayments of subordinated debt, in each case subject to certain exceptions. In addition, the Credit Agreement contains financial covenants that require compliance with a maximum secured net leverage ratio and minimum interest coverage ratio, in each case tested at the end of each fiscal quarter.
Our current and future indebtedness could:
•make it more difficult for us to satisfy our debt obligations under the convertible notes or our Credit Agreement;
•increase our vulnerability to general adverse economic and industry conditions;
•require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital and other general corporate purposes;
•limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;
•restrict us from exploiting business opportunities;
•place us at a competitive disadvantage compared to our competitors that have less indebtedness; and
•limit our availability to borrow additional funds for working capital, capital expenditures, acquisitions, debt service requirements, execution of our business strategy or other general purposes.
Any of these factors could harm our business, results of operations, and financial condition. In addition, we and our subsidiaries may be able to incur significant additional indebtedness in the future. If we incur additional indebtedness, the risks related to our business and our ability to service or repay our indebtedness would increase.
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Risks Related to Human Capital
Our ability to develop, market and sell products could be harmed if we are unable to retain or hire key personnel.
Our future success depends on our ability to recruit and retain the services of executive, engineering, manufacturing, sales and marketing, and support personnel. The supply of highly qualified individuals, in particular engineers in very specialized technical areas, or salespeople specializing in the service provider, enterprise and commercial laser markets, is limited and competition for such individuals is intense. Competition is particularly intense in certain jurisdictions where we have research and development centers, including Silicon Valley, and for engineering talent generally. Competition is also intense and turnover is high in certain jurisdictions where we or our suppliers have manufacturing facilities. Also, the increase of remote work among employees in our industries has increased employee mobility and turnover, making it difficult for us to retain or hire employees. Further, to attract and retain top talent, we have offered, and we believe we will need to continue to offer, competitive compensation and benefits packages. Job candidates and existing employees often consider the value of the equity awards they receive in connection with their employment. If the perceived value of our equity awards declines, it may adversely affect our ability to attract and retain highly qualified employees. There can be no assurance that the programs, initiatives, rewards and recognition that are part of our people strategy will be successful in attracting and retaining the talent necessary to execute on our business plans. In addition, as a result of our past and any future acquisitions and related integration activities, our current and prospective employees may experience uncertainty about their futures that may impair our ability to retain, recruit, or motivate key management, engineering, technical and other personnel. None of our officers or key employees is bound by an employment agreement for any specific term. The loss of the services of any of our key employees, the inability to attract or retain personnel in the future, particularly during the integration of acquisitions, or delays in hiring required personnel and the complexity and time involved in replacing or training new employees, could delay the development and introduction of new products, and negatively impact our ability to market, sell, or support our products. Similarly, the failure to properly manage the necessary knowledge transfer required for employee transitions could impact our ability to meet customers’ needs, to work effectively with customers, suppliers or other third parties, or to maintain industry and innovation leadership. The loss of members of our management team or other key personnel could be disruptive to our business and, were it necessary, it could be difficult to replace such individuals. If we are unable to attract and retain qualified personnel, we may be unable to manage our business effectively, and our business, financial condition and results of operations may be harmed.
Our ability to hire and retain employees may be negatively impacted by changes in immigration laws, regulations and procedures.
Foreign nationals who are not U.S. citizens or permanent residents constitute an important part of our U.S. workforce, particularly in the areas of engineering and product development. Our ability to hire and retain these workers and their ability to remain and work in the United States are impacted by laws and regulations, as well as by procedures and enforcement practices of various government agencies and global events that may interfere with our ability to hire or retain workers who require visas or entry permits. For example, if the U.S. implements travel restrictions or changes visa requirements, our ability to hire and retain employees could be impacted. Additional changes in immigration laws, regulations or procedures in jurisdictions in which we hire workers may adversely affect our ability to hire or retain such workers, increase our operating expenses and negatively impact our ability to deliver our products and services.
Risks Related to Legal, Regulatory and Compliance
Our sales may decline if we are unable to obtain government authorization to export certain of our products, and we may be subject to legal and regulatory consequences if we do not comply with applicable export control laws and regulations.
Exports of certain of our products are subject to export controls imposed by the U.S. government and administered by the U.S. Departments of State and Commerce. In certain instances, these regulations may require pre-shipment authorization from the administering department. For products subject to the EAR administered by the BIS, the requirement for a license is dependent on the type and end use of the product, the final destination, the identity of the end user and whether a license exception might apply. Virtually all exports of products subject to the International Traffic in Arms Regulations (“ITAR”) administered by the Department of State’s Directorate of Defense Trade Controls, require a license. Certain of our fiber optics products are subject to EAR and ITAR. Products and the associated technical data developed and manufactured in our foreign locations are subject to export controls of the applicable foreign nation. There is no assurance that we will be issued these licenses or be granted exceptions, and failure to obtain such licenses or exceptions could limit our ability to sell our products into certain countries and negatively impact our business, financial condition and/or operating results.
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The requirement to obtain a license could put us at a competitive disadvantage by restricting our ability to sell products to customers in certain countries or by giving rise to delays or expenses related to obtaining a license. Given the current global political climate, obtaining export licenses can be difficult and time-consuming. Failure to obtain export licenses for these shipments could significantly reduce our revenue and adversely affect our business, financial condition, relationships with our customers and results of operations. Compliance with U.S. government regulations also subjects us to additional fees and costs. The absence of comparable restrictions on competitors in other countries may adversely affect our competitive position.
Further, there is increased attention from the government and the media regarding potential threats to U.S. national security and foreign policy relating to certain foreign entities, particularly Chinese entities, and the imposition of enhanced restrictions or sanctions regarding the export of our products or on specific foreign entities that would restrict their ability to do business with U.S. companies may adversely affect our business. For example, on May 16, 2019, Huawei was added to the Entity List, additional regulatory restrictions were imposed in May and August 2020, including the October 2022 changes to the Foreign Direct Product Rule, which imposes limitations on the supply of certain U.S. items and product support to Huawei. FiberHome Technologies was also added to the Entity List on May 22, 2020. These actions, among others, have resulted in escalating tensions between the U.S. and China and create the possibility that the Chinese government may take additional steps to retaliate against U.S. companies or industries. We currently do not supply any products to Huawei, and we cannot predict whether we will again be able to sell to Huawei. Further, we cannot predict what additional actions the U.S. government may take with respect to Huawei beyond what is described above or to other of our customers, including modifications to or interpretations of Entity List restrictions, export restrictions, tariffs, or other trade limitations or barriers.
Our association with customers that are or become subject to U.S. regulatory scrutiny or export restrictions could negatively impact our business. Governmental actions such as these could subject us to actual or perceived reputational harm among current or prospective investors, suppliers or customers, customers of our customers, other parties doing business with us, or the general public. Any such reputational harm could result in the loss of investors, suppliers or customers, which could harm our business, financial condition, operating results or prospects. Our failure or perceived failure to comply with any of the foregoing legal and regulatory requirements, or other actual or asserted obligations relating to export controls has in the past and could in the future result in increased costs for our products, damage to our reputation, government inquiries, subpoenas, investigations. If we fail to comply with any of these export regulations, we could be subject to civil, criminal, monetary and non-monetary penalties and costly consent decrees, which would lead to disruptions to our business, restrictions on our ability to export products and technology, and adversely affect our business and results of operation.
In addition, certain of our significant customers and suppliers have products that are subject to U.S. export controls, and therefore these customers and suppliers may also be subject to legal and regulatory consequences if they do not comply with applicable export control laws and regulations. Such regulatory consequences could disrupt our ability to obtain components from our suppliers, or to sell our products to major customers, which could significantly increase our costs, reduce our revenue and adversely affect our business, financial condition and results of operations.
Social and environmental responsibility regulations, policies and provisions, as well as customer and investor demands, may make our supply chain more complex and may adversely affect our relationships with customers and investors.
There has been in recent years a focus on corporate social and environmental (“ESG”) responsibility in our industry as well as generally in the United States and globally, especially with respect to large public companies. A number of our customers have adopted, or may adopt, procurement policies that include social and environmental responsibility provisions or requirements that their suppliers should comply with, or they may seek to include such provisions or requirements in their procurement terms and conditions. These legal and regulatory requirements, as well as investor expectations, on corporate environmental and social responsibility practices and disclosure, are subject to change, can be unpredictable, and may be difficult and expensive for us to comply with, given the complexity of our supply chain. If we are unable to comply with, or are unable to cause our suppliers or contract manufacturers to comply with such policies or provisions, or if we are unable to meet the requirements of our customers and investors, a customer may stop purchasing products from us or an investor may sell their shares, and may take legal action against us, which could harm our reputation, revenue and results of operations. We expect to face increasing worldwide regulatory activity relating to climate change in the future. Future compliance with these laws and regulations, as well as meeting related customer and investor expectations, may adversely affect our business and results of operations.
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Our reputation and/or business could be negatively impacted by ESG matters and/or our reporting of such matters.
We have in the past and may in the future communicate certain ESG-related initiatives regarding sustainability matters, fair labor practices, responsible sourcing, and other matters in a Corporate Social Responsibility Report, on our website, in certain filings with the SEC, and elsewhere. These initiatives could be difficult to achieve and costly to implement. In addition, we could be criticized for the timing, scope or nature of these initiatives, or for our disclosures related to such matters, or for our policies and practices related to these matters. Opinions, perspectives, and expectations on sustainability and governance matters may differ amongst our stakeholders and may evolve over time. We have been and may continue to be subject to conflicting expectations and views on various matters, and legal requirements and interpretations may change. Our actual or perceived failure to meet evolving stakeholder expectations, or achieve any required ESG-related initiatives, could negatively impact our reputation or otherwise harm our business.
We may be adversely affected by climate change regulations.
In many of the jurisdictions in which we operate, government bodies are increasingly enacting legislation and regulations in response to potential impacts of climate change. These laws and regulations are mandatory in some cases, and have the potential to impact our operations directly or indirectly as a result of required compliance by our customers or supply chain. Inconsistency of regulations may also affect the costs of compliance with such laws and regulations. Assessments of the potential impact of future climate change legislation, regulation, and international treaties and accords are uncertain, given the wide scope of potential regulatory change in countries in which we operate.
We may incur increased capital expenditures resulting from required compliance with revised or new legislation or regulations, added costs to purchase raw materials, lower profits from sales of our products, increased insurance premiums and deductibles, changes in competitive position relative to industry peers, changes to profit or loss arising from increased or decreased demand for goods produced by us, or changes in costs of goods sold, which would have an adverse effect on our business, financial condition and results of operations.
We are subject to laws and regulations worldwide including with respect to environmental matters, securities laws, privacy and data protection, compliance with which could increase our expenses and harm our operating results.
Our operations and our products are subject to various federal, state and foreign laws and regulations, including those governing pollution and protection of human health and the environment in the jurisdictions in which we operate or sell our products. These laws and regulations govern, among other things, wastewater discharges and the handling and disposal of hazardous materials in our products. Our failure to comply with current and future environmental or health or safety requirements could cause us to incur substantial costs, including significant capital expenditures, to comply with such environmental laws and regulations and to clean up contaminated properties that we own or operate. Such clean-up or compliance obligations could result in disruptions to our operations. Additionally, if we are found to be in violation of these laws, we could be subject to governmental fines or civil liability for damages resulting from such violations. These costs could have an adverse impact on our financial condition or operating results.
From time-to-time new regulations are enacted, and it is difficult to anticipate how such regulations will be implemented and enforced. We continue to evaluate the necessary steps for compliance with regulations as they are enacted. These regulations include, for example, the Registration, Evaluation, Authorization and Restriction of Chemicals (“REACH”), the Restriction of the Use of Certain Hazardous Substances in Electrical and Electronic Equipment Directive (“RoHS”) and the Waste Electrical and Electronic Equipment Directive (“WEEE”) enacted in the European Union which regulate the use of certain hazardous substances in, and require the collection, reuse and recycling of waste from, certain products we manufacture. These regulations and similar legislation may require us to re-design our products to ensure compliance with the applicable standards, for example by requiring the use of different types of materials, which could have an adverse impact on the performance of our products, add greater testing lead-times for product introductions or other similar effects. We believe we comply with all such legislation where our products are sold, and we continuously monitor these laws and the regulations being adopted under them to determine our responsibilities.
In addition, pursuant to Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the SEC has promulgated rules requiring disclosure regarding the use of certain “conflict minerals” that are mined from the Democratic Republic of Congo and adjoining countries and procedures regarding a manufacturer’s efforts to prevent the sourcing of such minerals. We may face challenges with government regulators and our customers and suppliers if we are unable to sufficiently make any required determination that the metals used in our products are conflict free. Complying with these disclosure requirements involves substantial diligence efforts to determine the source of any conflict minerals used in our products and may require third-party auditing of our diligence process. These efforts may demand internal resources that would otherwise be directed towards operations activities.
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Since our supply chain is complex, we may face reputational challenges if we are unable to sufficiently verify the origins of all minerals used in our products. Additionally, if we are unable to satisfy those customers who require that all of the components of our products are determined to be conflict free, they may choose a competitor’s products which could materially impact our financial condition and operating results.
We are also subject to laws and regulations relating to our collection, use, protection and other processing of personal data of our employees, customers and others. These laws and regulations are subject to frequent modifications and updates and require ongoing supervision. For example, the European Union adopted the GDPR, which became effective in May 2018, establishing stringent requirements for data protection in Europe and providing for substantial penalties for noncompliance. Additionally, California has the CCPA, which went into effect on January 1, 2020, and which was amended and supplemented by California Privacy Rights Act (“CPRA”), which went into effect on January 1, 2023. Other legislation relating to privacy, data protection and cybersecurity has been proposed or adopted in several other states, including the enactment of legislation similar to the CCPA and CPRA enacted in numerous states. Aspects of the CCPA, CPRA and these other laws and regulations, as well as their enforcement, remain unclear. The U.S. federal government also is contemplating federal privacy legislation, and the U.S. Department of Justice has issued regulations restricting certain bulk transfers of sensitive personal data. The effects and impact of these or other laws and regulations relating to privacy, data protection and cybersecurity are potentially significant and may require us to modify practices and policies and to incur substantial costs and expenses in efforts to comply. Laws and regulations relating to privacy, data protection and cybersecurity, and their interpretation and enforcement, continue to evolve in various jurisdictions.
Further, the United Kingdom has implemented legislation similar to the GDPR, which provides for penalties, similar to the GDPR. This legislation was amended in 2025. Aspects of United Kingdom data protection law, including with respect to cross-border data transfers, are subject to uncertainty. The European Commission has adopted an adequacy determination regarding the United Kingdom data protection regime that generally has permitted personal data to be transferred between the European Economic Area (“EEA”) and the United Kingdom, which it has extended through December 2031. This adequacy decision is, however, subject to potential revocation or modification. We cannot fully predict how the United Kingdom data protection laws or regulations may develop in the medium to longer term nor the effects of divergent laws, regulations, and guidance regarding data transfers. We may find it necessary to make further changes to our handling of personal data of residents of various jurisdictions, each of which may require us to incur significant costs and expenses.
New technology trends, such as AI, require us to keep pace with evolving regulations and industry standards. Various current and proposed regulatory frameworks in the U.S., the European Union, China and other jurisdictions address the development and use of AI in products and services. We expect that the legal and regulatory environment relating to emerging technologies such as AI will continue to develop and could increase the cost of doing business, and create compliance risks and potential liability, all which may have an adverse effect on our financial condition and results of operations.
Evolving laws and regulations relating to the foregoing matters add to the complexity of our compliance obligations and increase our compliance costs, and it is possible that our practices may be deemed not to comply with such laws and regulations or other actual or asserted obligations relating to such matters. Any actual or alleged failure to comply with applicable laws or regulations or other actual or asserted obligations relating to such matters could result in increased costs for our products, monetary penalties, damage to our reputation and market position, government inquiries, subpoenas, investigations and other legal proceedings, legal claims, demands and litigation and other obligations and liabilities. Furthermore, legal and regulatory requirements applicable to our business are subject to change from time-to-time, which increases our monitoring and compliance costs and the risk that we may fall out of compliance or for this to be alleged to have occurred. Additionally, we may be required to ensure that our suppliers comply with applicable laws and regulations. If we or our suppliers fail or are perceived to fail to comply with such laws or regulations, we could face sanctions for such noncompliance, and our customers may refuse to purchase our products, which would have an adverse effect on our business, financial condition and results of operations.
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Risks Related to Our Common Stock
Our stock price may be volatile and may decline regardless of our operating performance.
Our common stock is listed on the Nasdaq Global Select Market under the symbol “LITE.” The market price of our common stock has fluctuated in the past and may fluctuate significantly due to a number of factors, some of which may be beyond our control and may often be unrelated or disproportionate to our operating performance. These include:
•changes in global economic, market and political conditions and other external factors, including those resulting from trade tensions, rising inflation, and fluctuations in foreign currency exchange and interest rates;
•speculation in the press or investment community about our strategic position;
•actual or anticipated fluctuations in our quarterly or annual operating results;
•changes in earnings estimates or recommendations by securities analysts or our ability to meet those estimates;
•the operating and stock price performance of other comparable companies;
•a shift in our investor base;
•the financial performance of other companies in our industry, and of our customers;
•general market conditions in the semiconductor industry;
•pandemics and similar major health concerns;
•success or failure of our business strategy;
•credit market fluctuations which could negatively impact our ability to obtain financing as needed;
•changes in governmental regulation including taxation and tariff policies;
•announcements by us, competitors, customers, or our contract manufacturers of significant acquisitions or dispositions, strategic alliances or overall movement toward industry consolidations among our customers and competitors;
•investor perception of us and our industry;
•changes in accounting standards, policies, guidance, interpretations or principles;
•differences, whether actual or perceived, between our corporate social responsibility and ESG practices and disclosure and government or customer, business partner, investor or other stakeholder expectations;
•litigation or disputes in which we may become involved;
•issuances of our shares upon conversion of some or all of the convertible notes; and
•sales of our shares by our officers, directors, or significant stockholders.
In addition, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many technology companies. Stock prices of many technology companies have fluctuated in a manner unrelated or disproportionate to the operating performance of those companies. In the past, stockholders have instituted securities class action litigation following periods of market volatility. If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business and adversely affect our business, results of operations, financial condition and cash flows.
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Transactions relating to our convertible notes may dilute the ownership interest of existing stockholders, or may otherwise depress the price of our common stock.
Pursuant to the terms of our convertible notes, if the convertible notes are converted by holders, we are required to satisfy our conversion obligation with respect to the convertible notes by delivering cash equal to the principal amount of such converted convertible notes and cash, shares of common stock, or a combination of cash and shares of common stock, at our election, with respect to any conversion value in excess thereof. If we elect to deliver common stock upon conversion of the convertible notes, it would dilute the ownership interests of existing stockholders. Any sales in the public market of the common stock issuable upon such conversion could adversely affect prevailing market prices of our common stock. In addition, certain holders of the convertible notes may engage in short selling to hedge their position in the convertible notes. Anticipated future conversions of the convertible notes into shares of our common stock could depress the price of our common stock.
We do not expect to pay dividends on our common stock.
We do not currently expect to pay dividends on our common stock. The payment of any dividends to our stockholders in the future, and the timing and amount thereof, if any, is within the discretion of our board of directors. Our board of directors’ decisions regarding the payment of dividends will depend on many factors, such as our financial condition, earnings, capital requirements, potential debt service obligations or restrictive covenants, industry practice, legal requirements, regulatory constraints and other factors that our board of directors deems relevant. As a result, the success of an investment in our common stock will depend on future appreciation in its value. There is no guarantee that our common stock will maintain its value or appreciate in value.
In addition, because we are a holding company with no material direct operations, we are dependent on loans, dividends and other payments from our operating subsidiaries to generate the funds necessary to pay dividends on our common stock. However, our operating subsidiaries’ ability to make such distributions will be subject to their operating results, cash requirements and financial condition and the applicable provisions of Delaware law that may limit the amount of funds available for distribution. Our ability to pay cash dividends may also be subject to covenants and financial ratios related to existing or future indebtedness, and other agreements with third parties.
Certain provisions in our charter and Delaware corporate law could hinder a takeover attempt.
We are subject to the provisions of Section 203 of the Delaware General Corporate Law which prohibits us, under some circumstances, from engaging in business combinations with some stockholders for a specified period of time without the approval of the holders of substantially all of our outstanding voting stock. Such provisions could delay or impede the removal of incumbent directors and could make more difficult a merger, tender offer or proxy contest involving us, even if such events could be beneficial, in the short-term, to the interests of our stockholders. In addition, such provisions could limit the price that some investors might be willing to pay in the future for shares of our common stock. Our certificate of incorporation and bylaws contain provisions providing for the limitations of liability and indemnification of our directors and officers, allowing vacancies on our board of directors to be filled by the vote of a majority of the remaining directors, granting our board of directors the authority to establish additional series of preferred stock and to designate the rights, preferences and privileges of such shares (commonly known as “blank check preferred”) and providing that our stockholders can take action only at a duly called annual or special meeting of stockholders, which may only be called by the chairman of the board of directors, the chief executive officer or the board of directors. These provisions may also have the effect of deterring hostile takeovers or delaying changes in control or changes in our management.
Our bylaws designate Delaware courts as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could discourage lawsuits against us or our directors and officers.
Our bylaws provide that, unless we consent in writing to an alternative forum, the state or federal courts of Delaware are the sole and exclusive forum for any derivative action or proceeding brought on our behalf; any action asserting breach of fiduciary duty, or other wrongdoing, by our directors, officers or other employees to us or our stockholders; any action asserting a claim against Lumentum pursuant to the Delaware General Corporation Law or our certificate of incorporation or bylaws; any action asserting a claim against Lumentum governed by the internal affairs doctrine; or any action to interpret, apply, enforce or determine the validity of our certificate of incorporation or bylaws. This exclusive forum provision may limit the ability of our stockholders to bring a claim in a different judicial forum that such stockholders find favorable for disputes with us or our directors or officers, which may discourage such lawsuits against us or our directors and officers.
Alternatively, if a court outside of Delaware were to find this exclusive forum provision inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings described above, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business, financial condition or results of operations.
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The 2032 Capped Call Options may affect the value of our common stock.
In connection with the issuance of the 2032 Notes, we entered into the 2032 Capped Call Options with the 2032 Capped Call Counterparties. We have been advised that the 2032 Capped Call Counterparties may modify the hedge positions they established when they entered into the 2032 Capped Call Options by entering into or unwinding various derivatives with respect to our common stock and/or purchasing or selling our common stock or other securities of ours in secondary market transactions prior to the maturity of the 2032 Notes (and are likely to do so in connection with any conversion, repurchase or redemption of the 2032 Notes or if we unwind all or a portion of the 2032 Capped Call Options). This activity could cause or prevent an increase or a decrease in the market price of our common stock.
We are subject to counterparty risk with respect to the 2032 Capped Call Options.
The 2032 Capped Call Counterparties are financial institutions, and we will be subject to the risk that one or more of the 2032 Capped Call Counterparties may default under the 2032 Capped Call Options. Our exposure to the credit risk of the 2032 Capped Call Counterparties will not be secured by any collateral.
Global economic conditions have in the past resulted in the actual or perceived failure and/or financial difficulties of many financial institutions. If a 2032 Capped Call Counterparty becomes subject to insolvency proceedings, we will become an unsecured creditor in those proceedings with a claim equal to our exposure at the time under the 2032 Capped Call Option with such 2032 Capped Call Counterparty. Our exposure will depend on many factors but, generally, our exposure will increase if the market price or the volatility of our common stock increases. In addition, upon a default by a 2032 Capped Call Counterparty, we may suffer adverse tax consequences and experience more dilution than we currently anticipate with respect to our common stock. We can provide no assurances as to the financial stability or viability of the 2032 Capped Call Counterparties.
ITEM 1B.    UNRESOLVED STAFF COMMENTS 
None.
ITEM 1C. CYBERSECURITY
Risk Management and Strategy
Cybersecurity risk management is an important part of and is integrated into our overall enterprise risk management framework, with cybersecurity risks being among the core enterprise risks identified for oversight by our Board of Directors (the “Board”) through our annual enterprise risk assessment. We maintain an enterprise-wide cybersecurity risk assessment program and framework that is designed to identify, assess, and manage cybersecurity risk, vulnerabilities, and threats. The foundation of our cybersecurity program is based on the National Institute of Standards and Technology ("NIST") Cybersecurity Framework and complies with the International Organization for Standardization (“ISO”) 27001:2022 standard. In alignment with the concepts and principles articulated in these standards, we have implemented controls related to cybersecurity threats and incidents including monitoring, log collection and analysis, threat hunting and intelligence surveillance, and regular vulnerability scans/penetration tests. Additionally, in furtherance of assessing, identifying, and managing material cybersecurity risks, we:
•Leverage technology solutions designed to provide protection for our assets and detect threats in our environment;
•Perform regular vulnerability assessments and penetration testing in efforts to identify, assess, and remediate weaknesses;
•Maintain an enterprise-wide disaster recovery governance program;
•Regularly perform cybersecurity-related disaster recovery testing designed to ensure that our mission-critical IT systems are recoverable, in support of our business continuity needs; and
•Work with each of our business and corporate groups with our internal cybersecurity program to integrate cybersecurity requirements into operating environments as appropriate. In addition, executive management, as well as our Board, regularly review our financial planning processes for these areas, inclusive of our cybersecurity programs.
Changes or additions to our cybersecurity risk assessment program and related practices and procedures described above in response to cybersecurity needs are reviewed by our Cybersecurity Steering Committee (“CSC”), an executive management-level cross-functional group.
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We regularly engage independent third parties to assess the effectiveness of our cybersecurity program and practices and to assist with risk mitigation. These assessments are performed in conformance with ISO standards and requirements. Enhancements to our cybersecurity program and practices are identified from assessment findings, and if deemed appropriate, implemented.
In addition, we evaluate the security posture and features of critical vendors and suppliers. This includes reviewing and monitoring of the third party controls, to help ensure third party services meet our standards for such providers and that the cybersecurity risks associated with the use of these services are appropriate.
For additional information regarding whether any risks from cybersecurity threats are reasonably likely to materially affect our company, including our business strategy, results of operations, or financial condition, please refer to Item 1A, “Risk Factors - Any failure, disruption or security breach or incident of or impacting our information technology infrastructure or information management systems could have an adverse impact on our business and operations.” We believe that risks from prior cybersecurity threats, including as a result of any previous cybersecurity incidents, have not materially affected our business to date. However, we can provide no assurance that there will not be incidents in the future or that they will not materially affect us, including our business strategy, results of operations, or financial condition.
Governance
Our Board oversees our enterprise risk management program and practices, and the Audit Committee assists the Board in its oversight of cybersecurity matters. Quarterly updates are presented to our Audit Committee by our Chief Information Security Officer (“CISO”) on cybersecurity risks and threats. In addition, our Audit Committee provides Board-level oversight for management’s actions with respect to practices, procedures and controls used to identify, assess, and manage our key cybersecurity programs and risks, and, as necessary, responses to any significant cybersecurity incidents.
Our cybersecurity program is led by our CISO, who manages a team of cybersecurity professionals. Our CISO has over 20 years of experience in cybersecurity and technology, including as a CISO at another public company. Members of our cybersecurity team, combined, have over 80 years of cybersecurity experience and members of the team hold various professional certifications.
As noted above, we also maintain a CSC, which consists of our Vice President IT - Chief Information Security Officer (CISO), Chief Executive Officer, Executive Vice President - Chief Financial Officer, Senior Vice President - Chief Human Resources Officer, Senior Vice President - General Counsel, Executive Vice President - Chief Transformation Officer, Senior Vice President - Global Fabs, Senior Vice President - Manufacturing Operations, Group Vice President - Chief Information Officer (CIO), and Vice President - Internal Audit. The CSC has the primary responsibility to monitor and manage existing and emerging cybersecurity risks. The CSC provides oversight of cybersecurity initiatives within Lumentum and is responsible for integrating cybersecurity risk management practices with critical business processes to help ensure that cybersecurity is appropriately addressed throughout Lumentum.
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ITEM 2.    PROPERTIES 
We own and lease various properties in the United States and eleven other countries around the world. We use the properties for executive and administrative offices, product development offices, customer service offices and manufacturing facilities. Our current corporate headquarters, which we own, is approximately 124,000 square feet and located in San Jose, California. As of June 27, 2026, our leased and owned properties in total are approximately 3,100,000 square feet, of which we own approximately 2,136,000 square feet, including the 1,173,000 square feet manufacturing sites in Thailand, the 183,000 square feet manufacturing site in the United Kingdom, the 148,000 square feet manufacturing site in Greensboro, North Carolina, the 124,000 square feet on the San Jose campus, the 472,000 square feet manufacturing and R&D site in Japan, and the 36,000 square feet manufacturing and R&D sites in Slovenia. Leased sites include properties located in Canada, China, Hong Kong, Italy, Japan, Switzerland, Taiwan, the United States, and South Korea. We believe our existing properties, including both owned and leased sites, are in good condition and suitable for the conduct of our business.
From time-to-time we consider various alternatives related to our long-term facilities’ needs. While we believe our existing facilities are adequate to meet our immediate needs, it may become necessary to lease, acquire, or sell additional or alternative space to accommodate future business needs. In March 2026, we acquired a manufacturing facility in Greensboro, North Carolina, which mainly included land, building, machinery and equipment. In March 2026, we also completed the sale of two commercial real estate properties located in San Jose, California. The properties consist of commercial buildings used by us for administrative, research and development and manufacturing support activities. In March 2025, we completed a transaction to sell the land and building of a 250,000 square feet manufacturing facility located in Shenzhen, China. In July 2024, we completed a transaction to purchase the land and building of our wafer fabrication facility located in Sagamihara, Japan. Our lease of the building at the premises was terminated as a result of the purchase.
ITEM 3.    LEGAL PROCEEDINGS 
We are subject to a variety of claims and suits that arise from time-to-time in the ordinary course of our business. As such, we regularly evaluate developments in legal matters that could affect the amount of the previously accrued liability and record adjustments as appropriate. While management currently believes that resolving claims against us, individually or in the aggregate, will not have a material adverse impact on our financial position, results of operations or cash flows, these matters are subject to inherent uncertainties and management’s view of these matters may change in the future. Should we experience an unfavorable final outcome, there exists the possibility of a material adverse impact on our financial position, results of operations or cash flows for the period in which the effect becomes reasonably estimable. For a description of our material pending legal proceedings, refer to “Note 16. Commitments and Contingencies” to the consolidated financial statements.

ITEM 4.    MINE SAFETY DISCLOSURES 
None.
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PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock trades on the Nasdaq Global Select Market under the symbol “LITE”. According to records of our transfer agent, we had 1,657 stockholders of record as of August 14, 2026, and we believe there is a substantially greater number of beneficial holders.
We do not expect to pay cash dividends on our common stock in the foreseeable future.
Stock Performance Graph
This performance graph shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the Exchange Act), or incorporated by reference into any filing of Lumentum Holdings Inc. under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
The following graph compares the cumulative total return of our common stock with the total return for the Nasdaq Composite Index (the “IXIC”) and the Nasdaq 100 Technology Sector Index (the “NDXT”) from market close on July 2, 2021 (the last trading day before the beginning of our fifth preceding fiscal year) through June 27, 2026. The stock price performance on the following graph is not necessarily indicative of future stock price performance.
1274
Recent Sale of Unregistered Equity Securities
None.
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Issuer Purchases of Equity Securities
None.
ITEM 6.    [RESERVED] 
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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion in conjunction with the audited consolidated financial statements and the corresponding notes included elsewhere in this Annual Report. This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements. The matters discussed in these forward-looking statements are subject to risk, uncertainties and other factors that could cause actual results to differ materially from those made, projected or implied in the forward-looking statements. Refer to “Risk Factors” and “Forward-Looking Statements” for a discussion of the uncertainties, risks and assumptions associated with these statements.
Overview
We are a global leader in optical and photonic technologies and an industry-leading provider of optical and photonic products based on revenue and market share. Our products are essential to a range of cloud, artificial intelligence and machine learning (“AI/ML”), telecommunications, consumer, and industrial end-market applications.
We believe the global markets in which Lumentum participates have fundamentally robust, long-term trends that will increase the need for our photonics products and technologies. We believe the world is becoming more reliant on ever-increasing amounts of data flowing through optical networks and data centers. Lumentum’s products and technology enable the scaling of these optical networks and data centers to higher capacities. AI/ML has caused a dramatic surge in the growing demands on data networking in cloud data centers and accelerated the usage of optical components and modules. We expect that the accelerating shift to digital and virtual approaches to many aspects of work and life will continue into the future. Virtual meetings, video calls, and hybrid in-person and virtual environments for work and other aspects of life will continue to drive strong needs for bandwidth growth and present dynamic new challenges that our technologies address. As manufacturers demand higher levels of precision, new materials, and factory and energy efficiency, suppliers of manufacturing tools globally are turning to laser-based approaches, including the types of lasers Lumentum supplies. Laser-based 3D sensing and LiDAR for security, industrial and automotive applications are rapidly developing markets. The technology enables computer vision applications that enhance security, safety, and new functionality in the electronic devices that people rely on every day. The use of LiDAR and in-cabin 3D sensing in automobile and delivery vehicles will over time significantly add to our long-term market opportunity.
To maintain and grow our market and technology leadership positions, we are continually investing in new and differentiated products and technologies and customer programs that address both nearer-term and longer-term growth opportunities, both organically and through acquisitions, as well as continually improving and optimizing our operations. Over many years, we have developed close relationships with market-leading customers. We seek to use our core optical and photonic technologies and our volume manufacturing capability to expand into attractive emerging markets that benefit from advantages that optical or photonics-based solutions provide.
We disaggregate revenue by type of product, which are Components and Systems, and by geography. A Components product is defined as one of the individual building blocks that goes into creating a larger solution. It is typically not a complete solution on its own but rather a specialized element that enables system functionality. This includes semiconductor laser chips, laser sub-assemblies, line subsystems and wavelength management systems. These are supplied to customers who then integrate them into their own full system solutions. Components represent foundational parts that support or enable that system’s operation and include optical chips and subsystems that are supplied to cloud data center operators, AI/ML infrastructure providers, and network equipment manufacturer customers.
A Systems product is defined as a complete, stand-alone solution that delivers full functionality to the end customer. It is typically self-contained and ready to operate within a customer’s network or application environment. This includes optical modules, optical circuit switches, and industrial lasers such as short-pulse solid-state lasers and kilowatt-class fiber lasers. These products integrate multiple technologies and subsystems into a finished solution that directly addresses a customer’s needs. A system represents the end-product that can be deployed and used independently.
Our products enable high-capacity optical links for cloud computing, AI/ML workloads, and data center interconnect (“DCI”) applications, as well as for communications service provider networks. Our offerings support access (local), metro (intracity), long-haul (intercity and global), and submarine (undersea) network infrastructure. Our products serve enterprise network infrastructure needs, including storage area networks (“SANs”), local area networks (“LANs”), and wide area networks (“WANs”). Demand for our products is fueled by the ongoing expansion of network capacity required to support cloud services, AI/ML processing, streaming video, video conferencing, wireless and mobile connectivity, and the internet of things (“IoT”). In addition, our industrial laser products are used for precision material processing across diverse industries, including semiconductor and microelectronics fabrication, electric vehicle and battery production, metal cutting and welding, and advanced manufacturing that emphasize greater manufacturing precision, flexibility, and sustainability.
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Operating Segment Information
Prior to fiscal year 2026, we operated in two reportable segments: Cloud & Networking and Industrial Tech. During the first quarter of fiscal year 2026, we implemented a reorganization and are now managed as a single, integrated enterprise. A unified management team oversees operations across the entire company rather than through discrete operating segments. The Chief Operating Decision Maker (“CODM”) is our Chief Executive Officer, who reviews financial information presented as a single enterprise to allocate resources and evaluate financial performance.
The CODM assesses performance and allocates resources based on consolidated net (loss) income from our consolidated statements of operations. This metric is used to set budgets, evaluate performance, review actual results, and determine whether to reinvest profits, pursue acquisitions, or make other capital management decisions. Segment expenses are reflected in our consolidated statements of operations and cash flows, while segment assets are measured through the consolidated assets on the consolidated balance sheets. Accordingly, we operate in a single reporting segment. Comparative prior-period segment information has been updated to reflect this structure, with no impact on previously reported consolidated results of operations, financial position or cash flows.
Industry Conditions
Through fiscal year 2024, we experienced significant fluctuations in demand as customers delayed projected shipments or built up inventory in response to supply shortages and then brought down inventories as supply chain constraints eased. Our revenue fluctuated in response to these changes in demand and our margins were adversely impacted as we were not able to fully recover costs, such as underutilized manufacturing capacity. However, beginning in the first quarter of fiscal year 2025, network equipment manufacturers normalized inventory levels; and since then, we have seen increasing demand from AI and cloud customers as they continue to expand their data centers, driven in part by the continued advances in cloud and AI infrastructure. This demand is outpacing our current supply which has required us to make decisions on supply allocation. We are investing in manufacturing capacity, both internally and with contract manufacturers, to meet demand.
Our supply chain is complex, and we need to manage supply of certain components required to build our products while confronted with fluctuating demand from our customers. From time to time, we experience logistics and supply chain issues and shortages of the types of components we and our customers require in our products, and when we experience these shortages, we have had to incur incremental supply and procurement costs in order to increase our ability to fulfill demands from our customers.
Due to worldwide operations, we and our customers are also subject to risks relating to the global trade environment. We are actively monitoring and assessing the global trade environment, particularly with respect to various proposed and enacted changes in tariff regulations and trade restrictions. The ongoing uncertainty surrounding trading policies, including the potential for additional tariffs, restrictions related to our customers and retaliatory measures by non-U.S. governments, continues to create a volatile environment that could disrupt our operations. The imposition of tariffs on certain imported goods and materials and export controls on critical components may increase our costs and place upward pressure on the cost of goods sold, which, in turn, may reduce our gross margins if we are unable to pass these costs onto customers through price increases.
For more information on risks associated with supply chain constraints and customer inventory, as well as tariffs and other trade restrictions, refer to Item 1A “Risk Factors” of this Annual Report.
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Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) as set forth in the Financial Accounting Standards Board’s Accounting Standards Codification (“ASC”). We also consider the various staff accounting bulletins and other applicable guidance issued by the United States Securities and Exchange Commission (“SEC”). GAAP, as set forth within the ASC, requires us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented. To the extent there are differences between these estimates, judgments or assumptions and actual results, our financial statements will be affected. The accounting policies that reflect our more significant estimates, judgments and assumptions and which we believe are the most critical to aid in fully understanding and evaluating our reported financial results include the following:
•Inventory Valuation
•Revenue Recognition
•Income Taxes
•Business Combinations
•Goodwill and Intangible Assets - Impairment Assessment
Inventory Valuation
Our inventories are recorded at standard cost, which approximates actual cost computed on a first-in, first-out basis, not in excess of net realizable value. We assess the value of our inventories on a quarterly basis and write down those inventories which are obsolete or in excess of our forecasted demand to the lower of their cost or estimated net realizable value.
Our estimates of forecasted demand are based on our analysis and assumptions including, but not limited to, expected product lifecycles, product development plans and historical usage by product. Our product line management personnel play a key role in our excess review process by providing updated sales forecasts, managing product transitions and working with manufacturing to minimize excess inventory. If actual market conditions are less favorable than our forecasts, or actual demand from our customers is lower than our estimates, we may be required to record additional inventory write-downs. If actual market conditions are more favorable than anticipated, inventories previously written down may be sold, resulting in lower cost of sales and higher income from operations than expected in that period.
Our inventories are sensitive to technical obsolescence in the near term due to the use in industries characterized by the continuous introduction of new product lines, rapid technological advances, and product obsolescence. Based on certain assumptions and judgments made from the information available at that time, we determine the amount of allowance for potential inventory obsolescence. If these estimates and related assumptions or the market changes, we may be required to record additional reserves. Historically, actual results have not varied materially from our estimates.
Revenue Recognition
Pursuant to Topic 606, we recognize our revenues upon the application of the following steps:
•identification of the contract, or contracts, with a customer;
•identification of the performance obligations in the contract;
•determination of the transaction price;
•allocation of the transaction price to the performance obligations in the contract; and
•recognition of revenues when, or as, the contractual performance obligations are satisfied.
The majority of our revenue comes from product sales, consisting of sales of hardware products to our customers. Our revenue contracts generally include only one performance obligation. Revenues are recognized at a point in time when control of the promised goods or services are transferred to our customers upon shipment or delivery of goods or rendering of services, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.
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Revenue from all sales types is recognized at the transaction price. The transaction price is determined based on the consideration to which we will be entitled in exchange for transferring goods or services to the customer adjusted for estimated variable consideration, if any. We typically estimate the impact on the transaction price for discounts offered to the customers for early payments on receivables or net of accruals for estimated sales returns. These estimates are based on historical returns, analysis of credit memo data and other known factors. Actual returns could differ from these estimates. We allocate the transaction price to each distinct product based on its relative standalone selling price. The product price as specified on the purchase order is considered the standalone selling price as it is an observable input that depicts the price as if sold to a similar customer in similar circumstances.
We exclude from revenue the taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, which are collected by us from a customer and deposited with the relevant government authority.
Our revenue arrangements do not contain significant financing components.
If a customer pays consideration, or we have a right to an amount of consideration that is unconditional before we transfer a good or service to the customer, those amounts are classified as deferred revenue or deposits received from customers which are included in other current liabilities or other long-term liabilities when the payment is made.
Transaction Price Allocated to the Remaining Performance Obligations
Remaining performance obligations represent the transaction price allocated to performances obligations that are unsatisfied or partially unsatisfied as of the end of the reporting period. Unsatisfied and partially unsatisfied performance obligations consist of contract liabilities and non-cancellable backlog. Non-cancellable backlog includes goods and services for which customer purchase orders have been accepted that are scheduled or in the process of being scheduled for shipment. A portion of our revenue arises from vendor managed inventory arrangements where the timing and volume of customer utilization is difficult to predict.
Warranty
Hardware products regularly include warranties to the end customers such that the product continues to function according to published specifications. We typically offer a twelve-month warranty for most of our products. However, in some instances depending on the product, specific market, product line and geography in which we operate, and what is common in the industry, our warranties can vary and range from six months to five years. These standard warranties are assurance type warranties and do not offer any services in addition to the assurance that the product will continue working as specified. Therefore, warranties are not considered separate performance obligations in the arrangement.
We provide reserves for the estimated costs of product warranties that we record as cost of sales at the time revenue is recognized. We estimate the costs of our warranty obligations based on our historical experience of known product failure rates, use of materials to repair or replace defective products and service delivery costs incurred in correcting product failures. In addition, from time-to-time, specific warranty accruals may be made if discrete technical problems arise.
Shipping and Handling Costs and Tariffs
We record shipping and handling costs and tariffs related to revenue transactions within cost of sales as a period cost. Amounts billed to the customer for shipping and handling costs, including tariff charges, is recorded as revenue when the relevant product is recognized as revenue.
Contract Costs
We recognize the incremental direct costs of obtaining a contract, which consist of sales commissions, when control over the products they relate to transfers to the customer. Applying the practical expedient, we recognize commissions as expense when incurred, as the amortization period of the commission asset we would have otherwise recognized is less than one year.
Contract Balances
We record accounts receivable when we have an unconditional right to consideration. Contract liabilities are recorded when cash payments are received or due in advance of performance. Contract liabilities consist of advance payments and deferred revenue, where we have unsatisfied performance obligations. Contract liabilities are classified as deferred revenue and customer deposits and are included in other current liabilities within our consolidated balance sheet. Payment terms vary by customer. The time between invoicing and when payment is due is not significant.
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The following table reflects the changes in contract balances as of June 27, 2026 (in millions, except percentages):
Contract balancesBalance sheet locationJune 27, 2026June 28, 2025ChangePercentage Change
Accounts receivable, net Accounts receivable, net $520.3 $250.0 $270.3 108.1 %
Deferred revenue and customer deposits
Other current liabilities
$15.4 $0.7 $14.7 n/a
Deferred revenue and customer deposits
Other non-current liabilities
$1.4 $— $1.4 n/a
Disaggregation of Revenue
We disaggregate revenue by geography and by type of product. Refer to “Note 18. Revenue Recognition” to the consolidated financial statements for a presentation of disaggregated revenue. We do not present other levels of disaggregation, such as by customer, markets, contracts, duration of contracts, timing of transfer of control and sales channels, as this information is not used by our Chief Operating Decision Maker (“CODM”) to manage the business.
Income Taxes
In accordance with the authoritative guidance on accounting for income taxes, we recognize income taxes using an asset and liability approach. This approach requires the recognition of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in our consolidated financial statements or tax returns. The measurement of current and deferred taxes is based on provisions of the enacted tax law, and the effects of future changes in tax laws or rates are not anticipated.
The authoritative guidance provides for recognition of deferred tax assets if the realization of such deferred tax assets is more likely than not to occur based on an evaluation of both positive and negative evidence and the relative weight of the evidence. In considering the need for valuation allowance, we consider future growth, forecasted earnings including future taxable income, the mix of earnings in the jurisdictions in which we operate, historical earnings including historical earnings adjusted for non-recurring items, taxable income in prior years, if carry-back is permitted under the law, and prudent and feasible tax planning strategies.
In the event we determine that we would not be able to realize all or part of our net deferred tax assets in the future, an adjustment to the deferred tax assets valuation allowance would be charged to earnings in the period in which we make such a determination, or goodwill would be adjusted at our final determination of the valuation allowance related to an acquisition within the measurement period. Conversely, if we later determine that it is more likely than not that all or a portion of the net deferred tax assets will be realized, we would reverse the applicable portion of the previously established valuation allowance. A release of valuation allowance decreases our income tax expense in the period of release, increases our net income, and reduces our effective tax rate. Such releases may be material to our financial statements depending on the size of the deferred tax assets involved.
In the fourth quarter of fiscal year 2026, we released $236.3 million of valuation allowance on the majority of our U.S. federal and state deferred tax assets after we considered all available positive and negative evidence. As of June 27, 2026, we have a cumulative U.S. loss for the 3-year period on the basis of pretax income adjusted for recurring permanent book-to-tax differences. The cumulative loss is driven by the loss on debt extinguishment of $7,756.6 million. Because of this cumulative U.S. loss, we developed an objectively verifiable estimate of future taxable income based upon our recent U.S. operating results which excluded the loss on debt extinguishment. In other words, we would have had cumulative U.S. income for the 3-year period based on our pretax income adjusted for recurring permanent book-to-tax differences without the loss on debt extinguishment. Additional positive evidence that we have considered in our assessment of the need for a valuation allowance included existing contracts and firm sales backlog, as well as utilization of more U.S. tax attribute than generated which reduces our U.S. federal and state net deferred tax assets. Based upon this objectively verifiable estimate of future income, our U.S. deferred tax assets are more likely than not to be realized prior to expiration with the exception of federal foreign tax credit carryforwards and California research and development credit carryforwards. We continued to maintain valuation allowances against these deferred tax assets because, based on their character, jurisdiction, applicable utilization limitations, and expiration periods, it is more likely than not that they will not be utilized in the future. As of the end of fiscal year 2026, we maintained an $81.4 million valuation allowance on these U.S. deferred tax assets.
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In the fourth quarter of fiscal year 2025, we released $153.1 million of valuation allowances on our United Kingdom (“U.K.”) deferred tax assets after we considered all available positive and negative evidence related to our U.K. subsidiary. We analyzed the U.K. subsidiary’s historical operating results, projected future taxable income, tax planning strategies, and reversals of deferred tax liabilities, and determined that the weight of available objectively verifiable positive evidence supported the realizability of the U.K. deferred tax assets. In weighing the available evidence, more weight was placed upon our forecasts of future taxable income than on the history of pre-tax losses as such losses were generated under our prior U.K. business operating model which will no longer be in effect beginning with fiscal year 2026, and the guarantee of a positive operating margin as we effectuated an internal restructuring at the end of fiscal year 2025. Further, the most significant deferred tax asset in the U.K. is the net operating loss carryforward. Under the U.K. tax law, net operating losses may be carried forward indefinitely, and we have considered the indefinite carryforward period to be positive evidence.
We are subject to income tax audits by the respective tax authorities of the jurisdictions in which we operate. The determination of our income tax liabilities in each of these jurisdictions requires the interpretation and application of complex, and sometimes uncertain, tax laws and regulations. The authoritative guidance on accounting for income taxes prescribes both recognition and measurement criteria that must be met for the benefit of a tax position to be recognized in the financial statements. If a tax position taken, or expected to be taken, in a tax return does not meet such recognition or measurement criteria, an unrecognized tax benefit liability is recorded. If we ultimately determine that an unrecognized tax benefit liability is no longer necessary, we reverse the liability and recognize a tax benefit in the period in which it is determined that the unrecognized tax benefit liability is no longer necessary.
Our income tax provision is highly dependent on the geographic distribution of our worldwide earnings or losses, tax laws and regulations in various jurisdictions, tax incentives, the availability of tax credits and loss carryforwards, and the effectiveness of our tax planning strategies. The application of tax laws and regulations is subject to legal and factual interpretation, judgment and uncertainty. Tax laws themselves are subject to change as a result of changes in fiscal policy, changes in legislation, and the evolution of regulations and court rulings and tax audits.
The recognition and measurement of current taxes payable or refundable and deferred tax assets and liabilities requires that we make certain estimates and judgments. Changes to these estimates, including changes in judgment regarding the realizability of deferred tax assets and the need for or release of valuation allowances, may have a material impact on our tax provision, net income, and effective tax rate in a future period.
Business Combinations
In accordance with the guidance for business combinations, we determine whether a transaction or event is a business combination, which requires that the assets acquired and liabilities assumed constitute a business. Each business combination is then accounted for by applying the acquisition method. If the assets acquired are not a business, we account for the transaction or event as an asset acquisition. Under both methods, we recognize the identifiable assets acquired, the liabilities assumed, and noncontrolling interest, if any, in the acquired entity. We capitalize acquisition-related costs and fees associated with asset acquisitions and immediately expense acquisition-related costs and fees associated with business combinations.
We allocate the fair value of purchase consideration to assets acquired and liabilities assumed based on their estimated fair values at the acquisition date. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. We make significant estimates and assumptions to determine assets acquired and liabilities assumed, in particular intangible assets and pre-acquisition contingencies, as applicable.
Critical estimates in valuing intangible assets include, but are not limited to, discount rates, the period required for customer revenues to mature, and future expected cash flows from customer relationships, acquired developed technology and acquired in-process research and development assets. Our estimates of fair value are based on assumptions using the best information available. These assumptions are inherently uncertain and unpredictable and, as a result, actual results may differ materially from these estimates.
We may identify certain pre-acquisition contingencies as of the acquisition date and may extend our review and evaluation of these pre-acquisition contingencies throughout the measurement period in order to obtain sufficient information to assess whether these contingencies should be included as a part of the fair value of assets acquired and liabilities assumed and, if so, the amounts to be included.
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Certain estimates associated with the accounting for acquisitions may change as additional information becomes available regarding the assets acquired and liabilities assumed. Any change in facts and circumstances that existed as of the acquisition date and impacts to our preliminary estimates are recorded to goodwill if identified within the measurement period. Subsequent to the measurement period or our final determination of fair value of assets and liabilities, whichever is earlier, the adjustments will affect our earnings. Although we believe that the assumptions and estimates we have made in the past have been reasonable and appropriate, they are based in part on historical experience and information obtained from the management of the acquired companies and are inherently uncertain. Unanticipated events and circumstances may occur that may affect the accuracy or validity of such assumptions, estimates or actual results.
Goodwill and Intangible Assets - Impairment Assessment
Goodwill represents the excess of the purchase price of an acquired business over the fair value of the identifiable assets acquired and liabilities assumed. We test goodwill impairment on an annual basis in the fiscal fourth quarter and at any other time when events occur or circumstances indicate that the carrying amount of goodwill may not be recoverable.
We have the option to first assess qualitative factors to determine whether it is necessary to perform the quantitative goodwill impairment test. The qualitative factors we assess include long-term prospects of our performance, share price trends and market capitalization, and events specific to us. Unanticipated events and circumstances may occur that affect the accuracy of our assumptions, estimates and judgments. For example, if the price of our common stock were to significantly decrease combined with other adverse changes in market conditions, thus indicating that the underlying fair value of our reporting units may have decreased, we may reassess the value of our goodwill in the period such circumstances were identified.
If we determine that, as a result of the qualitative assessment, it is more likely than not (i.e., greater than 50% likelihood) that the fair value of a reporting unit is less than its carrying amount, we perform the quantitative test by estimating the fair value of our reporting units. If the carrying value of a reporting unit exceeds its fair value, we record goodwill impairment loss equal to the excess of the carrying value of the reporting unit’s goodwill over its fair value, not to exceed the carrying amount of goodwill. Performing a quantitative goodwill impairment test includes the determination of the fair value of a reporting unit and involves significant estimates and assumptions. These estimates and assumptions include, among others, revenue growth rates and operating margins used to calculate projected future cash flows, risk-adjusted discount rates, future economic and market conditions, and the determination of appropriate market comparables.
We make judgments about the recoverability of purchased finite-lived intangible assets whenever events or changes in circumstances indicate that impairment may exist. In such situations, we are required to evaluate whether the net book values of our finite-lived intangible assets are recoverable. We determine whether finite-lived intangible assets are recoverable based on the forecasted future cash flows that are expected to be generated by the lowest level associated asset grouping. Assumptions and estimates about future values and remaining useful lives of our intangible assets are complex and subjective and include, among others, forecasted undiscounted cash flows to be generated by certain asset groupings. These assumptions and estimates can be affected by a variety of factors, including external factors such as industry and economic trends and internal factors such as changes in our business strategy and our internal forecasts.
Recently Issued Accounting Pronouncements
Refer to “Note 2. Recently Issued Accounting Pronouncements” to the consolidated financial statements.
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Results of Operations
This section of this Form 10-K generally discusses fiscal year 2026 compared to fiscal year 2025. The comparison of the fiscal year 2025 results with the fiscal year 2024 results that are not included in this Form 10-K can be found in the “Management’s Discussion and Analysis Results of Operations” section in our fiscal year 2025 Annual Report within Part II, Item 7 of Form 10-K, filed on August 19, 2025.
The following table summarizes selected consolidated statements of operations items as a percentage of net revenue:
Years Ended
June 27, 2026June 28, 2025June 29, 2024
Net revenue by type of products:
Components66.5 %67.9 %60.5 %
Systems33.5 32.1 39.5 
Net revenue100.0 100.0 100.0 
Cost of sales55.7 67.0 75.3 
Amortization of acquired developed intangibles2.6 5.0 6.2 
Gross profit41.7 28.0 18.5 
Operating expenses:
Research and development11.8 18.5 22.2 
Selling, general and administrative12.1 21.2 22.9 
Restructuring and related charges0.4 1.4 5.3 
Gain on sale of facility— (2.1)— 
Total operating expenses24.3 38.9 50.4 
Income (loss) from operations17.4 (10.9)(31.9)
Other (expense) income, net:
Loss on debt extinguishment(257.4)— — 
Escrow settlement0.9 — — 
Interest expense(0.7)(1.3)(2.5)
    Other income, net1.8 1.8 4.6 
Total other (expense) income, net(255.4)0.5 2.1 
Loss before income taxes(238.0)(10.4)(29.8)
Income tax (benefit) provision(7.9)(12.0)10.4 
Net (loss) income (230.1)%1.6 %(40.2)%
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Financial Data for Fiscal Years 2026, 2025, and 2024
The following table summarizes selected consolidated statements of operations items (in millions, except for percentages):
20262025ChangePercentage Change20252024ChangePercentage Change
Net revenue by type of products:
Components$2,005.6$1,116.3$889.3 79.7 %$1,116.3$822.1$294.2 35.8 %
Systems1,008.4528.7479.7 90.7 %528.7537.1(8.4)(1.6)%
Net revenue$3,014.0$1,645.0$1,369.0 83.2 %$1,645.0$1,359.2$285.8 21.0 %
Gross profit$1,255.9$459.9$796.0 173.1 %$459.9$251.5$208.4 82.9 %
Gross margin41.7 %28.0 %28.0 %18.5 %
Research and development$356.5$303.9$52.617.3 %$303.9$302.2$1.7 0.6 %
Percentage of net revenue11.8 %18.5 %18.5 %22.2 %
Selling, general and administrative$363.2$348.2$15.0 4.3 %$348.2$310.7$37.5 12.1 %
Percentage of net revenue12.1 %21.2 %21.2 %22.9 %
Restructuring and related charges$11.4$22.8$(11.4)(50.0)%$22.8$72.6$(49.8)(68.6)%
Percentage of net revenue0.4 %1.4 %1.4 %5.3 %
Gain on sale of facility$— $(34.9)$34.9n/a$(34.9)$— $(34.9)n/a
Percentage of net revenue— %(2.1)%(2.1)%— %
Net Revenue
Net revenue increased by $1,369.0 million, or 83.2%, during fiscal year 2026 compared to fiscal year 2025, driven by $889.3 million increase in Components products and a $479.7 million increase in Systems products.
The Components products net revenue growth was primarily driven by the ramp of laser chip and laser assembly product shipment, which represent 78% of the total growth to support strong, broad-based demand across intra-data center, data center interconnect, and long-haul applications, complemented by a slight increase in average selling prices of laser chip products driven primarily by a shift to 200G lane speeds. The remaining approximately 22% of Components net revenue growth was primarily due to an increase in shipment volume of data transport products, encompassing line subsystems solutions for long-haul terrestrial networks and charge pump products used in undersea network installations.
The System products net revenue growth was primarily driven by our cloud transceiver product lines which increased by more than 173% due to an increase in shipment volume, partially offset by lower average selling prices. We also continued the initial phase of optical circuit switch shipments, which contributed more than $90.0 million of revenue during fiscal year 2026. and we remain on track for manufacturing expansion over the coming quarters to support future growth.
During our fiscal years 2026, 2025 and 2024, net revenue from a single end customer which represented 10% or greater of total net revenue is summarized as follows:
Years Ended
June 27, 2026June 28, 2025June 29, 2024
Customer A26.6 %15.4 %18.9 %
Customer B15.0 %16.0 %11.4 %
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Revenue by Region
We operate in three geographic regions: Americas, Asia-Pacific, and EMEA (Europe, Middle East, and Africa). Net revenue is assigned to the geographic region and country where our product is initially shipped to. For example, certain customers may request shipment of our product to a contract manufacturer in one country, which may differ from the location of their end customers.
The following table presents net revenue by the three geographic regions we operate in and net revenue from countries that represented 10% or more of our total net revenue (in millions, except percentage data):
Years Ended
June 27, 2026June 28, 2025June 29, 2024
Net revenue:
Americas:
United States
$627.9 20.8 %$312.3 19.0 %$356.1 26.2 %
Mexico443.7 14.7 148.5 9.0 91.7 6.7 
Other Americas
13.2 0.4 20.1 1.2 3.4 0.3 
Total Americas
$1,084.8 35.9 %$480.9 29.2 %$451.2 33.2 %
Asia-Pacific:
Thailand$626.6 20.8 %$291.8 17.7 %$183.8 13.5 %
Hong Kong519.3 17.2 398.6 24.2 261.9 19.3 
China284.8 9.4 95.5 5.8 68.2 5.0 
Japan
104.6 3.5 78.3 4.8 84.6 6.2 
Other Asia-Pacific
216.9 7.3 136.4 8.4 181.3 13.4 
Total Asia-Pacific
$1,752.2 58.2 %$1,000.6 60.9 %$779.8 57.4 %
EMEA$177.0 5.9 %$163.5 9.9 %$128.2 9.4 %
Total net revenue
$3,014.0 100.0%$1,645.0 100.0%$1,359.2 100.0%
During fiscal years 2026, 2025 and 2024, net revenue from customers outside the United States, based on customer shipping location, represented 79.2%, 81.0% and 73.8% of net revenue, respectively.
Our net revenue is primarily denominated in U.S. dollars, including our net revenue from customers outside the United States as presented above. We expect revenue from customers outside of the United States to continue to be an important part of our overall net revenue and a focus for net revenue growth opportunities. However, regulatory and enforcement actions by the United States and other governmental agencies, as well as changes in tax and trade policies and tariffs, have impacted and may continue to adversely impact net revenue from customers outside the United States.
Gross Margin
Gross margin in fiscal year 2026 increased to 41.7% from 28.0% in fiscal year 2025, primarily driven by higher revenue from our laser chip, laser assembly, and data transport products. Approximately 54% of the gross margin dollar increase was driven by lower manufacturing costs as a percentage of revenue, primarily due to higher internal factory utilization. Additionally, 29% of the gross margin increase was driven by a mix shift to higher margin products. The remaining 17% increase in gross margin relates to the decrease in amortization of acquired intangibles.
The markets in which we sell products are undergoing product, architectural and business model transitions, driven in part by the deployment of AI, high customer concentrations, are highly competitive, are price sensitive and/or are affected by customer seasonality and have variants in buying patterns. We expect these factors to result in variability of our gross margin, and our gross margin may be subject to increasing downward pressure due to these factors.
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Research and Development (“R&D”)
R&D expense increased by $52.6 million, or 17.3% during fiscal year 2026 compared to fiscal year 2025, primarily due to a $23.2 million increase in our cash incentive compensation due to higher revenue and profit levels, whereas the fiscal year 2025 annual incentive plan was mostly equity-based, a $19.9 million increase related to new R&D programs, and a $14.4 million increase in payroll related expenses primarily driven by equity-related taxes. These increases were offset in part by a $4.5 million decrease in stock-based compensation.
We believe that continuing our investments in R&D is critical to attaining our strategic objectives. We plan to continue to invest in R&D and new products that we believe will further differentiate us in the marketplace.
Selling, General and Administrative (“SG&A”)
SG&A expense increased by $15.0 million, or 4.3%, during fiscal year 2026 compared to fiscal year 2025, primarily due to a $20.2 million increase in our cash incentive compensation due to higher revenue and profit levels, whereas the fiscal year 2025 annual incentive plan was mostly equity-based, a $16.0 million increase in payroll related expenses primarily driven by equity-related taxes, and a $7.7 million loss on sale of two commercial buildings. These increases were offset in part by a $9.5 million decrease in amortization of intangible assets as certain assets were fully amortized, a $5.1 million decrease in stock-based compensation as a result of equity award modifications made in 2025, a $5.2 million decrease related to executive employee transitions, and a $3.2 million reductions in bad debt expense.
From time-to-time, we incur expenses that are not part of our ordinary operations, such as mergers and acquisition-related and litigation expenses, which generally increase our SG&A expenses and potentially impact our profitability expectations in any particular period.
Restructuring and Related Charges
We have initiated various strategic restructuring events primarily intended to reduce costs, consolidate our operations, rationalize the manufacturing of our products and align our business in response to market conditions and as a result of recent acquisitions.
During fiscal year 2026, we recorded restructuring and related charges of $11.4 million, primarily related to a reduction in force during the period in order to enhance operational efficiency and realign our investments toward the most critical initiatives
Refer to “Note 12. Restructuring and Related Charges” to the consolidated financial statements.
Gain on Sale of Facility
In fiscal year 2025, we completed the sale of our assets in an entity in Shenzhen, China and received net proceeds of $47.8 million, which was net of cash of $17.6 million and direct selling costs of $1.1 million. The net assets sold consisted primarily of building, building improvements and land rights as of December 17, 2024 with a net carrying value of $12.9 million, and were used for manufacturing and research and development activities. As a result, we recognized a gain on sale of facility of $34.9 million, which was recorded in our consolidated statements of operations for the year ended June 28, 2025. We paid $4.4 million of withholding taxes on this sale transaction, which is recorded as part of the income tax provision for the year ended June 28, 2025. We also incurred $0.7 million of indirect selling expenses related to this transaction, which was recorded as part of selling, general and administrative expenses in our consolidated statements of operations for fiscal year 2025.
Escrow Settlement
In November 2023, we completed the acquisition of Cloud Light Technology Limited (“Cloud Light”). In accordance with a definitive merger agreement, dated as of October 29, 2023, between us and Cloud Light, cash consideration included $75.8 million of cash held in an escrow fund to support Cloud Light’s indemnification obligations and customary adjustment for working capital. In November 2025, we and the former shareholders of Cloud Light mutually agreed to settle outstanding indemnification claims for $27.5 million and signed a settlement agreement releasing the balance of the escrow fund to the former Cloud Light shareholders and releasing them of their indemnification obligations. Since the measurement period has expired, we recorded the settlement amount of $27.5 million as other income, net in our consolidated statements of operations for the fiscal year 2026.
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Loss on Debt Extinguishment
During our fourth quarter of fiscal year 2026, we entered into privately negotiated exchange arrangements with certain holders of our 2026 Notes, 2028 Notes, and 2029 Notes. Pursuant to these agreements, we issued an aggregate of approximately 10.6 million shares of our common stock in exchange for approximately $264.8 million, $650.4 million, and $209.7 million aggregate principal amount of the 2026 Notes, 2028 Notes, and 2029 Notes, respectively, and the related conversion value in excess of the principal amounts thereof. This resulted in a $7,756.6 million loss on debt extinguishment, which includes $7,755.1 million of conversion value in excess of principal amounts, $3.1 million of related transaction costs and $2.9 million of unamortized debt issuance costs, offset by $2.9 million of forfeited interest and $1.6 million of negotiated exchange discount recorded in our consolidated statement of operations for the fiscal year 2026.
Interest Expense
Our interest expense is as follows for the years presented (in millions):
Years Ended
June 27, 2026June 28, 2025June 29, 2024
Interest expense$21.8 $22.2 $33.8 
Interest expense is primarily driven by interest on our convertible notes and term loans.
Interest expense in fiscal year 2026 slightly decreased by $0.4 million, or 2%, as compared to fiscal year 2025, primarily due to the early conversion and equitizations of a portion of the 2026 Notes, 2028 Notes, and 2029 Notes, offset in part by the interest expense from the issuance of the 2032 Notes in September 2025. Interest expense also includes the amortization of the debt issuance costs of our convertible notes.
Other Income, Net
The components of other income, net are as follows for the years presented (in millions):
Years Ended
June 27, 2026June 28, 2025June 29, 2024
Foreign exchange (losses) gains, net$(0.5)$(4.2)$0.8 
Interest and investment income60.2 34.4 61.3 
Inducement expense and others(6.4)— — 
Total other income, net$53.3 $30.2 $62.1 
Other income, net in fiscal year 2026 increased by $23.1 million compared to fiscal year 2025 primarily due to an increase of $25.8 million in interest and investment income driven by higher short-term investment balances, primarily attributed to $2.0 billion proceeds from issuance of Preferred Stock and $27.5 million Cloud Light escrow settlement. This was offset in part by a $5.9 million inducement expense and others related to the partial repurchase of 2026 Notes.
Provision for Income Taxes
Years Ended
(in millions)June 27, 2026June 28, 2025June 29, 2024
Income tax (benefit) provision$(237.7)$(198.0)$140.8 

Our benefit for income taxes for fiscal year 2026 differs from the 21% U.S. statutory rate primarily due to the non-deductible loss on debt extinguishment and the income tax expense on U.S. income inclusions from GILTI and Subpart F, partially offset by the income tax benefit associated with the release of valuation allowances on certain U.S. deferred tax assets.
Our provision for incomes taxes may be impacted by changes in the geographic mix of earnings, acquisitions, changes in the realizability of deferred tax assets, changes in our uncertain tax positions, the results of income tax audits, settlements with tax authorities, the expiration of statutes of limitations, the implementation of tax planning strategies, tax rulings, court decisions, and changes in tax laws and regulations. It is also possible that significant negative or positive evidence may become available that causes us to change our conclusion regarding whether a valuation allowance is needed on certain of our deferred tax assets, which would affect our income tax provision in the period of such change.
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We also evaluate changes to regulations and requirements in the international jurisdictions where we conduct our business. For additional information, refer to Part II Item 1A “Risk Factors”.
Defined Benefit Plans
We sponsor defined benefit pension plans covering employees in Japan, Switzerland, and Thailand. Pension plan benefits are based primarily on participants’ compensation and years of service credited as specified under the terms of each country’s plan. Employees are entitled to a lump sum benefit upon retirement or upon certain instances of termination. The funding policy is consistent with the local requirements of each country. As of June 27, 2026, the defined benefit plans in Switzerland were partially funded, while defined benefit plans in Japan and Thailand were unfunded. As of June 27, 2026, our projected benefit obligations, net, in Japan, Switzerland, and Thailand were $2.3 million, $0.3 million and $5.6 million, respectively. They were recorded in our consolidated balance sheets as accrued payroll and related expenses for the current portion while other non-current liabilities for the non-current portion, and represent the total projected benefit obligation (“PBO”) less the fair value of plan assets.
A key actuarial assumption in calculating the net periodic cost and the PBO is the discount rate. Changes in the discount rate impact the interest cost component of the net periodic benefit cost calculation and PBO due to the fact that the PBO is calculated on a net present value basis. Decreases in the discount rate will generally increase pre-tax cost, recognized expense and the PBO. Increases in the discount rate tend to have the opposite effect. We estimate a 100 basis point decrease or increase in the discount rate would cause a corresponding increase or decrease of $3.4 million or $3.3 million, respectively, in the PBO based on data as of June 27, 2026.
We expect to contribute $1.8 million to our defined benefit pension plans in fiscal year 2027.
Financial Condition
Liquidity and Capital Resources
As of June 27, 2026 and June 28, 2025, our cash and cash equivalents were $2,043.5 million and $520.7 million, respectively. As of June 27, 2026 and June 28, 2025, our short-term investments of $694.9 million and $356.4 million, respectively, were all held in the United States. Cash equivalents and short-term investments are primarily comprised of money market funds, treasuries, agencies, high quality investment grade fixed income securities, certificates of deposit, and commercial paper. Our investment policy and strategy is focused on the preservation of capital and supporting our liquidity requirements.
The total amount of cash outside the United States held by the non-U.S. entities as of June 27, 2026 and June 28, 2025 was $417.9 million and $398.3 million, respectively, which was primarily held by entities incorporated in the United Kingdom, Japan, Hong Kong, China, Switzerland, and Thailand. Although cash currently held in the United States, as well as cash generated in the United States from future operations, is expected to cover our normal operating requirements, a substantial amount of additional cash could be required for other purposes, such as capital expenditures to support our business and growth, including costs associated with increasing internal manufacturing capabilities, strategic transactions and partnerships, and future acquisitions.
Our intent is to indefinitely reinvest funds held outside the United States and, except for the funds held in the Cayman Islands, the British Virgin Islands, and Hong Kong, as well as certain subsidiaries in China and Japan, our current plans do not demonstrate a need to repatriate them to fund our domestic operations. However, if in the future, we encounter a significant need for liquidity domestically or at a particular location that we cannot fulfill through borrowings, equity offerings, or other internal or external sources, or the cost to bring back the money is not significant from a tax perspective, we may determine that cash repatriations are necessary or desirable. Repatriation could result in additional material taxes. These factors may cause us to have an overall tax rate higher than other companies or higher than our tax rates in the past. Additionally, if conditions warrant, we may seek to obtain additional financing through debt or equity sources. To the extent we issue additional shares, it may create dilution to our existing stockholders. However, any such financing may not be available on terms favorable to us or may not be available at all.
Beginning in fiscal year 2023, the Tax Cuts and Jobs Act of 2017 requires taxpayers to capitalize research and development expenditures and amortize domestic expenditures over five years and foreign expenditures over fifteen years. The OBBBA enacted in July 2025 eliminates capitalization of domestic research and development expenditures for taxable years beginning on or after January 1, 2025, but retains the requirement to amortize foreign research and development expenditures over 15 years. In addition, the OBBBA permits all taxpayers who paid or incurred domestic research and development expenses in tax years beginning on or after January 1, 2022 and before January 1, 2025 to elect to deduct any remaining unamortized amount over a one-year period or ratably over a two-year period (at the taxpayer’s election), accelerating the benefit of such expenses. We have evaluated these changes and included their impact in our tax provision for fiscal year 2026.
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Indebtedness
The carrying amounts and estimated fair values of the convertible notes are as follows for the periods presented (in millions):
June 27, 2026June 28, 2025
Carrying AmountEstimated Fair ValueCarrying AmountEstimated Fair Value
2032 Notes$1,256.1 $5,411.1 $— $— 
2029 Notes54.7 640.2 600.2 925.5 
2028 Notes179.1 1,108.7 857.7 890.2 
2026 Notes54.7 447.2 1,048.3 1,233.3 
$1,544.6 $7,607.2 $2,506.2 $3,049.0 
The table below summarizes the applicable conversion price and the equivalent 130% of the conversion price of each series of Notes (per share amount):
Conversion Price (1)
130% of Conversion Price (1)
2032 Notes$187.77 $244.10 
2029 Notes69.54 90.40 
2028 Notes131.03 170.34 
2026 Notes99.29 129.08 
(1) Since the closing price of our stock was at least 130% of the applicable conversion price for each series of Notes for 20 of the last 30 trading days of our fiscal year 2026, all of our Notes remain convertible at the option of the holders during the first quarter of fiscal year 2027. The outstanding Notes are recorded as current portion of long-term debt, which is presented as current liabilities in our consolidated balance sheets as of June 27, 2026, net of unamortized debt issuance costs. If the Notes are converted by holders, we are required to satisfy our conversion obligations with respect to each series of converted Notes by paying cash equal to the principal amounts of such series of converted Notes and paying or delivering, as the case may be, cash, shares of common stock, or a combination of cash and shares of common stock, at our election, with respect to any conversion value in excess thereof. The outstanding Notes as of June 28, 2025 are recorded as long-term debt, which is presented as non-current liabilities in our consolidated balance sheets, net of unamortized debt issuance costs.
As of August 14, 2026, we have received early conversion requests totaling $757.8 million aggregate principal amount of the Notes (or the “Converted Notes”), which principal amount will be settled in cash and the conversion value in excess thereof will be settled in cash, shares of common stock, or a combination cash and shares of common stock, at our election, in accordance with Indenture governing the applicable series of Converted Notes. During the year ended June 27, 2026, the aggregate principal amount of the Notes settled in cash was $519.4 million.
On April 7, 2026, we entered into privately negotiated exchange arrangements with certain holders of our 2026 Notes and 2029 Notes. Pursuant to these agreements, we issued an aggregate of approximately 5.7 million shares of our common stock in exchange for approximately $264.8 million and $209.7 million aggregate principal amount of the 2026 Notes and 2029 Notes, respectively, and the related conversion value in excess of the principal amounts thereof. The issuance of common stock in the exchange transactions resulted in incremental dilution of approximately 0.6 million shares of our common stock related to the aggregate principal amount.
On May 29, 2026, we entered into privately negotiated exchange arrangements with certain holders of our 2028 Notes. Pursuant to these agreements, we issued an aggregate of approximately 5.0 million shares of our common stock in exchange for approximately $650.4 million aggregate principal amount of the 2028 Notes, and the related conversion value in excess of the principal amounts thereof. The issuance of common stock in the exchange transactions resulted in incremental dilution of approximately 0.8 million shares of our common stock related to the aggregate principal amount.
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The principal amount outstanding of our SMBC Term Loans and the Mizuho Term Loan, collectively referred to as Japan Term Loans, are as follows for the periods presented (in millions):
June 27, 2026June 28, 2025
Short-termLong-termTotalShort-termLong-termTotal
SMBC Term Loans$46.8 $28.0 $74.8 $4.4 $36.2 $40.6 
Mizuho Term Loan5.5 12.5 18.0 6.2 20.2 26.4 
Total$52.3 $40.5 $92.8 $10.6 $56.4 $67.0 
The short-term portion of the Japan Term Loans is recorded as current liabilities while the long-term portion is recorded as long-term debt in our consolidated balance sheets.
On December 19, 2025, we entered into a Credit Agreement providing for a senior secured revolving credit facility in an aggregate principal amount of $400.0 million, including a $23.0 million sublimit for the issuance of letters of credit. As of June 27, 2026, there were no borrowings outstanding under the revolving credit facility. For additional information regarding the Credit Agreement, refer to “Note 10. Debt” in the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K. For additional information, refer to “Part I, Item 1A. Risk Factors”.
Contractual Obligations
The following table summarizes our contractual obligations as of June 27, 2026, and the effect such obligations are expected to have on our liquidity and cash flow (in millions):
Payments due
TotalLess than 1 yearMore than 1 year
Contractual Obligations
Asset retirement obligations$9.0 $— $9.0 
Operating lease liabilities, including imputed interest (1)
36.0 14.6 21.4 
Pension plan contributions (2)
1.8 $1.8 — 
Purchase obligations (3)
2,354.4 2,112.5 241.9 
Term loans - principal (4)
92.8 52.340.5
Term loans - interest (4)
1.2 0.7 0.5 
Convertible notes - principal (5)
1,554.3 54.8 1,499.5 
Convertible notes - interest (5)
30.6 5.4 25.2 
Others14.9 6.9 8.0 
Total$4,095.0 $2,249.0 $1,846.0 
(1) The amounts of operating lease liabilities do not include any sublease income amounts nor do they include payments for short-term leases or variable lease payments. As of June 27, 2026, we expect to receive sublease income of approximately $0.8 million over the next year. Refer to “Note 8. Leases” to the consolidated financial statements.
(2) The amount of pension plan contributions represents planned contributions to our defined benefit plans. Although additional future contributions will be required, the amount and timing of these contributions will be affected by actuarial assumptions, the actual rate of returns on plan assets, the level of market interest rates, legislative changes, and the amount of voluntary contributions to the plan. Any contributions for the following fiscal year and later will depend on the value of the plan assets in the future and thus are uncertain. As such, we have not included any amounts beyond one year in the table above. Refer to “Note 15. Employee Retirement Plans” to the consolidated financial statements.
(3) Purchase obligations represent legally binding commitments to purchase inventory and other commitments made in the normal course of business to meet operational requirements. Refer to “Note 16. Commitments and Contingencies” to the consolidated financial statements.
(4) The amounts related to term loans include principal and interest on our Sumitomo Mitsui Banking Corporation (“SMBC”) 2026 and 2029 Term Loans with a fixed annual interest rate of 0.88% and 1.44%, respectively, and Mizuho Bank, Ltd. (“Mizuho”) term loan with a fixed annual interest rate of 0.90%. The SMBC Term Loans requires monthly principal payments with the remaining principal due on the loan maturity date of July 31, 2029 and December 19, 2026 while the Mizuho Term Loan requires quarterly principal payments with the final payment due on September 20, 2029.
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(5) The amounts related to convertible notes include principal and interest on our 0.50% Convertible Senior Notes due 2026 (the “2026 Notes”), principal and interest on our 0.50% Convertible Senior Notes due 2028 (the “2028 Notes”), principal and interest on our 1.50% Convertible Senior Notes due 2029 (the “2029 Notes”), and principal and interest on our 0.375% Convertible Senior Notes due 2032 (the “2032 Notes”). The 2026 Notes have a maturity date of December 15, 2026, the 2028 Notes have a maturity date of June 15, 2028, the 2029 Notes have a maturity date of December 15, 2029, and the 2032 Notes have a maturity date of March 15, 2032. The principal balances of our convertible notes are reflected in the payment periods in the table above based on their respective contractual maturities, which may be accelerated if the holders elect to convert the notes prior to maturity. The principal amounts of all of our outstanding convertible notes must be settled in cash. The actual cash settlement may be higher if we decide to settle the conversion value in excess of the principal amounts in cash, rather than issuing shares of common stock. Refer to “Note 10. Debt” to the consolidated financial statements.
We do not have any off-balance sheet arrangements, as such term is defined in rules promulgated by the SEC, which have or are reasonably likely to have a current or future effect on our liquidity or capital resources that are material to investors.
Unrecognized Tax Benefits
As of June 27, 2026, our other non-current liabilities also include $67.2 million of unrecognized tax benefit for uncertain tax positions. We are unable to reliably estimate the timing of future payments related to uncertain tax positions.
Liquidity and Capital Resources Requirements
We believe that our cash and cash equivalents as of June 27, 2026, and cash flows from our operating activities will be sufficient to meet our liquidity and capital spending requirements for at least the next 12 months from the issuance of our financial statements for the fiscal year 2026.
There are a number of factors that could positively or negatively impact our liquidity position, including:
•the settlement of any conversion or redemption of our convertible notes in cash;
•global economic conditions which affect demand for our products and services and impact the financial stability of our suppliers and customers, including the impact of uncertainty in the banking and financial services industries;
•fluctuations in demand for our products as a result of changes in regulations, tariffs or other trade barriers, and trade relations in general;
•changes in accounts receivable, inventory or other operating assets and liabilities, which affect our working capital;
•increase in capital expenditures to support our business and growth, including increases in manufacturing capacity;
•the tendency of customers to delay payments or to negotiate favorable payment terms to manage their own liquidity positions;
•timing of payments to our suppliers;
•volatility in fixed income and credit, which impact the liquidity and valuation of our investment portfolios;
•cost and availability of credit, which may impact available financing for us, our customers or others with whom we do business;
•volatility in foreign exchange markets, which impacts our financial results;
•possible investments or acquisitions of complementary businesses, products or technologies, or other strategic transactions or partnerships;
•issuance of debt or equity securities, or other financing transactions, including bank debt;
•potential funding of pension liabilities either voluntarily or as required by law or regulation; and
•acquisitions or strategic transactions.

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Cash Flows
Fiscal Year 2026
As of June 27, 2026, our consolidated balance of cash and cash equivalents increased by $1,522.8 million, to $2,043.5 million from $520.7 million as of June 28, 2025. The increase in cash and cash equivalents was due to cash from operating activities of $751.4 million and cash from financing activities of $1,556.9 million, partially offset by and cash used in investing activities of $785.5 million during the year ended June 27, 2026.
Cash provided by operating activities was $751.4 million during the year ended June 27, 2026, which reflects the net loss of $6,935.1 million and non-cash items of $7,978.5 million, partially offset by $292.0 million of changes in our operating assets and liabilities. Changes in operating assets and liabilities were primarily driven by a $221.6 million increase in accounts payable primarily due to higher inventory purchases and capital expenditures, a $88.4 million increase in accrued payroll and related expenses mainly driven by our accrual for employee cash bonuses and related payroll taxes and payroll taxes related to stock-based compensation, a $43.4 million increase in accrued expenses and other current and non-current liabilities driven by contractual liabilities and provision for warranty reserves, and a $47.9 million decrease in income tax liabilities primarily due to income tax payments, offset by a $270.4 million increase in accounts receivable mainly driven by higher revenue, a $228.4 million increase in inventories driven by builds to support market demand and a $96.2 million increase in prepayments and other current and non-current assets primarily driven by a $45.3 million increase in value-added-tax receivables related to capital expenditures and inventory purchases, a $24.0 million inventory-related prepayments, and a $13.2 million increase in receivables from our contract manufacturers driven by increase manufacturing volume.
Cash used in investing activities of $785.5 million during the year ended June 27, 2026 was primarily attributable to capital expenditures of $451.3 million, purchases of short-term investments, net of sales and maturities of $338.6 million, and a $38.0 million payment for an acquisition of a business, offset by $42.4 million of proceeds from the sale of assets.
Cash from financing activities of $1,556.9 million during the year ended June 27, 2026, was attributable to $1,999.7 million of net proceeds from the issuance of Series A Convertible Preferred Stock, $1,254.7 million of net proceeds from the issuance of our 2032 Notes, $47.9 million of proceeds from SMBC term loans and $17.1 million of proceeds from employee stock plans, offset by $843.1 million of payments for the partial repurchase of the 2026 Notes, $520.0 million of payments for Notes conversions, $281.0 million of tax payments related to net share settlement of restricted stock, $102.0 million of payments for the 2032 Capped Call Options, $14.0 million of principal payments on term loans, and $2.4 million of payments for financing costs related to our revolving credit facility.
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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Foreign Exchange Risk
We conduct our business and sell our products to customers primarily in Asia, Europe, and North America. Due to the impact of changes in foreign currency exchange rates between the U.S. Dollar and foreign currencies, we recorded foreign exchange losses of $0.5 million in fiscal year 2026, foreign exchange losses of $4.2 million in fiscal year 2025 and foreign exchange gains of $0.8 million in fiscal year 2024 in the consolidated statements of operations.
Although we sell primarily in the U.S. Dollar, we have foreign currency exchange risks related to our expenses denominated in currencies other than the U.S. Dollar, principally the Chinese Yuan, Canadian Dollar, Thai Baht, Japanese Yen, Hong Kong Dollar, UK Pound, Swiss Franc, and Euro. The volatility of exchange rates depends on many factors that we cannot forecast with reliable accuracy. In the event our foreign currency denominated monetary assets and liabilities, sales or expenses increase, our operating results may be affected to a greater extent by fluctuations in the exchange rates of the currencies in which we do business as compared with the U.S. dollar.
Equity Price Risk
We are exposed to equity price risk related to the conversion options embedded in our 2032 Notes, 2029 Notes, 2028 Notes and 2026 Notes.
We issued the 2032 Notes in September 2025, 2029 Notes in June 2023, the 2028 Notes in March 2022 and the 2026 Notes in December 2019. As of June 27, 2026, the aggregate principal amounts of the 2032 Notes, 2029 Notes, 2028 Notes and 2026 Notes is $1,265.0 million, $54.9 million, $179.6 million, $54.8 million, respectively, and bear interest at a rate of 0.375%, 1.50%, 0.50% and 0.50% per year, respectively. Since the convertible notes bear interest at fixed rates, we have no financial statement risk associated with changes in market interest rates. However, the potential value of the shares to be distributed to the holders of our convertible notes changes when the market price of our stock fluctuates. The 2032 Notes, 2029 Notes, 2028 Notes and 2026 Notes will mature on March 15, 2032, December 15, 2029, June 15, 2028 and December 15, 2026, respectively, unless earlier repurchased by us or converted pursuant to their terms, at a conversion price of approximately $187.77 per share for the 2032 Notes, $69.54 per share for the 2029 Notes, $131.03 per share for the 2028 Notes and $99.29 per share for the 2026 Notes. In fiscal year 2026, we have equitized $209.7 million, $650.4 million and $264.8 million in aggregate principal amount of 2029 Notes, 2028 Notes, and 2026 Notes respectively. In fiscal year 2026, we have settled early conversions which also reduced $339.1 million, $31.0 million, and $149.3 million in aggregate principal amount of the 2029 Notes, 2028 Notes, and 2026 Notes respectively.
In connection with the issuance of the 2032 Notes, we entered into the 2032 Capped Call Options with the 2032 Capped Call Counterparties. The cap price of the 2032 Capped Call Options was initially $268.24 per share, and is subject to certain adjustments under the terms of the 2032 Capped Call Options. To the extent the market price per share of our common stock, as measured under the terms of the 2032 Capped Call Options, exceeds the cap price of the 2032 Capped Call Options, there would be dilution and/or there would not be an offset of any potential cash payments in excess of the principal amounts of converted 2032 Notes, in each case, to the extent that such market price exceeds the cap price of the 2032 Capped Call Options.
Interest Rate Fluctuation Risk
As of June 27, 2026, we had cash, cash equivalents, and short-term investments of $2,738.4 million. Cash equivalents and short-term investments are primarily comprised of money market funds, treasuries, agencies, high quality investment grade fixed income securities, certificates of deposit, and commercial paper. Our investment policy and strategy is focused on the preservation of capital and supporting our liquidity requirements. We do not enter into investments for trading or speculative purposes. As of June 27, 2026, the weighted-average life of our investment portfolio was approximately twelve months.
Our fixed-income portfolio is subject to fluctuations in interest rates, which could affect our results of operations. Based on our investment portfolio balance as of June 27, 2026, a hypothetical increase or decrease in interest rates of 1% (100 basis points) would have resulted in a decrease or an increase in the fair value of our portfolio of approximately $7.4 million, and a hypothetical increase or decrease of 0.50% (50 basis points) would have resulted in a decrease or an increase in the fair value of our portfolio of approximately $3.6 million.
On December 19, 2025, we entered into a Credit Agreement providing for a senior secured revolving credit facility in an aggregate principal amount of $400.0 million, including a $23.0 million sublimit for the issuance of letters of credit. At our option, borrowings bears interest at a variable rate tied to either a base rate or a term Secured Overnight Financing Rate, plus, in each case, a margin based on our secured net leverage ratio. Consequently, our interest expense could fluctuate due to the variable interest rates applicable to any borrowing under the Credit Agreement. As of June 27, 2026, there were no borrowings outstanding under the Credit Agreement.
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Bank Liquidity Risk
As of June 27, 2026, we had approximately $635.9 million of unrestricted cash (excluding cash equivalents) in operating accounts that are held with domestic and international financial institutions. These cash balances could be lost or become inaccessible if the underlying financial institutions fail or if they are unable to meet the liquidity requirements of their depositors and if they are not supported by the national government of the country in which such financial institution is located. Notwithstanding, we have not incurred any losses to date and have had full access to our operating accounts. We believe any failures of domestic and international financial institutions could impact our ability to fund our operations in the short term. The value of our investment portfolio could also be impacted if we hold debt instruments which were issued by any institutions that fail or become illiquid. Our ability to obtain raw materials for our supply chain and collections of cash from sales may be unduly impacted if any of our vendors or customers are affected by illiquidity events.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of Lumentum Holdings Inc.

Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Lumentum Holdings Inc. and subsidiaries (the “Company”) as of June 27, 2026 and June 28, 2025, the related consolidated statements of operations, comprehensive income (loss), cash flows, and stockholders’ equity for each of the three years in the period ended June 27, 2026, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of June 27, 2026 and June 28, 2025, and the results of its operations and its cash flows for each of the three years in the period ended June 27, 2026, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of June 27, 2026, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated August 17, 2026, expressed an unqualified opinion on the Company's internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which it relates.
Inventories, Valuation of Inventory - Refer to Notes 1 and 7 to the financial statements
Critical Audit Matter Description
The Company assesses the value of inventory and writes down those inventories which are obsolete or in excess of forecasted demand to the lower of their cost or estimated net realizable value. The Company’s estimates of forecasted demand are based upon analysis and assumptions including, but not limited to, expected product lifecycles, product development plans and historical usage by product.
We identified the valuation of inventory as a critical audit matter because of the significant assumptions management makes with regards to estimating certain elements of the excess and obsolete write downs. This required a high degree of auditor judgment and an increased extent of effort when performing audit procedures to evaluate the reasonableness of inputs used in management’s valuation of inventory excess and obsolete write downs including estimates of expected product lifecycles, product development plans and historical usage by product.
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How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to management’s estimates of forecasted demand used in the valuation of inventory excess and obsolete write downs included the following, among others:
•We tested the effectiveness of controls over the review and approval of the valuation of inventory for excess and obsolete write downs, including controls designed to review the assumptions regarding expected product lifecycles, product development plans and historical usage by product.
•We selected a sample of inventory products and tested the forecasted demand by comparing internal and external information (e.g. historical usage, contracts, communications with customers, expected product lifecycles, product development plans, macroeconomic conditions, and inquiries with business unit managers, executives, sales, and operations personnel) with the Company’s forecasted demand.
•We selected a sample of inventory products and evaluated management's ability to accurately estimate forecasted demand by comparing current usage by product to estimates made in prior year.
•We considered the existence of contradictory evidence based on reading of internal communications to management and the board of directors, Company press releases, and analyst reports, as well as our observations and inquiries as to changes within the business.



/s/ DELOITTE & TOUCHE LLP

San Jose, California  
August 17, 2026  

We have served as the Company's auditor since 2016.

Table of Contents

LUMENTUM HOLDINGS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share data)


Years Ended
June 27, 2026June 28, 2025June 29, 2024
Net revenue$3,014.0 $1,645.0 $1,359.2 
Cost of sales1,680.5 1,102.9 1,023.8 
Amortization of acquired developed intangibles77.6 82.2 83.9 
Gross profit1,255.9 459.9 251.5 
Operating expenses:
    Research and development356.5 303.9 302.2 
    Selling, general and administrative363.2 348.2 310.7 
    Restructuring and related charges11.4 22.8 72.6 
    Gain on sale of facility— (34.9)— 
Total operating expenses731.1 640.0 685.5 
Income (loss) from operations524.8 (180.1)(434.0)
    Loss on debt extinguishment(7,756.6)— — 
    Escrow settlement27.5 — — 
    Interest expense(21.8)(22.2)(33.8)
    Other income, net53.3 30.2 62.1 
Total other (expense) income, net(7,697.6)8.0 28.3 
Loss before income taxes(7,172.8)(172.1)(405.7)
Income tax (benefit) provision(237.7)(198.0)140.8 
Net (loss) income $(6,935.1)$25.9 $(546.5)
Net (loss) income per share:
    Basic$(92.96)$0.38 $(8.12)
    Diluted$(92.96)$0.37 $(8.12)
Shares used to compute net (loss) income per share - common stock and preferred stock assuming conversion:
    Basic 74.6 69.0 67.3 
    Diluted74.6 69.6 67.3 

See accompanying Notes to Consolidated Financial Statements.
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LUMENTUM HOLDINGS INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in millions)

Years Ended
June 27, 2026June 28, 2025June 29, 2024
Net (loss) income $(6,935.1)$25.9 $(546.5)
Other comprehensive (loss) income, net of tax:
Net change in cumulative translation adjustment(0.3)0.1 (0.6)
Net change in unrealized gain on available-for-sale securities(1.7)1.9 4.7 
Net change in defined benefit obligations3.0 (2.3)1.1 
Other comprehensive income (loss), net of tax1.0 (0.3)5.2 
Comprehensive (loss) income, net of tax$(6,934.1)$25.6 $(541.3)

See accompanying Notes to Consolidated Financial Statements.

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Table of Contents
LUMENTUM HOLDINGS INC.
CONSOLIDATED BALANCE SHEETS
(in millions, except per share data)






June 27, 2026June 28, 2025
ASSETS
Current assets:
Cash and cash equivalents$2,043.5 $520.7 
Short-term investments694.9 356.4 
Accounts receivable, net 520.3 250.0 
Inventories691.6 470.1 
Prepayments and other current assets211.6 120.1 
Total current assets4,161.9 1,717.3 
Property, plant and equipment, net1,159.1 726.4 
Operating lease right-of-use assets, net29.2 27.9 
Goodwill1,069.3 1,060.9 
Other intangible assets, net326.9 465.1 
Deferred tax asset530.9 210.3 
Other non-current assets30.2 10.8 
Total assets$7,307.5 $4,218.7 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$567.4 $225.2 
Accrued payroll and related expenses146.3 57.9 
Accrued expenses64.9 34.6 
Current portion of long-term debt1,596.9 10.6 
Operating lease liabilities, current13.5 11.4 
Other current liabilities91.5 53.1 
Total current liabilities2,480.5 392.8 
Long-term debt40.5 2,562.6 
Operating lease liabilities, non-current20.3 23.6 
Deferred tax liability7.1 7.2 
Other non-current liabilities115.2 97.8 
Total liabilities2,663.6 3,084.0 
Commitments and contingencies (Note 16)
Stockholders’ equity:
Preferred stock, $0.001 par value, 10 authorized shares, 2.9 shares and zero shares issued and outstanding as of June 27, 2026 and June 28, 2025, respectively
0.0— 
Common stock, $0.001 par value, 990 authorized shares; 88.6 and 69.8 shares issued and outstanding as of June 27, 2026 and June 28, 2025, respectively
0.1 0.1 
Additional paid-in capital12,430.1 1,986.8 
Accumulated deficit(7,796.3)(861.2)
Accumulated other comprehensive income10.0 9.0 
Total stockholders’ equity4,643.9 1,134.7 
Total liabilities and stockholders’ equity$7,307.5 $4,218.7 
 
See accompanying Notes to Consolidated Financial Statements.
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Table of Contents
LUMENTUM HOLDINGS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
Years Ended
June 27, 2026June 28, 2025June 29, 2024
OPERATING ACTIVITIES:
Net (loss) income $(6,935.1)$25.9 $(546.5)
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation expense128.8 104.3 110.6 
Stock-based compensation 170.2 177.2 128.8 
Bad debt expense0.1 3.4 — 
Changes in income tax valuation allowance(236.3)(153.1)150.1 
Amortization and write-off of acquired intangible assets138.2 152.4 179.7 
Write-off of right-of-use assets— 7.8 — 
Write-down and loss on sales and dispositions of property, plant and equipment21.7 5.2 2.6 
Loss on debt extinguishment7,756.6 — — 
Amortization of debt issuance costs3.8 3.0 14.6 
Amortization of inventory fair value adjustment in connection with acquisition— — 8.3 
Inducement expense on partial repurchase of 2026 Notes5.9 — — 
Gain on sale of facility— (34.9)— 
Other non-cash income, net(10.5)(3.5)(12.2)
Changes in operating assets and liabilities:
Accounts receivable(270.4)(58.7)72.3 
Inventories(228.4)(71.3)73.8 
Operating lease right-of-use assets, net(1.3)5.1 3.4 
Prepayments and other current and non-currents assets(96.2)(35.1)30.6 
Income taxes, net(47.9)(65.1)(72.4)
Accounts payable221.6 69.2 (89.7)
Accrued payroll and related expenses88.4 22.0 (8.9)
Operating lease liabilities(1.2)(5.7)(4.3)
Accrued expenses and other current and non-current liabilities43.4 (21.8)(16.1)
Net cash provided by operating activities751.4 126.3 24.7 
INVESTING ACTIVITIES:
Payments for acquisition of property, plant and equipment(451.3)(231.0)(133.0)
Acquisition of businesses, net of cash acquired(38.0)— (700.9)
Payment for acquisition of intangible assets— — (4.0)
Purchases of short-term investments(603.4)(365.9)(278.7)
Proceeds from maturities and sales of short-term investments264.8 464.7 1,001.5 
Proceeds from sale of facility, net of cash and selling costs— 47.8 — 
Proceeds from the sales of property and equipment42.4 0.3 0.8 
Net cash used in investing activities(785.5)(84.1)(114.3)
FINANCING ACTIVITIES:
Proceeds from the issuance of Series A Convertible Preferred Stock1,999.7 — — 
Proceeds from the issuance of 2032 Notes, net of issuance costs1,254.7 — — 
Proceeds from term loans47.9 76.5 — 
Proceeds from employee stock plans17.1 16.1 14.4 
Payment for partial repurchase of 2026 Notes(843.1)— — 
Cash paid for conversions of convertible notes(520.0)— — 
Payment, repurchase and conversion of 2024 Notes— — (323.1)
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LUMENTUM HOLDINGS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
Payment for 2032 capped call options(102.0)— — 
Principal payments on term loans(14.0)(8.1)— 
Payment of withholding taxes related to net share settlement of restricted stock units(281.0)(41.7)(24.0)
Payment of acquisition related holdback— (1.0)— 
Payment for financing costs related to revolving credit facility(2.4)— — 
Net cash provided by (used in) financing activities1,556.9 41.8 (332.7)
Increase (decrease) in cash and cash equivalents1,522.8 84.0 (422.3)
Cash and cash equivalents at beginning of period 520.7 436.7 859.0 
Cash and cash equivalents at end of period$2,043.5 $520.7 $436.7 
Supplemental disclosure of cash flow information:
Cash paid for taxes, net$46.7 $20.6 $61.2 
Cash paid for interest 15.7 19.1 19.7 
Supplemental disclosure of non-cash transactions:
Unpaid property, plant and equipment in accounts payable and accrued expenses$181.4 $43.4 $11.8 
Right-of-use assets obtained in exchange for new operating lease liabilities12.0 6.4 16.0 
Net transfer of assets from property, plant, and equipment to assets-held-for-sale4.2 — — 
Holdback receivable from sale of property, plant, and equipment3.0 — — 
Unpaid intangible assets in accrued expense— — 1.0 
Share-based purchase price consideration in connection with the Cloud Light acquisition— — 23.5 
Aggregate principal amount of the convertible notes settled through issuance of common stock (equitization)1,124.9 — — 
See accompanying Notes to Consolidated Financial Statements.
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LUMENTUM HOLDINGS INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in millions)
Series A Convertible Preferred StockCommon StockAdditional Paid-In CapitalRetained Earnings (Accumulated Deficit)Accumulated
 Other Comprehensive
Income		Total Stockholders’ Equity
SharesAmountSharesAmount
Balance as of July 1, 2023— $— 66.4 $0.1 $1,692.2 $(340.6)$4.1 $1,355.8 
Net loss— — — — — (546.5)— (546.5)
Other comprehensive income— — — — — — 5.2 5.2 
Issuance of shares in connection with vesting of restricted stock units and performance stock units— — 1.5 — — — — — 
Withholding taxes related to net share settlement of restricted stock units— — (0.4)— (24.0)— — (24.0)
ESPP shares issued— — 0.4 — 14.4 — — 14.4 
Equity awards pursuant to merger agreement— — — — 23.5 — — 23.5 
Stock-based compensation— — — — 128.9 — — 128.9 
Balance as of June 29, 2024— $— 67.9 $0.1 $1,835.0 $(887.1)$9.3 $957.3 
Net income— — — — — 25.9 — 25.9 
Other comprehensive income— — — — — — (0.3)(0.3)
Issuance of shares in connection with vesting of restricted stock units and performance stock units— — 2.0 — — — — — 
Withholding taxes related to net share settlement of restricted stock units— — (0.7)— (41.7)— — (41.7)
Exercise of stock options— — 0.3 — 3.3 — — 3.3 
ESPP shares issued— — 0.3 — 12.8 — — 12.8 
Stock-based compensation— — — — 177.4 — — 177.4 
Balance as of June 28, 2025— $— 69.8 $0.1 $1,986.8 $(861.2)$9.0 $1,134.7 
Net loss— — — — — (6,935.1)— (6935.1)
Other comprehensive income— — — — — — 1.0 1.0 
Issuance of Series A Convertible Preferred Stock, net of issuance costs2.9 0.0— — 1,999.7 — — 1,999.7 
Issuance of shares in exchange for convertible notes (equitization)— — 10.6 — 8,876.9 — — 8,876.9 
Issuance of shares in connection with vesting of restricted stock units and performance stock units— — 2.4 — — — — — 
Withholding taxes related to net share settlement of restricted stock units— — (0.8)— (281.0)— — (281.0)
Exercise of stock options— — 0.4 — 2.9 — — 2.9 
ESPP shares issued— — 0.2 — 14.2 — — 14.2 
Stock-based compensation— — — — 165.2 — — 165.2 
Fair value of incremental consideration on partial repurchase of 2026 Notes— — — — (256.9)— — (256.9)
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CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in millions)
2032 capped call options, net of tax— — — — (77.0)— — (77.0)
Conversion of convertible notes for conversion value in excess of principal amount— — 6.0 — (0.7)— — (0.7)
Balance as of June 27, 20262.9 $0.0 88.6 $0.1 $12,430.1 $(7,796.3)$10.0 $4,643.9 
See accompanying Notes to Consolidated Financial Statements.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Description of Business and Summary of Significant Accounting Policies
Description of Business
Lumentum Holdings Inc. (“we,” “us,” “our”, “Lumentum” or the “Company”) is a global leader in optical and photonic technologies and an industry-leading provider of optical and photonic products based on revenue and market share. Our products are essential to a range of cloud, artificial intelligence and machine learning (“AI/ML”), telecommunications, consumer, and industrial end-market applications. We operate in one reportable segment as a single, integrated enterprise. See “Note 17. Operating Segments and Geographic Information”.
We disaggregate revenue by type of product, which are Components and Systems, and by geography. A Components product is defined as one of the individual building blocks that goes into creating a larger solution. It is typically not a complete solution on its own but rather a specialized element that enables system functionality. This includes semiconductor laser chips, laser sub-assemblies, line subsystems and wavelength management systems. These are supplied to customers who then integrate them into their own full system solutions. Components represent foundational parts that support or enable that system’s operation and include optical chips and subsystems that are supplied to cloud data center operators, AI/ML infrastructure providers, and network equipment manufacturer customers.
A Systems product is defined as a complete, stand-alone solution that delivers full functionality to the end customer. It is typically self-contained and ready to operate within a customer’s network or application environment. This includes optical modules, optical circuit switches, and industrial lasers such as short-pulse solid-state lasers and kilowatt-class fiber lasers. These products integrate multiple technologies and subsystems into a finished solution that directly addresses a customer’s needs. A system represents the end-product that can be deployed and used independently.
Our products enable high-capacity optical links for cloud computing, AI/ML workloads, and data center interconnect (“DCI”) applications, as well as for communications service provider networks. Our offerings support access (local), metro (intracity), long-haul (intercity and global), and submarine (undersea) network infrastructure. Our products serve enterprise network infrastructure needs, including storage area networks (“SANs”), local area networks (“LANs”), and wide area networks (“WANs”). Demand for our products is fueled by the ongoing expansion of network capacity required to support cloud services, AI/ML processing, streaming video, video conferencing, wireless and mobile connectivity, and the internet of things (“IoT”). In addition, our industrial laser products are used for precision material processing across diverse industries, including semiconductor and microelectronics fabrication, electric vehicle and battery production, metal cutting and welding, and advanced manufacturing that emphasize greater manufacturing precision, flexibility, and sustainability.
Basis of Presentation
We have prepared the consolidated financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”), which requires management to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes. Management bases its estimates on historical experience and various other assumptions believed to be reasonable. Although these estimates are based on management’s best knowledge of current events and actions that may impact us in the future, actual results may be different from the estimates. Our critical accounting policies are those that affect our financial statements materially and involve difficult, subjective or complex judgments by management. These policies are inventory valuation, revenue recognition, income taxes, goodwill and business combinations.
Prior to fiscal year 2026, we operated in two reportable segments consisting of Cloud & Networking and Industrial Tech. During the first quarter of fiscal year 2026, we implemented a re-organization, and we are now managed as a single, integrated enterprise, with a unified management team overseeing operations across the entire company, rather than through discrete operating segments. The chief operating decision maker (“CODM”) is our Chief Executive Officer, who reviews financial information presented as a single enterprise for purposes of allocating resources and evaluating financial performance. Accordingly, following the reorganization, we determined we operate in a single reporting segment. Comparative prior period segment information has been updated to reflect the new segment structure and measures. The changes in our operating segments had no impact on our previously reported consolidated results of operations, financial position or cash flows. Refer to “Note 17. Operating Segments and Geographic Information” for more details.
Our business and operating results depend significantly on general market and economic conditions. The current global macroeconomic environment is volatile and continues to be adversely impacted by many factors including inflation, a dynamic supply chain and demand environment, changes in trade policies, including heightened, scheduled, or threatened tariffs, trade restrictions including for certain rare earth minerals, and signs of a fluctuating macroeconomic environment.
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We are actively monitoring and assessing the ongoing global trade environment, particularly with respect to recent changes in tariff regulations. We have assessed the potential impacts of heightened restrictions and tariffs on our allowance for credit losses, the carrying value of our goodwill and other long-lived assets, inventory valuation, and revenue recognition. While we have determined there was not a material impact to our consolidated financial statements as of June 27, 2026 and for the year ended June 27, 2026, import tariffs implemented by the U.S. and other countries, as currently in effect and/or proposed, could have a material impact on our results in the future. The impact of tariffs is dependent on negotiations with customers and suppliers and other mitigation efforts and potential further changes in global trade policies, including higher tariffs in the U.S. or other countries.
Fiscal Years
We utilize a 52-53 week fiscal year ending on the Saturday closest to June 30th. Every fifth or sixth fiscal year will have a 53-week period. The additional week in a 53-week year is added to the third quarter, making such quarter consist of 14 weeks. Our fiscal years 2026, 2025 and 2024 were 52-week years, ending on June 27, 2026, June 28, 2025 and June 29, 2024, respectively. Our fiscal year 2027 ending on July 3, 2027 has a 53-week period.
Principles of Consolidation
The consolidated financial statements are prepared in accordance with GAAP and includes the accounts of Lumentum Holdings Inc. and its wholly owned subsidiaries. Intercompany transactions and balances are fully eliminated in consolidation.

Business Combination

On March 17, 2026, we acquired a manufacturing facility in Greensboro, North Carolina for $38.0 million in cash from a third party. The acquired business mainly included land and building, machinery and equipment, and an assembled workforce. We have applied the acquisition method of accounting to account for these transactions in accordance with ASC Topic 805, Business Combinations. Our consolidated financial statements include the operating results of the acquired entities from the acquisition close date. Refer to “Note 4. Business Combination”.

Summary of Significant Accounting Policies
Our significant accounting policies are those that affect our financial statements materially and involve difficult, subjective or complex judgments by management. We believe that the significant accounting policies described below, involve a greater degree of judgment and complexity and are the most critical to aid in fully understanding and evaluating our consolidated financial statements. These policies include inventory valuation, revenue recognition, income taxes, goodwill and business combinations. For a description of our critical accounting policies, also refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, Critical Accounting Policies and Estimates.
Cash Equivalents
We consider highly liquid fixed income securities with original maturities of three months or less at the time of purchase to be cash equivalents. As of June 27, 2026, our cash equivalents consist of money market funds, commercial paper and U.S. Treasury securities.
Short-Term Investments
We classify our investments in debt securities as available-for-sale and record these investments at fair value. Investments with an original maturity of three months or less at the date of purchase are considered cash equivalents, while all other investments are classified as short-term based on management’s intent and ability to use the funds in current operations. Unrealized gains and losses are reported as a component of other comprehensive (loss) income. Realized gains and losses are determined based on the specific identification method, and are reflected as other (expense) income, net in our consolidated statements of operations.
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We regularly review our investment portfolio to identify and evaluate investments that have indicators of possible impairment. Factors considered in determining whether a loss is other-than-temporary include, but are not limited to: the length of time and extent a security’s fair value has been below its cost, the financial condition and near-term prospects of the investee, the credit quality of the security’s issuer, likelihood of recovery and our intent and ability to hold the security for a period of time sufficient to allow for any anticipated recovery in value. For our debt instruments, we also evaluate whether we have the intent to sell the security, or it is more likely than not that we will be required to sell the security before recovery of its cost basis.
Fair Value of Financial Instruments
We define fair value as the price that would be received from selling an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities which are required to be recorded at fair value, we consider the principal or most advantageous market in which to transact and the market-based risk. We apply fair value accounting for all financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis. The carrying amounts reported in the consolidated financial statements approximate the fair value for cash, accounts receivable, accounts payable and accrued liabilities due to their short-term nature.
Basic and Diluted Net (Loss) Income per Share
We calculate basic net (loss) income per share pursuant to the two-class method as a result of the issuance of the Series A Convertible Preferred Stock (the “Preferred Stock”) in March 2026. Our Preferred Stock represents a second class of common stock for purposes of computing net (loss) income per share under the two-class method as it is entitled to receive dividends on an as-converted basis in the same manner as holders of common stock and does not have any material preferential rights relative to our common stock.
Diluted net (loss) income per share is calculated assuming the Preferred Stock have been converted into common stock, and the related shares are included in the diluted weighted-average share. As the Preferred Stock participates on an if-converted basis, and there are no dividends, the (loss) income allocated to the two classes of stock converge and the results are mathematically equal. Thus, basic and diluted net (loss) income per share is calculated assuming the Preferred Stock have been converted into common stock, and the related shares are included in the weighted average shares outstanding.
Potentially dilutive common shares result from the assumed exercise of outstanding stock options, assumed vesting of outstanding equity awards, assumed issuance of stock under the employee stock purchase plan, assumed conversion of the Preferred Stock, and assumed conversion of the aggregate principal outstanding of our 2032 Notes, 2029 Notes, 2028 Notes and 2026 Notes (collectively, the “convertible notes”). We used the if-converted method for all convertible notes in the diluted net income per share calculation. In September 2024, we made an irrevocable settlement method election, wherein upon conversion, we are required to satisfy our conversion obligation with respect to such converted convertible notes by delivering cash equal to the principal amount of such converted convertible notes and cash, shares of common stock or a combination of cash and shares of common stock, at our election, with respect to any conversion value in excess thereof. Therefore, the convertible notes will only be dilutive when the average share price of our stock exceeds the conversion price, as the principal will be paid in cash.
The dilutive effect of securities from the Equity Incentive Plans are reflected in diluted earnings per share by application of the treasury stock method, which includes consideration of unamortized share-based compensation expense and the dilutive effect of in-the-money options and non-vested restricted stock units. Under the treasury stock method, the amount the employee must pay for exercising stock options and the amount of unamortized share-based compensation expense are collectively assumed to be used to repurchase hypothetical shares. An increase in the fair value of our common stock can result in a greater dilutive effect from potentially dilutive awards.
Anti-dilutive potential shares from the Equity Incentive Plans are excluded from the calculation of diluted earnings per share if their exercise price exceeded the average market price during the period or the share-based awards were determined to be anti-dilutive based on applying the treasury stock method.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Inventory Valuation
Inventory is recorded at standard cost, which approximates actual cost computed on a first-in, first-out basis, not in excess of net realizable value. We assess the value of our inventory on a quarterly basis and write down those inventories which are obsolete or in excess of our forecasted demand to the lower of their cost or estimated net realizable value. Our estimates of forecasted demand are based on our analysis and assumptions including, but not limited to, expected product lifecycles, product development plans and historical usage by product. Our product line management personnel play a key role in our excess review process by providing updated sales forecasts, managing product transitions and working with manufacturing to minimize excess inventory. If actual market conditions are less favorable than our forecasts, or actual demand from our customers is lower than our estimates, we may be required to record additional inventory write-downs. If actual market conditions are more favorable than anticipated, inventory previously written down may be sold, resulting in lower cost of sales and higher income from operations than expected in that period.
Leases
We determine if an arrangement is a lease at inception for arrangements with an initial term of more than 12 months, and classify it as either a finance or operating lease pursuant to Topic 842.
Finance leases are generally those that allow us to substantially utilize or pay for the entire asset over its estimated useful life. Finance leases are recorded in property, plant and equipment, net, and finance lease liabilities within other current and other non-current liabilities on our consolidated balance sheets. We have lease arrangements with lease and non-lease components, and the non-lease components for our finance leases are accounted for separately, based on estimated stand-alone values, and are not included in the initial measurement of our finance lease assets and corresponding liabilities. Finance lease assets are amortized in operating expenses on a straight-line basis over the shorter of the estimated useful lives of the assets or the lease term, with the interest component included in interest expense and recognized using the effective interest method over the lease term.
Operating leases are recorded in operating lease right-of-use assets, net, and operating lease liabilities, current and non-current on our consolidated balance sheets. For operating leases of buildings, we account for non-lease components, such as common area maintenance, as a component of the lease, and include it in the initial measurement of our operating lease assets and corresponding liabilities. Operating lease assets are amortized on a straight-line basis in operating expenses over the lease term.
Our lease liabilities are recognized based on the present value of the remaining fixed lease payments, over the lease term, using a discount rate of similarly secured borrowings available to us. For the purpose of lease liability measurement, we consider only payments that are fixed and determinable at the time of commencement. Any variable payments that depend on an index or rate are expensed as incurred. Our lease terms may include options to extend when it is reasonably certain that we will exercise that option. Our lease assets also include any lease payments made and exclude any lease incentives received prior to commencement. Our lease assets are tested for impairment in the same manner as long-lived assets used in operations. We generally recognize sublease income on a straight-line basis over the sublease term.
Revenue Recognition
Pursuant to Topic 606, we recognize our revenues upon the application of the following steps:
•identification of the contract, or contracts, with a customer;
•identification of the performance obligations in the contract;
•determination of the transaction price;
•allocation of the transaction price to the performance obligations in the contract; and
•recognition of revenues when, or as, the contractual performance obligations are satisfied.
The majority of our revenue comes from product sales, consisting of sales of hardware products to our customers. Our revenue contracts generally include only one performance obligation. Revenues are recognized at a point in time when control of the promised goods or services are transferred to our customers upon shipment or delivery of goods or rendering of services, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.
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Revenue from all sales types is recognized at the transaction price. The transaction price is determined based on the consideration to which we will be entitled in exchange for transferring goods or services to the customer adjusted for estimated variable consideration, if any. We typically estimate the impact on the transaction price for discounts offered to the customers for early payments on receivables or net of accruals for estimated sales returns. These estimates are based on historical returns, analysis of credit memo data and other known factors. Actual returns could differ from these estimates. We allocate the transaction price to each distinct product based on its relative standalone selling price. The product price as specified on the purchase order is considered the standalone selling price as it is an observable input that depicts the price as if sold to a similar customer in similar circumstances.
We exclude from revenue the taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, which are collected by us from a customer and deposited with the relevant government authority.
Our revenue arrangements do not contain significant financing components.
If a customer pays consideration, or we have a right to an amount of consideration that is unconditional before we transfer a good or service to the customer, those amounts are classified as deferred revenue or deposits received from customers which are included in other current liabilities or other long-term liabilities when the payment is made.
Transaction Price Allocated to the Remaining Performance Obligations
Remaining performance obligations represent the transaction price allocated to performances obligations that are unsatisfied or partially unsatisfied as of the end of the reporting period. Unsatisfied and partially unsatisfied performance obligations consist of contract liabilities and non-cancellable backlog. Non-cancellable backlog includes goods and services for which customer purchase orders have been accepted that are scheduled or in the process of being scheduled for shipment. A portion of our revenue arises from vendor managed inventory arrangements where the timing and volume of customer utilization is difficult to predict.
Deferred revenue as of June 27, 2026 was $16.8 million, of which $15.4 million was recorded in other current liabilities and $1.4 million in other non-current liabilities in the consolidated balance sheets. Deferred revenue as of June 28, 2025 was $0.7 million, which was recorded in other current liabilities in the consolidated balance sheets. During fiscal year 2026 and fiscal year 2025, we recognized $0.2 million and $0.1 million of revenue that was included in deferred revenue as of June 28, 2025 and June 29, 2024, respectively.
Warranty
Hardware products regularly include warranties to the end customers such that the product continues to function according to published specifications. We typically offer a twelve-month warranty for most of our products. However, in some instances depending on the product, specific market, product line and geography in which we operate, and what is common in the industry, our warranties can vary and range from six months to five years. These standard warranties are assurance type warranties and do not offer any services in addition to the assurance that the product will continue working as specified. Therefore, warranties are not considered separate performance obligations in the arrangement.
We provide reserves for the estimated costs of product warranties that we record as cost of sales at the time revenue is recognized. We estimate the costs of our warranty obligations based on our historical experience of known product failure rates, use of materials to repair or replace defective products and service delivery costs incurred in correcting product failures. In addition, from time-to-time, specific warranty accruals may be made if discrete technical problems arise.
Shipping and Handling Costs and Tariffs
We record shipping and handling costs and tariffs related to revenue transactions within cost of sales as a period cost. Amounts billed to the customer for shipping and handling costs, including tariff charges, is recorded as revenue when the relevant product is recognized as revenue.
Contract Costs
We recognize the incremental direct costs of obtaining a contract, which consist of sales commissions, when control over the products they relate to transfers to the customer. Applying the practical expedient, we recognize commissions as expense when incurred, as the amortization period of the commission asset we would have otherwise recognized is less than one year.
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Contract Balances
We record accounts receivable when we have an unconditional right to consideration. Contract liabilities are recorded when cash payments are received or due in advance of performance. Contract liabilities consist of advance payments and deferred revenue, where we have unsatisfied performance obligations. Contract liabilities are classified as deferred revenue and customer deposits and are included in other current liabilities within our consolidated balance sheet. Payment terms vary by customer. The time between invoicing and when payment is due is not significant. Refer to “Note 18. Revenue Recognition” for a presentation of changes in contract balances.
Disaggregation of Revenue
We disaggregate revenue by geography and by type of product. Refer to “Note 18. Revenue Recognition” for a presentation of disaggregated revenue. We do not present other levels of disaggregation, such as by customer, markets, contracts, duration of contracts, timing of transfer of control and sales channels, as this information is not used by our Chief Operating Decision Maker (“CODM”) to manage the business.
Income Taxes
In accordance with the authoritative guidance on accounting for income taxes, we recognize income taxes using an asset and liability approach. This approach requires the recognition of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in our consolidated financial statements or tax returns. The measurement of current and deferred taxes is based on provisions of the enacted tax law, and the effects of future changes in tax laws or rates are not anticipated.
The authoritative guidance provides for recognition of deferred tax assets if the realization of such deferred tax assets is more likely than not to occur based on an evaluation of both positive and negative evidence and the relative weight of the evidence. We consider future growth, forecasted earnings, future taxable income, the mix of earnings in the jurisdictions in which we operate, historical earnings, taxable income in prior years, if carry-back is permitted under the law, and prudent and feasible tax planning strategies in determining the need for a valuation allowance.
In the event we determine that we would not be able to realize all or part of our net deferred tax assets in the future, an adjustment to the deferred tax assets valuation allowance would be charged to earnings in the period in which we make such a determination, or goodwill would be adjusted at our final determination of the valuation allowance related to an acquisition within the measurement period. Conversely, if we later determine that it is more likely than not that all or a portion of the net deferred tax assets will be realized, we would reverse the applicable portion of the previously established valuation allowance. A release of valuation allowance decreases income tax expense in the period of release, increases net income, and reduces our effective tax rate. Such releases may be material to our financial statements depending on the size of the deferred tax assets involved.
We are subject to income tax audits by the respective tax authorities of the jurisdictions in which we operate. The determination of our income tax liabilities in each of these jurisdictions requires the interpretation and application of complex, and sometimes uncertain, tax laws and regulations. The authoritative guidance on accounting for income taxes prescribes both recognition and measurement criteria that must be met for the benefit of a tax position to be recognized in the financial statements. If a tax position taken, or expected to be taken, in a tax return does not meet such recognition or measurement criteria, an unrecognized tax benefit liability is recorded. We recognize interest and penalties related to unrecognized tax benefits as a component of income tax expense. If we ultimately determine that an unrecognized tax benefit liability is no longer necessary, we reverse the liability and recognize a tax benefit in the period in which it is determined that the unrecognized tax benefit liability is no longer necessary.
Our income tax provision is highly dependent on the geographic distribution of our worldwide earnings or losses, tax laws and regulations in various jurisdictions, tax incentives, the availability of tax credits and loss carryforwards, and the effectiveness of our tax planning strategies. The application of tax laws and regulations is subject to legal and factual interpretation, judgment and uncertainty. Tax laws themselves are subject to change as a result of changes in fiscal policy, changes in legislation, and the evolution of regulations and court rulings and tax audits.
The recognition and measurement of current taxes payable or refundable and deferred tax assets and liabilities requires that we make certain estimates and judgments. Changes to these estimates, including changes in judgment regarding the realizability of deferred tax assets and the need for or release of valuation allowances, may have a material impact on our tax provision, net income, and effective tax rate in a future period.
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Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation is computed by the straight-line method generally over the following estimated useful lives of the assets: 10 to 40 years for building and improvements, 3 to 10 years for machinery and equipment, and 2 to 5 years for furniture, fixtures, software and office equipment. Leasehold improvements are amortized using the straight-line method over the shorter of the estimated useful lives of the assets or the term of the lease, including the renewal option that we are reasonably certain to exercise.
Business Combination
In accordance with the guidance for business combinations, we determine whether a transaction or event is a business combination, which requires that the assets acquired and liabilities assumed constitute a business. Each business combination is then accounted for by applying the acquisition method. If the assets acquired are not a business, we account for the transaction or event as an asset acquisition. Under both methods, we recognize the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquired entity. We capitalize acquisition-related costs and fees associated with asset acquisitions and immediately expense acquisition-related costs and fees associated with business combinations.
We allocate the fair value of purchase consideration to the tangible assets acquired, liabilities assumed and intangible assets acquired based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. When determining the fair values of assets acquired and liabilities assumed, we make significant estimates and assumptions, especially with respect to intangible assets. Critical estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from customer relationships and acquired developed technology and discount rates. Our estimates of fair value are based on assumptions believed to be reasonable using the best information available. These assumptions are inherently uncertain and unpredictable and, as a result, actual results may differ materially from estimates. Certain estimates associated with the accounting for acquisitions may change as additional information becomes available regarding the assets acquired and liabilities assumed. Any change in facts and circumstances that existed as of the acquisition date and impacts to our preliminary estimates is recorded to goodwill if identified within the measurement period. Subsequent to the measurement period or our final determination of fair value of assets and liabilities, whichever is earlier, the adjustments will affect our earnings.
We estimate the economic lives of certain acquired assets and these lives are used to calculate depreciation and amortization expense. If our estimates of the economic lives change, depreciation or amortization expenses could be accelerated or slowed.
Goodwill
Goodwill represents the excess of the purchase price of an acquired business over the fair value of the identifiable assets acquired and liabilities assumed. We test goodwill impairment on an annual basis in the fiscal fourth quarter and at any other time when events occur or circumstances indicate that the carrying amount of goodwill may not be recoverable.
We have the option to first assess qualitative factors to determine whether it is necessary to perform the quantitative goodwill impairment test. The qualitative factors we assess include long-term prospects of our performance, share price trends and market capitalization, and our specific events. Unanticipated events and circumstances may occur that affect the accuracy of our assumptions, estimates and judgments. For example, if the price of our common stock were to significantly decrease combined with other adverse changes in market conditions, thus indicating that the underlying fair value of our reporting units may have decreased, we may reassess the value of our goodwill in the period such circumstances were identified.
If we determine that, as a result of the qualitative assessment, it is more likely than not (i.e., greater than 50% likelihood) that the fair value of a reporting unit is less than its carrying amount, we perform the quantitative test by estimating the fair value of our reporting units. If the carrying value of a reporting unit exceeds its fair value, we record goodwill impairment loss equal to the excess of the carrying value of the reporting unit’s goodwill over its fair value, not to exceed the carrying amount of goodwill. The fair value of each of our goodwill reporting units is generally estimated using a combination of public company multiples and discounted cash flow methodologies.
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During the third quarter of fiscal year 2026, we completed a reorganization of our business units, which resulted in changes to our reporting unit structure. As a result of this reorganization, we performed an interim qualitative assessment of goodwill for our reporting units. In performing the assessment, we evaluated relevant events and circumstances, including changes in the composition of reporting units, financial performance, and other entity-specific and macroeconomic factors. Based on this assessment along with a qualitative assessment done in the fourth quarter of fiscal year 2026, it was not more likely than not that the fair value of any of our reporting units was less than its carrying value; as such, our annual qualitative assessment did not indicate that a more detailed quantitative analysis was necessary. Accordingly, no goodwill impairment charge was recognized during fiscal year 2026.
Intangible Assets
Intangible assets consist primarily of intangible assets purchased through acquisitions. Purchased intangible assets include acquired developed technologies (developed and core technology), customer relationships, and order backlog. Intangible assets, with the exception of certain customer relationships, are amortized using the straight-line method over the estimated economic useful lives of the assets, which is the period during which expected cash flows support the fair value of such intangible assets. Certain customer relationships are amortized using an accelerated method of amortization over the expected customer lives, which more accurately reflects the pattern of realization of economic benefits expected to be obtained.
Long-lived Asset Valuation
We test long-lived assets for recoverability, at the asset group level, when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset, significant adverse changes in the business climate or legal factors, accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset, current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset, or current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life.
Recoverability is assessed based on the difference between the carrying amount of the asset and the sum of the undiscounted cash flows expected to result from the use and the eventual disposal of the asset. An impairment loss is recognized when the carrying amount is not recoverable and exceeds fair value.
Pension Benefits
We sponsor various employee retirement plans, including defined contribution, defined benefit and other post-retirement plans. Refer to “Note 15. Employee Retirement Plans” for more information.

The funded status of our retirement-related benefit plan is measured as the difference between the fair value of plan assets and the benefit obligation at fiscal year end, the measurement date. The funded status of an underfunded benefit plan, of which the fair value of plan assets is less than the benefit obligation, is recognized as a non-current net pension liability in the consolidated balance sheets. For defined benefit pension plans, the benefit obligation is the projected benefit obligation (“PBO”) which represents the actuarial present value of benefits expected to be paid upon retirement.
Net periodic pension cost (income) (“NPPC”) is recorded in the consolidated statements of operations and includes service cost, interest cost, expected return on plan assets, amortization of prior service cost and gains or losses previously recognized as a component of accumulated other comprehensive income. Service cost represents the actuarial present value of participant benefits attributed to services rendered by employees in the current year. Interest cost represents the time value of money cost associated with the passage of time. Gains or losses arise as a result of differences between actual experience and assumptions or as a result of changes in actuarial assumptions. Prior service cost or credits represent the cost of benefit improvements attributable to prior service granted in plan amendments. (Gains) losses and prior service cost (credit) that arise during the current year are first recognized as a component of accumulated other comprehensive income in the consolidated balances sheets, net of tax. Prior service cost is amortized as a component of NPPC over the average remaining service period of active plan participants starting at the date the plan amendment is adopted. Deferred actuarial gains or losses are subsequently recognized as a component of NPPC if they exceed the greater of 10% of PBO or the fair value of plan assets, with the excess amortized over the average remaining service period of active plan participants.
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The measurement of the benefit obligation and NPPC is based on our estimates and actuarial valuations, provided by third-party actuaries, which are approved by management. These valuations reflect the terms of the plans and use participant-specific information such as compensation, age and years of service, as well as certain assumptions, including estimates of discount rates, expected return on plan assets, rate of compensation increases, and mortality rates. We evaluate these assumptions annually at a minimum. In estimating the expected return on plan assets, we consider historical returns on plan assets, adjusted for forward-looking considerations, inflation assumptions and the impact of the active management of the plan’s invested assets.
Concentration of Credit and Other Risks
Financial instruments that potentially subject our business to concentration of credit risk consist primarily of cash, short-term investments, and trade receivables.
Although we deposit our cash with financial institutions that management believes are of high credit quality, our deposits, at times, may exceed federally insured limits. Our investment portfolio consists of investment grade securities diversified amongst security types, industries, and issuers. Our investment policy limits the amount of credit exposure in the investment portfolio by imposing credit rating minimums and limiting purchases of a single issuer, security type, geography and industry, except for Treasury securities. We believe no significant concentration risk exists with respect to these investments.
We perform credit evaluations of our customers’ financial condition and generally do not require collateral from our customers. These evaluations require significant judgment and are based on a variety of factors including, but not limited to, current economic trends, payment history, bad debt write-off experience, and financial review of the customer.
We maintain an allowance for credit losses for estimated losses resulting from the inability of our customers to make required payments. When we become aware that a specific customer is unable to meet their financial obligations, we record a specific allowance to reflect the level of credit risk in the customer’s outstanding receivable balance. In addition, we record additional allowances based on certain percentages of aged receivable balances. These percentages take into account a variety of factors including, but not limited to, current economic trends, payment history and bad debt write-off experience. We classify bad debt expenses as selling, general and administrative expense.
During fiscal years 2026, 2025, and 2024, a few customers generated more than 10% of total net revenue. Refer to “Note 17. Operating Segments and Geographic Information” for more information.
As of June 27, 2026, our accounts receivable from a single customer, which represented 10% or greater of the total accounts receivable, was concentrated with two customers, which represented 30% and 11% of gross accounts receivable, respectively. As of June 28, 2025, our accounts receivable from a single customer, which represented 10% or greater of the total accounts receivable, was concentrated with two customer, which represented 13% and 11% of gross accounts receivable respectively.
We rely on a limited number of suppliers for a number of key components contained in our products. We also rely on a limited number of significant independent contract manufacturers for the production of certain key components and subassemblies contained in our products.
We generally use a rolling twelve months forecast based on anticipated product orders, customer forecasts, product order history and backlog to determine our materials requirements. Lead times for the parts and components that we order vary significantly and depend on factors such as the specific supplier, contract terms and demand for a component at a given time. If the forecast does not meet or if it exceeds actual demand, we may have excess or shortfalls of some materials and components, as well as excess inventory purchase commitments. We could experience reduced or delayed product shipments or incur additional inventory write-downs and cancellation charges or penalties, which would increase costs and could have a material adverse impact on our results of operations.
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In connection with the issuance of the 2032 Notes, we entered into the 2032 Capped Call Options with the 2032 Capped Call Counterparties. The 2032 Capped Call Counterparties are financial institutions, and we will be subject to the risk that one or more of the 2032 Capped Call Counterparties may default under the 2032 Capped Call Options. Our exposure to the credit risk of the 2032 Capped Call Counterparties will not be secured by any collateral. Global economic conditions have in the past resulted in the actual or perceived failure and/or financial difficulties of many financial institutions. If a 2032 Capped Call Counterparty becomes subject to insolvency proceedings, we will become an unsecured creditor in those proceedings with a claim equal to our exposure at the time under the 2032 Capped Call Option with such 2032 Capped Call Counterparty. No asset or gain has been recognized in our financial statements for the 2032 Capped Call Options, and while our exposure may depend on many factors, our exposure is limited to the capped payout on the 2032 Capped Call Options, which is approximately $542.0 million when our stock price is above $268.24 per share. In addition, upon a default by a 2032 Capped Call Counterparty, we may suffer adverse tax consequences and experience more dilution than we currently anticipate with respect to our common stock. We can provide no assurances as to the financial stability or viability of the 2032 Capped Call Counterparties.
Foreign Currency Translation
In fiscal year 2019, we established the functional currency for our worldwide operations as the U.S. dollar. Translation adjustments reported prior to December 10, 2018 remain as a component of accumulated other comprehensive income (loss) in our consolidated balance sheets, until all or a part of the investment in the subsidiaries is sold or liquidated. In fiscal year 2023, we acquired IPG telecom transmission product lines. The functional currency of the Brazilian entities acquired as part of this acquisition is the local currency. In fiscal year 2026, we sold our Brazilian entities, and therefore, recognized the related accumulated translation adjustments to earnings.
Translation adjustments reported prior to fiscal year 2019, remain as a component of accumulated other comprehensive income in our consolidated balance sheet. The translated values for any non-monetary assets and liabilities as of the date we established the U.S. dollar as the functional currency became the new accounting basis for those assets. Accordingly, monetary assets and liabilities denominated in foreign currencies have been remeasured into U.S. dollars using the exchange rates in effect at the balance sheet date. Foreign currency re-measurement gains or losses are included in other income (expense), net in the consolidated statements of operations.
Stock-based Compensation
Generally, compensation expense related to stock-based transactions is measured and recognized in the financial statements based on fair value at the grant date.
Restricted stock units (“RSUs”) are grants of shares of our common stock, the vesting of which is based on the requisite service requirement. Generally, our RSUs are subject to forfeiture and expected to vest over one to four years. For new-hire grants, RSUs generally vest ratably on an annual basis over four years. For annual refresh grants, RSUs generally vest ratably on an annual, or combination of annual and quarterly, basis over three years.
Performance stock units (“PSUs”) are grants of shares of our common stock that vest upon the achievement of certain performance and service conditions. We account for the fair value of PSUs using the closing market price of our common stock on the date of grant. We begin recognizing compensation expense when we conclude that it is probable that the performance conditions will be achieved. We reassess the probability of vesting at each reporting period and adjust our compensation cost based on this probability assessment. Our PSUs are subject to risk of forfeiture until performance and service conditions are satisfied and generally vest over three years.
We granted certain employees with stock options, the vesting of which is based on the requisite service requirement and expected to vest within three years. We calculate the fair value of stock options using the Black-Scholes option-pricing model, which requires us to make estimates of assumptions such as expected volatility, expected term, risk-free interest rate, expected dividend yield, and forfeiture rates.
We estimate the fair value of the rights to acquire stock under our 2015 Employee Stock Purchase Plan (the “2015 Purchase Plan”) using the Black-Scholes option pricing formula. Our 2015 Purchase Plan provides for consecutive six-month offering periods. We recognize such compensation expense on a straight-line basis over the requisite service period. We calculate the volatility factor based on our historical stock prices.
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Restructuring and Related Charges
Costs associated with restructuring activities are recognized when they are obligated. However, in the case of leases, the expense is estimated and accrued when the property is vacated. Given the significance of, and the timing of the execution of such activities, this process is complex and involves periodic reassessments of estimates made from the time the property was vacated, including evaluating real estate market conditions for expected vacancy periods and sub-lease income. We recognize a liability for post-employment benefits for workforce reductions related to restructuring activities when payment is probable and the amount is reasonably estimable. Restructuring and related charges may also include charges related to write-offs of long-lived assets related to significant restructuring initiatives.
We continually evaluate the adequacy of the remaining liabilities under our restructuring initiatives. Although we believe that these estimates accurately reflect the costs of our restructuring plans, actual results may differ, thereby requiring us to record additional provisions or reverse a portion of such provisions.
Refer to “Note 12. Restructuring and Related Charges”.
Research and Development (“R&D”) Expense
Costs related to R&D, which primarily consists of labor and benefits, supplies, facilities, consulting and outside service fees, are charged to expense as incurred.
Loss Contingencies
We are subject to the possibility of various loss contingencies arising in the ordinary course of business. We consider the likelihood of loss or impairment of an asset or the incurrence of a liability, as well as our ability to reasonably estimate the amount of loss in determining loss contingencies. An estimated loss is accrued when it is probable that an asset has been impaired or a liability has been incurred and the amount of loss can be reasonably estimated. We regularly evaluate current information available to determine whether such accruals should be adjusted and whether new accruals are required.
Asset Retirement Obligations (“ARO”)
Our ARO are legal obligations associated with the retirement of long-lived assets pertaining to leasehold improvements. These liabilities are initially recorded at fair value and the related asset retirement costs are capitalized by increasing the carrying amount of the related assets by the same amount as the liability. Asset retirement costs are subsequently depreciated over the useful lives of the related assets. Subsequent to initial recognition, we record period-to-period changes in the ARO liability resulting from the passage of time and revisions to either the timing or the amount of the original estimate of undiscounted cash flows. We de-recognize ARO liabilities when the related obligations are settled.
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Note 2. Recently Issued Accounting Pronouncements
Accounting Pronouncements Recently Adopted
In November 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2024-04, Debt with Conversion and Other Options (Subtopic 470-20): Induced Conversions of Convertible Debt Instruments, which clarifies the requirements related to accounting for the settlement of a debt as an induced conversion. ASU No. 2024-04 is intended to improve the relevance and consistency in application of the induced conversion guidance in Subtopic 470-20 for convertible debt instruments with cash conversion features and debt instruments that are not currently convertible, when the face value of the debt is settled in cash. We have early adopted ASU No. 2024-04 in the first quarter of fiscal year 2026 and applied the accounting in the partial repurchase of our 2026 Notes in September 2025. Refer to “Note 10. Debt” for detailed discussion of this transaction.
In March 2024, the FASB issued ASU No. 2024-02: Codification Improvements - Amendments to Remove References to the Concepts Statements, which contains amendments to the Codification that remove references to various FASB Concepts Statements. We have adopted ASU No. 2024-02 in the first quarter of fiscal year 2026 and it did not have a material impact on our consolidated financial statements and disclosures as a result of the adoption.
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income tax paid. ASU No. 2023-09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. We have adopted ASU No. 2023-09 in fiscal year 2026 on a prospective basis. The adoption resulted in expanded disclosures included in Note 13. Income Taxes and did not affect the recognition or measurement of income taxes or our consolidated financial position, results of operations, or cash flows.
Accounting Pronouncements Not Yet Effective
In May 2026, the FASB issued ASU No. 2026-02, Environmental Credits and Environmental Credit Obligations, which introduces a comprehensive model that establishes recognition, measurement, presentation, and disclosure requirements for environmental credits and compliance obligations that may be settled by using environmental credits. ASU No. 2026-02 is effective for fiscal years beginning after December 15, 2027. We plan to adopt ASU No. 2025-12 in the first quarter of fiscal year 2029. We are currently evaluating the impact of this ASU on our financial statements and disclosures.
In April 2026, the FASB issued ASU No. 2026-01, Initial Measurement of Paid-In-Kind (“PIK”) Dividends on Equity-Classified Preferred Stock, which amends ASC 505 to add guidance on how an issuer should measure PIK dividends on equity-classified preferred stock. ASU No. 2026-01 is effective for fiscal years beginning after December 15, 2026. We plan to adopt ASU No. 2025-01 in the first quarter of fiscal year 2028. We are currently evaluating the impact of this ASU on our financial statements and disclosures.
In December 2025, the FASB issued ASU No. 2025-12, Codification Improvements, the purpose of which is to update the codification for a broad range of topics arising from technical corrections, unintended applications of the codification, clarifications, and other minor improvements. ASU No. 2025-12 is effective for fiscal years beginning after December 15, 2026, with early adoption permitted. We plan to adopt ASU No. 2025-12 in the first quarter of fiscal year 2028. We are currently evaluating the impact of this ASU on our financial statements and disclosures.
In December 2025, the FASB issued ASU No. 2025-11, Interim Reporting (Topic 270), which is intended to improve the navigability of the interim reporting guidance in ASC 270 and clarify when it applies. ASU No. 2025-11 is effective for fiscal years beginning after December 15, 2027, with early adoption permitted. We plan to adopt ASU No. 2025-11 in the first quarter of fiscal year 2029. We are currently evaluating the impact of this ASU on our financial statements and disclosures.
In December 2025, the FASB issued ASU No. 2025-10, Government Grants (Topic 832), which adds guidance to ASC 832 on the recognition, measurement, and presentation of government grants. ASU No. 2025-10 is effective for fiscal years beginning after December 15, 2028, with early adoption permitted. We are currently evaluating the impact of this ASU on our financial statements and disclosures.
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In November 2025, the FASB issued ASU No. 2025-09, Derivatives and Hedging (Topic 815), which amends certain aspects of the hedge accounting guidance in ASC 815, including the risk assessment for cash flow hedges, hedging forecasted interest payments on choose-your-rate debt instruments, cash flow hedges of nonfinancial forecasted transactions, net written options as hedging instruments, and dual hedges of foreign currency denominated debt instruments. ASU No. 2025-09 is effective for fiscal years beginning after December 15, 2026, with early adoption permitted. We plan to adopt ASU No. 2025-09 in the first quarter of fiscal year 2028. We are currently evaluating the impact of this ASU on our financial statements and disclosures.
In November 2025, the FASB issued ASU No. 2025-08, Financial Instruments—Credit Losses (Topic 326), which amends the guidance in ASC 326 on the accounting for certain purchased loans. ASU No. 2025-08 is effective for fiscal years beginning after December 15, 2026, with early adoption permitted. We plan to adopt ASU No. 2025-08 in the first quarter of fiscal year 2028. We are currently evaluating the impact of this ASU on our financial statements and disclosures.
In September 2025, the FASB issued ASU No. 2025-07, Derivatives and Hedging (Topic 815) and Revenue from Contracts with Customers (Topic 606), which refines the scope of the guidance on derivatives in ASC 815 and clarifies the guidance on share-based payments from a customer in ASC 606. ASU No. 2025-07 is effective for fiscal years beginning after December 15, 2026, with early adoption permitted. We plan to adopt ASU No. 2025-07 in the first quarter of fiscal year 2028. We are currently evaluating the impact of this ASU on our financial statements and disclosures.
In September 2025, the FASB issued ASU No. 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Sub-topic 350-40), Targeted Improvements to the Accounting for Internal-Use Software, which amends certain aspects of the accounting for and disclosure of software costs under ASC 350-40. The amendments also supersede the guidance on Web site development costs in ASC 350-50 and relocate that guidance, along with the recognition requirements for development costs specific to Web sites, to ASC 350-40. ASU No. 2025-06 is effective for fiscal years beginning after December 15, 2027, with early adoption permitted. We plan to adopt ASU No. 2025-06 in the first quarter of fiscal year 2029. We are currently evaluating the impact of this ASU on our financial statements and disclosures.
In July 2025, the FASB issued ASU No. 2025-05, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses for Accounts Receivable and Contract Assets, which amends ASC 326-20 to provide a practical expedient for all entities, related to the estimation of expected credit losses for current accounts receivable and current contract assets that arise from transactions accounted for under ASC 606. ASU No. 2025-05 is effective for fiscal years beginning after December 15, 2025, with early adoption permitted. We plan to adopt ASU No. 2025-05 in the first quarter of fiscal year 2027. We are currently evaluating the impact of this ASU on our financial statements and disclosures.
In May 2025, the FASB issued ASU No. 2025-04, Compensation - Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606), which is intended to reduce diversity in practice and improve existing guidance, primarily by revising the definition of a “performance condition” and eliminating forfeiture policy election for service conditions associated with share-based consideration payable to a customer. In addition, ASU No. 2025-04 clarifies that the guidance in ASC 606 on the variable consideration constraints does not apply to share-based consideration payable to a customer regardless of whether an award’s grant date has occurred (as determined under ASC 718). ASU No. 2025-04 is effective for fiscal years beginning after December 15, 2026, with early adoption permitted. We plan to adopt ASU No. 2025-04 in the first quarter of fiscal year 2028. We are currently evaluating the impact of this ASU on our financial statements and disclosures.
In May 2025, the FASB issued ASU No. 2025-03, Business Combinations (Topic 805) and Consolidation (Topic 810), which revises the guidance in ASC 805 to clarify that, in determining the accounting acquirer in a business combination that is effected primarily by exchanging equity interests in which a VIE is acquired, an entity would be required to consider the factors in ASC 805-10-55-12 through 55-15. Previously, the accounting acquirer in such transactions was always the primarily beneficiary. ASU No. 2025-03 is effective for fiscal years beginning after December 15, 2026, with early adoption permitted. We plan to adopt ASU No. 2025-04 in the first quarter of fiscal year 2028. We are currently evaluating the impact of this ASU on our financial statements and disclosures.
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In November 2024, the FASB issued ASU No. 2024-03, Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40), which requires disaggregation of certain expense captions into specified categories in disclosures within the footnotes to the financial statements. In January 2025, the FASB issued ASU No. 2025-01, which revises the effective date of ASU No. 2024-03, to clarify that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted. We plan to adopt ASU No. 2024-04 in fiscal year 2028. We are currently evaluating the impact of this ASU on our financial statements and disclosures.
Note 3. Earnings Per Share
We calculate basic net (loss) income per share pursuant to the two-class method as a result of the issuance of the Series A Convertible Preferred Stock (the “Preferred Stock”) in March 2026. Our Preferred Stock represents a second class of common stock for purposes of computing net (loss) income per share under the two-class method as it is entitled to receive dividends on an as-converted basis in the same manner as holders of common stock and does not have any material preferential rights relative to our common stock.
Diluted net (loss) income per share is calculated assuming the Preferred Stock have been converted into common stock, and the related shares are included in the diluted weighted-average share. As the Preferred Stock participates on an if-converted basis, and there are no dividends, the (loss) income allocated to the two classes of stock converge and the results are mathematically equal. Thus, basic and diluted net (loss) income per share is calculated assuming the Preferred Stock have been converted into common stock, and the related shares are included in the weighted average shares outstanding. Refer to “Note 14. Equity” for more details.
The following table sets forth the computation of basic and diluted net (loss) income per share (in millions, except per share data):
Years Ended
June 27, 2026June 28, 2025June 29, 2024
Basic (loss) income per share:
Net (loss) income $(6,935.1)$25.9 $(546.5)
Weighted average shares outstanding - basic:
Common stock73.7 69.0 67.3 
Preferred stock0.9 — — 
Weighted average shares outstanding - basic74.6 69.0 67.3 
Basic (loss) income per share$(92.96)$0.38 $(8.12)
Diluted (loss) income per share:
Weighted average shares outstanding - basic74.6 69.0 67.3 
Effect of dilutive securities from stock-based benefit plans— 0.6 — 
Weighted average shares outstanding - diluted74.6 69.6 67.3 
     Diluted (loss) income per share$(92.96)$0.37 $(8.12)
Potentially dilutive common shares result from stock-based benefit plans, which includes the assumed exercise of outstanding stock options, assumed vesting of equity awards, and assumed issuance of stock under the ESPP, all using the treasury stock method.
Potentially dilutive common shares issuable upon conversion of our outstanding convertible notes are determined using the if-converted method. Under each series of convertible notes, we are required to satisfy our conversion obligation with respect to converted notes by paying cash equal to the principal amount of such converted notes and paying or delivering, as the case may be, cash, shares of common stock or a combination of cash and shares of common stock, at our election, with respect to any conversion value in excess thereof. Refer to “Note 10. Debt” for more details.
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Average anti-dilutive shares excluded from the calculation of diluted net income (loss) per share for the years ended June 27, 2026, June 28, 2025 and June 29, 2024 (in millions):
Years Ended
June 27, 2026June 28, 2025June 29, 2024
Effect of dilutive securities from ESPP0.00.1 0.2 
Effect of dilutive securities from stock options0.3 0.8 1.1 
Effect of dilutive securities from RSUs and PSUs2.5 4.4 4.1 
Shares issuable assuming conversion of the convertible notes13.6 0.5 29.6 
Weighted average common shares outstanding - diluted16.4 5.8 35.0 
Our outstanding capped call options are anti-dilutive under GAAP as they are specifically designed to mitigate the dilutive impact of the 2032 Notes, such that no dilution will occur until the capped call price is exceeded. Refer to “Note 10. Debt” for more details. There were no other material anti-dilutive shares excluded from the calculation of diluted net (loss) income per share for the years ended June 27, 2026, June 28, 2025 and June 29, 2024.
Note 4. Business Combination
Manufacturing Facility Acquisition
On March 17, 2026, we acquired a manufacturing facility in Greensboro, North Carolina for $38.0 million in cash from a third party. The acquired business mainly included land and building, machinery and equipment, and an assembled workforce. As part of the transaction, we also entered into a transitional supply agreement (the “supply agreement”) with the third party wherein we will be acting as an agent whereby we will manufacture wafers for the third party for approximately 15 months. The third party is primarily responsible for fulfillment, has discretion in establishing pricing, and bears inventory and credit risk. Accordingly, revenue is recognized on a net basis, representing the amount of consideration or reasonable margin to which we expect to be entitled in exchange for arranging for the specified goods or services to be provided.
We have applied the acquisition method of accounting in accordance with ASC 805 Business Combinations for this transaction, with respect to the fair value of purchase price consideration and the identifiable assets and liabilities acquired, including the supply agreement, which have been measured at estimated fair value as of the acquisition date. We allocated the fair value of the purchase price consideration to the assets acquired and liabilities assumed as of the acquisition date based on their estimated fair values. The excess of purchase price consideration over the fair value of net assets acquired is recorded as goodwill. Our preliminary allocation of the purchase price consideration to the assets acquired and liabilities assumed as of the acquisition date is as follows (in millions):
Fair Value
Total purchase price consideration$38.0 
Assets acquired
Property, plant and equipment, net39.5 
Liabilities assumed
Other liabilities (1)
9.9 
Goodwill$8.4 
(1) Since the supply agreement is priced at a discount below its fair market value, we accounted for it as a below-market contract liability, which will be amortized and recorded as revenue over the term of the supply agreement. During the twelve months ended June 27, 2026, we have recognized approximately $2.3 million of this amount to net revenue. Refer to “Note 18. Revenue Recognition” for further details.
The goodwill of $8.4 million arising from this acquisition has been attributed to the value of the assembled workforce and the strategic benefits associated with acquiring an operational fabrication facility to expand our capacity. None of the goodwill is expected to be deductible for local tax purposes. Refer to “Note 9. Goodwill and Other Intangible Assets.”
We also incurred a total of $0.4 million acquisition-related costs representing professional and other direct acquisition costs, which are recorded as selling, general and administrative expense in our consolidated statement of operations during the twelve months ended June 27, 2026.
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Cloud Light Acquisition
On November 7, 2023, we completed the acquisition of Cloud Light Technology Limited (“Cloud Light”). In accordance with a definitive merger agreement, dated as of October 29, 2023, between us and Cloud Light, cash consideration included $75.8 million of cash held in an escrow fund to support Cloud Light’s indemnification obligations and customary adjustment for working capital. In November 2025, we and the former shareholders of Cloud Light mutually agreed to settle outstanding indemnification claims for $27.5 million and signed a settlement agreement releasing the balance of the escrow fund to the former Cloud Light shareholders and releasing them of their indemnification obligations. Since the measurement period has expired, we recorded the settlement amount of $27.5 million as other income, net in our consolidated statements of operations for the twelve months ended June 27, 2026.
Note 5. Cash, Cash Equivalents and Short-term Investments
The following table summarizes our cash, cash equivalents and short-term investments by category for the periods presented (in millions):
Amortized CostGross Unrealized GainsGross Unrealized LossesFair Value
June 27, 2026:
Cash$635.9 $— $— $635.9 
Cash equivalents:
Certificate of deposit131.8 — — 131.8 
Commercial paper14.5 — — 14.5 
Money market funds1,261.3 — — 1,261.3 
Total cash and cash equivalents$2,043.5 $— $— $2,043.5 
Short-term investments:
Commercial paper$54.6 $— $(0.1)$54.5 
Corporate debt securities350.7 0.1 (1.2)349.6 
U.S. Agency securities154.7 — (0.4)154.3 
U.S. Treasury securities136.8 — (0.3)136.5 
Total short-term investments$696.8 $0.1 $(2.0)$694.9 
June 28, 2025:
Cash$349.5 $— $— 349.5 
Cash equivalents:
Commercial paper2.5 — — 2.5 
Money market funds161.7 — — 161.7 
U.S. Treasury securities7.0 — — 7.0 
Total cash and cash equivalents$520.7 $— $— $520.7 
Short-term investments:
Commercial paper$2.7 $— $— 2.7 
Corporate debt securities210.9 0.3 (0.1)211.1 
U.S. Agency securities67.6 0.1 — 67.7 
U.S. Treasury securities74.8 0.1 — 74.9 
Total short-term investments$356.0 $0.5 $(0.1)$356.4 
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We review our investment portfolio to identify and evaluate investments that have indicators of possible impairment. Factors considered in determining whether a loss is other-than-temporary include, but are not limited to, the length of time and extent a security’s fair value has been below its cost, the financial condition and near-term prospects of the investee, the credit quality of the security’s issuer, likelihood of recovery and our intent and ability to hold the security for a period sufficient to allow for any anticipated recovery in value. For the debt instruments we own, we also evaluate whether we have the intent to sell the security or whether it is more likely than not that we will be required to sell the security before recovery of its cost basis. We have not recorded our unrealized losses on our short-term investments into income because we do not intend to sell nor is it more likely than not that we will be required to sell these investments prior to recovery of their amortized cost basis.
We use the specific-identification method to determine any realized gains or losses from the sale of our short-term investments classified as available-for-sale. During fiscal years 2026, 2025 and 2024, we did not realize significant gains or losses on a gross level from the sale of our short-term investments classified as available-for-sale.
The components of other income, net are as follows for the years presented (in millions):
Years Ended
June 27, 2026June 28, 2025June 29, 2024
Foreign exchange (losses) gains, net$(0.5)$(4.2)$0.8 
Interest and investment income60.2 34.4 61.3 
Other losses, net(6.4)— — 
Other income, net$53.3 $30.2 $62.1 
Included in the interest and investment income are $11.1 million, $5.2 million and $5.8 million of interest receivable as of June 27, 2026, June 28, 2025 and June 29, 2024, respectively, recorded as prepayments and other current assets within the consolidated balance sheets. We did not recognize an allowance for credit losses against the interest receivable in any of the periods presented as there were no such losses.
The following table summarizes unrealized losses on our cash equivalents and short-term investments by category that have been in a continuous unrealized loss position for less than 12 months, as of the periods presented (in millions):
Continuous Loss Position For
 Less Than 12 Months		Gross Unrealized Losses
Fair ValueUnrealized Losses
June 27, 2026:
U.S. Agency securities$130.5 $(0.4)$(0.4)
Commercial paper69.0 (0.1)(0.1)
Corporate debt securities275.8 (1.2)(1.2)
U.S. government bonds106.9 (0.3)(0.3)
Total$582.2 $(2.0)$(2.0)
June 28, 2025:
U.S. Agency securities$24.5 $— $— 
Commercial paper5.2 — — 
Corporate debt securities73.8 (0.1)(0.1)
U.S. government bonds35.3 — — 
Total$138.8 $(0.1)$(0.1)
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There were no unrealized losses on our cash equivalents and short-term investments that have been in a continuous unrealized loss position for more than twelve months as of June 27, 2026 and June 28, 2025.
The following table classifies our short-term investments by remaining maturities (in millions): 
June 27, 2026June 28, 2025
Amortized CostFair ValueAmortized CostFair Value
Due within 1 year$247.9 $247.8 $139.9 $140.0 
Due between 1 year to 5 years448.9 447.1 216.1 216.4 
$696.8 $694.9 $356.0 $356.4 
All available-for-sale securities have been classified as current, based on management’s intent and ability to use the funds in current operations.
Note 6. Fair Value Measurements
We determine fair value based on the fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value assumes that the transaction to sell the asset or transfer the liability occurs in the principal or most advantageous market for the asset or liability and establishes that the fair value of an asset or liability shall be determined based on the assumptions that market participants would use in pricing the asset or liability. The classification of a financial asset or liability within the hierarchy is based on the lowest level input that is significant to the fair value measurement. The fair value hierarchy prioritizes the inputs into three levels that may be used to measure fair value: 
Level 1:Inputs are unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2:Inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument.
Level 3:Inputs are unobservable inputs based on our assumptions.
The fair value of our Level 1 financial instruments, such as money market funds and U.S. Treasury securities, which are traded in active markets, is based on quoted market prices for identical instruments. The fair value of our Level 2 fixed income securities is obtained from an independent pricing service, which may use quoted market prices for identical or comparable instruments or model driven valuations using observable market data or inputs corroborated by observable market data. Our marketable securities are held by custodians who obtain investment prices from a third-party pricing provider that incorporates standard inputs in various asset price models. Our procedures include controls to ensure that appropriate fair values are recorded, including comparing the fair values obtained from our pricing service against fair values obtained from another independent source.
Our pension assets consist of multiple institutional funds (“pension funds”) of which the fair values are based on the quoted prices of the underlying funds. Pension funds are primarily classified as Level 2 assets since such funds are not directly traded in active markets. Refer to “Note 15. Employee Retirement Plans.”
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Financial assets measured at fair value on a recurring basis are summarized below (in millions):
Level 1Level 2Level 3Total
June 27, 2026 (1)
Assets:
Cash equivalents:
Certificate of deposit$131.8 $— $— $131.8 
Commercial paper— 14.5 — 14.5 
Money market funds1,261.3 — — 1,261.3 
Short-term investments:
Commercial paper— 54.5 — 54.5 
Asset-backed securities— 
Corporate debt securities— 349.6 — 349.6 
U.S. Agency securities— 154.3 — 154.3 
U.S. Treasury securities136.5 — — 136.5 
Total assets$1,529.6 $572.9 $— $2,102.5 
(1) Excludes $635.9 million in cash held in our bank accounts as of June 27, 2026.
Level 1Level 2Level 3Total
June 28, 2025 (1)
Assets:
Cash equivalents:
Commercial paper$— $2.5 $— $2.5 
Money market funds161.7 $— $— 161.7 
U.S. Treasury securities7.0 — — 7.0 
Short-term investments:
Commercial paper— 2.7 — 2.7 
Corporate debt securities— 211.1 — 211.1 
U.S. Agency securities— 67.7 — 67.7 
U.S. Treasury securities74.9 — — 74.9 
Total assets$243.6 $284.0 $— $527.6 
(1) Excludes $349.5 million in cash held in our bank accounts as of June 28, 2025.
Financial Instruments Not Recorded at Fair Value on a Recurring Basis
We report our financial instruments at fair value with the exception of the convertible notes and term loans, see “Note 10. Debt”. The estimated fair value of the convertible notes was determined based on the trading price of the convertible notes as of the last day of trading for the period. We consider the fair value of the convertible notes to be a Level 2 measurement as they are not actively traded in markets.
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The carrying amounts and estimated fair values of our convertible notes are as follows for the periods presented (in millions):
June 27, 2026June 28, 2025
Carrying AmountEstimated Fair ValueCarrying AmountEstimated Fair Value
2032 Notes$1,256.1 $5,411.1 $— $— 
2029 Notes54.7 640.2 600.2 925.5 
2028 Notes179.1 1,108.7 857.7 890.2 
2026 Notes54.7 447.2 1,048.3 1,233.3 
$1,544.6 $7,607.2 $2,506.2 $3,049.0 
As of June 27, 2026, the carrying value of our Japan term loans in aggregate was $92.8 million compared to the fair value of approximately $91.6 million.
As of June 27, 2026, the fair value of our capped call options is approximately $200.0 million.
Assets Measured at Fair Value on a Non-Recurring Basis
We periodically review our intangible and other long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Determination of recoverability is based on the lowest level of identifiable estimated undiscounted cash flows resulting from use of the asset and its eventual disposition. If not recoverable, an impairment loss would be calculated based on the excess of the carrying amount over the fair value.
Management utilizes various valuation methods, including an income approach, a market approach and a cost approach, to estimate the fair value of intangibles and other long-lived assets. During the annual impairment testing performed in the fourth quarter of fiscal year 2026, we concluded that there was no impairment of our intangible and other long-lived assets. We review our intangible and other long-lived assets for impairment at least annually in the fourth quarter of each fiscal year, absent any interim indicators of impairment. During the twelve months ended June 27, 2026, we recorded $12.4 million in impairment charges to write-down certain assets held for sale to fair value less cost to sell in our consolidated statements of operations. There were no other indicators of impairment during the twelve months ended June 27, 2026.
Note 7. Balance Sheet Details
Allowance for current expected credit losses
We did not have any allowance for credit losses other than our allowance for uncollectible accounts receivable. As of June 27, 2026 and June 28, 2025, the allowance for credit losses on our trade receivables were $3.5 million and $3.5 million, respectively.
Inventories
The components of inventories were as follows (in millions):
June 27, 2026June 28, 2025
Raw materials and purchased parts$370.2 $253.2 
Work in process232.4 159.1 
Finished goods89.0 57.8 
Inventories$691.6 $470.1 

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Property, plant and equipment, net
The components of property, plant and equipment, net were as follows (in millions):
June 27, 2026June 28, 2025
Land$92.1 $108.6 
Buildings and improvement295.3 270.4 
Machinery and equipment1,141.6 848.8 
Computer equipment and software42.1 39.1 
Furniture and fixtures13.1 14.7 
Leasehold improvements53.1 45.9 
Construction in progress377.4 152.3 
2,014.7 1,479.8 
Less: Accumulated depreciation(855.6)(753.4)
Property, plant and equipment, net$1,159.1 $726.4 
Our construction in progress primarily includes building and improvements and machinery and equipment that we expect to place in service in the next 12 months.
In connection with our acquisition of a business in March 2026, we recorded approximately $39.5 million of property, plant and equipment in our consolidated balance sheets. Refer to “Note 4. Business Combination” for details.
In March 2026, we completed the sale of two commercial real estate properties located in San Jose, California. The properties consist of commercial buildings used by us for office, research and development and manufacturing support activities. The agreement provided for a cash purchase price of $43.0 million and included a short-term rental arrangement under which we occupied the properties through July 2026. We recorded a loss on sale of $7.7 million during the year ended June 27, 2026, which is included in the selling, general and administrative expenses in our consolidated statements of operations.
In addition, in connection with the sale of our Brazilian entities, we recorded a gain on sale of approximately $1.6 million recorded in selling, general and administrative expenses in our consolidated statements of operations during the year ended June 27, 2026.
In December 2024, we entered into an agreement to sell our assets in an entity in Shenzhen, China. In March 2025, we completed the sale and received net proceeds of $47.8 million, which was net of cash of $17.6 million and direct selling costs of $1.1 million. The net assets sold consisted primarily of building, building improvements and land rights as of December 17, 2024 with a net carrying value of $12.9 million, and were used for manufacturing and research and development activities. As a result, we recognized a gain on sale of facility of $34.9 million, which was recorded in our consolidated statements of operations for the year ended June 28, 2025. We paid $4.4 million of withholding taxes on this sale transaction, which is recorded as part of the income tax provision for the year ended June 28, 2025. We also incurred $0.7 million of indirect selling expenses related to this transaction, which was recorded as part of selling, general and administrative expenses in our consolidated statements of operations for the year ended June 28, 2025.
In July 2024, we purchased the land and building of our wafer fabrication facility located in Sagamihara, Japan for a total transaction price of $42.2 million including $1.3 million of incremental direct costs for fees paid to third parties that were capitalized. We also recorded a $16.3 million increase in the carrying value of buildings purchased related to the termination of leases for the purchased building. The total carrying value of assets purchased was $58.5 million at the purchase date, of which $33.4 million was allocated to the land and $25.1 million to the building.
During fiscal years 2026, 2025 and 2024, we recorded depreciation expense of $128.8 million, $104.3 million, and $110.6 million, respectively.
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Operating lease right-of-use assets, net
Operating lease right-of-use assets, net were as follows (in millions):
June 27, 2026June 28, 2025
Operating lease right-of-use assets$59.3 $54.4 
Less: accumulated amortization(30.1)(26.5)
Operating lease right-of-use assets, net$29.2 $27.9 
In connection with our integration efforts to consolidate our sites, we recorded restructuring charges for various sites and reduced our operating lease right-of-use assets by $7.8 million during the year ended June 28, 2025.
In connection with the purchase of land and building in Sagamihara, Japan in July 2024, we terminated our leases for the related facilities and recorded a $16.3 million increase in the carrying value of building purchased, as a result of derecognizing $32.0 million of net operating lease right-of-use asset, $1.6 million of operating lease liabilities, current, and $14.1 million of operating lease liabilities, non-current.
Other current liabilities
The components of other current liabilities were as follows (in millions):
June 27, 2026June 28, 2025
Restructuring and related accrual (1)
$2.4 $2.5 
Warranty reserve (2)
24.7 14.4 
Deferred revenue and customer deposits (4)
15.4 0.7 
Income tax payable (3)
38.3 29.1 
Other current liabilities 10.7 6.4 
Other current liabilities
$91.5 $53.1 
(1) Refer to “Note 12. Restructuring and Related Charges.”
(2) Refer to “Note 16. Commitments and Contingencies.”
(3) Refer to “Note 13. Income Taxes.”
(4) Refer to “Note 18. Revenue Recognition.”
Other non-current liabilities
The components of other non-current liabilities were as follows (in millions):
June 27, 2026June 28, 2025
Asset retirement obligation$9.0 $7.1 
Pension and related accrual (1)
7.2 9.7 
Unrecognized tax benefit (2)
67.2 55.6 
Other non-current liabilities (2)
31.8 25.4 
Other non-current liabilities
$115.2 $97.8 
(1) We have defined benefit pension plans in Japan, Switzerland, and Thailand. Pension and related accrual of $7.2 million as of June 27, 2026 relates to $7.9 million of non-current portion of benefit obligation, offset by $0.7 million of funding for the pension plan in Switzerland. Pension and related accrual of $9.7 million as of June 28, 2025 relates to $11.0 million of non-current portion of benefit obligation, offset by $1.3 million of funding for the pension plan in Switzerland. We typically re-evaluate the assumptions related to the fair value of our defined benefit obligations annually in the fiscal fourth quarter and make any updates as necessary. Refer to “Note 15. Employee Retirement Plans”.
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(2) We have reclassified a $21.4 million unrecognized tax position to other non-current liabilities during the year ended June 28, 2025 for an indemnification liability related to the sale of certain assets. This did not impact our results of operations for the year ended June 28, 2025.
Note 8. Leases
We lease certain real and personal property from unrelated third parties under non-cancellable operating leases that expire at various dates through fiscal year 2033. These operating leases are primarily for administrative offices, research and development and manufacturing facilities, as well as sales offices in various countries around the world. Certain leases require us to pay property taxes, insurance and routine maintenance, and include escalation clauses. Many leases include one or more options to renew. We do not assume renewals in our determination of the lease term unless the renewals are deemed to be reasonably assured at lease commencement.
As of June 27, 2026, we sublease a portion of our offices in Canada and China. These subleases will expire at various dates through fiscal year 2029.
The components of lease costs, lease term, and discount rate are as follows (in millions, except for weighted average data):
June 27, 2026June 28, 2025June 29, 2024
Operating lease cost$13.4 $13.3 $16.8 
Short-term and variable lease cost3.7 3.5 4.6 
Sublease income(0.8)(0.8)(2.0)
Total lease cost$16.3 $16.0 $19.4 
Weighted average remaining lease term (in years):
Operating leases2.93.35.2
Weighted average discount rate (in percentages):
Operating leases 3.8 %3.8 %3.5 %
As of June 27, 2026, maturities of our operating lease liabilities, which do not include short-term leases and variable lease payments, were as follows (in millions):
Fiscal Years
Operating Leases (1)
2027$14.6 
202811.1 
20297.6 
20301.5 
20310.7 
Thereafter0.5 
Total minimum lease payments36.0 
Less: amount representing interest(2.2)
Present value of total lease liabilities$33.8 
(1) We anticipate receiving approximately $0.8 million in sublease income for fiscal year 2027, which is not included in the table above.
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Note 9. Goodwill and Other Intangible Assets
Goodwill
The following table presents our goodwill balances as of June 27, 2026 and June 28, 2025 (in millions):
Amount
Balances as of June 29, 2024$1,055.8 
Acquisition of Cloud Light (1)
5.1 
Balances as of June 28, 2025$1,060.9 
Acquisition of a business (2)
$8.4 
Balances as of June 27, 2026$1,069.3 
(1) During the year ended June 28, 2025, prior to the end of the measurement period, we adjusted the purchase price allocation related to our Cloud Light acquisition and recorded a $5.1 million increase to goodwill. The primary adjustment to the opening balance sheet relates to income tax liabilities which were not known in previous periods.
(2) On March 17, 2026, we acquired a manufacturing facility in Greensboro, North Carolina for $38.0 million in cash from a third party. The acquired business mainly included land and building, machinery and equipment, and an assembled workforce, offset by the liabilities assumed. The goodwill of $8.4 million arising from this acquisition has been attributed to the value of the assembled workforce and the strategic benefits associated with acquiring an operational fabrication facility to expand our capacity. Refer to “Note 4. Business Combination” for details.
Impairment of Goodwill
During the third quarter of fiscal year 2026, we completed a reorganization of our business units, which resulted in changes to our reporting unit structure. As a result of this reorganization, we performed an interim qualitative assessment of goodwill for our reporting units. In performing the assessment, we evaluated relevant events and circumstances, including changes in the composition of reporting units, financial performance, and other entity-specific and macroeconomic factors. Based on this assessment along with a qualitative assessment done in the fourth quarter of fiscal year 2026, it was not more likely than not that the fair value of any of our reporting units was less than its carrying value; as such, our annual qualitative assessment did not indicate that a more detailed quantitative analysis was necessary. Accordingly, no goodwill impairment charge was recognized during fiscal year 2026.
Other Intangibles
Our intangible assets are amortized on a straight-line basis over the estimated useful lives, except for certain customer relationships, which are amortized using an accelerated method of amortization over the expected customer lives, more accurately reflecting the pattern of realization of economic benefits we expect to derive. Acquired developed technologies are amortized to cost of sales and research and development expenses. Acquired customer relationships are amortized to selling, general and administrative expenses in the consolidated statement of operations.
IPR&D is initially capitalized at fair value as an intangible asset with an indefinite life and assessed for impairment thereafter. When an IPR&D project is completed, the IPR&D is reclassified to an amortizable purchased intangible asset and amortized over the asset’s estimated useful life.
During the annual impairment testing performed in the fourth quarter of each year presented, we concluded that our intangible and other long-lived assets were not impaired at the asset group level. We review our intangible and other long-lived assets for impairment at least annually in the fourth quarter of each fiscal year, absent any interim indicators of impairment. Other than the write-off of IPR&D intangible asset discussed below, there were no other indicators of impairment at the asset group level during the years ended June 27, 2026 and June 28, 2025.
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The following tables present details of all of our intangibles as of the periods presented (in millions, except for weighted average remaining amortization period):
June 27, 2026Gross Carrying AmountsAccumulated AmortizationNet Carrying AmountsWeighted average remaining amortization period (years)
Acquired developed technologies$828.4 $(638.7)$189.7 3.5
Customer relationships 419.5 (282.3)137.2 3.4
Order backlog14.0 (14.0)— —
Trade name and trademarks3.0 (3.0)— —
Total intangible assets$1,264.9 $(938.0)$326.9 
During the year ended June 27, 2026, we recorded a $2.5 million write-off of IPR&D intangible asset for project we will no longer pursue, which was from the NeoPhotonics acquisition. We recognized this charge as research and development expense in our consolidated statements of operations during the year ended June 27, 2026.
June 28, 2025Gross Carrying AmountsAccumulated AmortizationNet Carrying AmountsWeighted average remaining amortization period (years)
Acquired developed technologies$822.4 $(559.0)$263.4 4.1
Customer relationships419.8 (226.6)193.2 4.1
In-process research and development8.5 — 8.5 n/a
Order backlog14.0 (14.0)— —
Trade name and trademarks3.0 (3.0)— —
Total intangible assets$1,267.7 $(802.6)$465.1 
During the year ended June 28, 2025, we reclassified $4.3 million of IPR&D intangible assets acquired from Cloud Light to acquired developed technologies for IPR&D projects that were completed during the period and recorded $0.2 million of related amortization expense in our consolidated statements of operations during the year ended June 28, 2025.
During the year ended June 28, 2025, we recorded a $2.7 million write-off of IPR&D intangible assets for projects we will no longer pursue, which includes $2.0 million from the NeoPhotonics acquisition and $0.6 million from the Cloud Light acquisition. We recognized this charge as research and development expense in our consolidated statements of operations during the year ended June 28, 2025.
During fiscal years 2026, 2025 and 2024, we recorded $135.7 million, $149.7 million and $150.6 million, respectively, of amortization related to intangibles assets.
The following table presents details of amortization for the periods presented (in millions):
Years ended
June 27, 2026June 28, 2025June 29, 2024
Cost of sales$77.6 $82.2 $83.9 
Selling, general and administrative56.4 65.9 65.2 
Research and development1.7 1.6 1.5 
Total amortization of intangibles$135.7 $149.7 $150.6 
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Based on the carrying amount of our intangible assets as of June 27, 2026, and assuming no future impairment of the underlying assets, the estimated future amortization is as follows (in millions):
Fiscal Years
2027$123.5 
202883.0 
202952.6 
203046.5 
203120.0 
Thereafter1.3 
Total$326.9 
Note 10. Debt
Our debt consists of the following:
June 27, 2026June 28, 2025
Short-termLong-termTotalShort-termLong-termTotal
Convertible notes (1)
$1,544.6 $— $1,544.6 $— $2,506.2 $2,506.2 
Term loans52.3 40.5 92.8 10.6 56.4 67.0 
Total$1,596.9 $40.5 $1,637.4 $10.6 $2,562.6 $2,573.2 
(1) Since the closing price of our stock was at least 130% of the applicable conversion price for each series of Notes for 20 of the last 30 trading days of our fiscal year 2026, all of our Notes remain convertible at the option of the holders during the first quarter of fiscal year 2027. The outstanding Notes are recorded as current portion of long-term debt, which is presented as current liabilities in our consolidated balance sheets as of June 27, 2026, net of unamortized debt issuance costs. If the Notes are converted by holders, we are required to satisfy our conversion obligations with respect to each series of converted Notes by paying cash equal to the principal amounts of such series of converted Notes and paying or delivering, as the case may be, cash, shares of common stock, or a combination of cash and shares of common stock, at our election, with respect to any conversion value in excess thereof. The outstanding Notes as of June 28, 2025 are recorded as long-term debt, which is presented as non-current liabilities in our consolidated balance sheets, net of unamortized debt issuance costs.
The table below summarizes the applicable conversion price and the equivalent 130% of the conversion price of each series of Notes (per share amount):
Conversion Price130% of Conversion Price
2032 Notes$187.77 $244.10 
2029 Notes69.54 90.40 
2028 Notes131.03 170.34 
2026 Notes99.29 129.08 
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The table below summarizes activities related to the aggregate principal amount of our convertible notes during the twelve months ended June 27, 2026 (in millions):
June 28, 2025
Debt Issuance (1)
Debt Conversions (2)
Debt Equitizations (3)
Debt Inducement (4)
June 27, 2026
2026 Notes$1,050.0 $— $(149.3)$(264.8)$(581.1)$54.8 
2028 Notes861.0 — (31.0)(650.4)— 179.6 
2029 Notes603.7 — (339.1)(209.7)— 54.9 
2032 Notes— 1,265.0 — — — 1,265.0 
$2,514.7 $1,265.0 $(519.4)$(1,124.9)$(581.1)$1,554.3 
(1) Refer to “2032 Notes” discussion below.
(2) Refer to “Debt Conversions” discussion below.
(3) Refer to “Debt Equitizations” discussion below.
(4) Refer to “Debt Inducement” discussion below.
Debt Conversions
As of August 14, 2026, we have received early conversion requests totaling $757.8 million aggregate principal amount of the Notes (or the “Converted Notes”), which principal amount will be settled in cash and the conversion value in excess thereof will be settled in cash, shares of common stock, or a combination cash and shares of common stock, at our election, in accordance with Indenture governing the applicable series of Converted Notes. During the year ended June 27, 2026, the aggregate principal amount of the Converted Notes settled in cash was $519.4 million. We accounted for these conversions in accordance with ASC 470-20 Debt with Conversion and Other Options wherein the carrying amount of the Converted Notes, including any unamortized issuance costs, forfeited interest, and cash transferred are recognized in additional paid-in capital account to reflect the shares issued and no gain or loss is recognized.
Debt Equitizations
On April 7, 2026, we entered into privately negotiated exchange arrangements with certain holders of our 2026 Notes and 2029 Notes. Pursuant to these agreements, we issued an aggregate of approximately 5.7 million shares of our common stock in exchange for approximately $264.8 million and $209.7 million aggregate principal amount of the 2026 Notes and 2029 Notes, respectively, and the related conversion value in excess of the principal amounts thereof. The issuance of common stock in the exchange transactions resulted in incremental dilution of approximately 0.6 million shares of our common stock related to the aggregate principal amount.
On May 29, 2026, we entered into privately negotiated exchange arrangements with certain holders of our 2028 Notes. Pursuant to these agreements, we issued an aggregate of approximately 5.0 million shares of our common stock in exchange for approximately $650.4 million aggregate principal amount of the 2028 Notes, and the related conversion value in excess of the principal amounts thereof. The issuance of common stock in the exchange transactions resulted in incremental dilution of approximately 0.8 million shares of our common stock related to the aggregate principal amount.
We accounted for these debt equitizations in accordance with ASC 470-50 Debt Modifications and Extinguishment, wherein we recognized a loss on debt extinguishment of $7,756.6 million in our consolidated statements of operations for the year ended June 27, 2026. The loss consisted primarily of $7,755.1 million of conversion value in excess of principal amounts, $3.1 million of related transaction costs and $2.9 million of unamortized debt issuance costs. These amounts were partially offset by $2.9 million of forfeited interest and $1.6 million of negotiated exchange discount. For income tax purposes, substantially all of the loss was non-deductible, except for approximately $4.4 million primarily related to the write-off of unamortized debt issuance costs and certain interest-related amounts.
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Debt Inducement
On September 8, 2025, concurrent with the issuance of the 2032 Notes, we used approximately $843.1 million of the net proceeds to repurchase $581.1 million aggregate principal amounts of the 2026 Notes. We also paid $0.7 million of the related accrued interest. We have adopted and applied ASU 2024-04, Debt with Conversion and Other Options: Induced Conversions of Convertible Debt Instruments. We determined that this transaction met the requirements for the settlement of debt as an induced conversion. Accordingly, we recorded $256.9 million, which represents the fair value increase in the fair value of the debt, as a reduction to additional paid-in capital within our consolidated balance sheets as of June 27, 2026, and recognized an inducement expense of $5.9 million in our consolidated statements of operations during the year ended June 27, 2026, which represents the excess of fair value of the total consideration over the fair value of securities issuable pursuant to the original conversion terms.
Convertible Notes
2032 Notes
On September 8, 2025, we issued $1,265.0 million in aggregate principal amounts of 0.375% Convertible Senior Notes due in 2032 (“2032 Notes”) in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”). The 2032 Notes are governed by an indenture between us and U.S. Bank Trust Company, National Association, as trustee (the “2032 Indenture”). The 2032 Notes are unsecured, rank equally with all of our existing senior unsecured indebtedness, and do not contain any financial covenants, restrictions on dividends, incurrence of senior debt or other indebtedness, or the issuance or repurchase of securities by us.
The net proceeds from the sale of the 2032 Notes was approximately $1,254.7 million, after deducting $10.3 million of debt issuance costs. Concurrent with the issuance of the 2032 Notes, we used $843.1 million of the net proceeds to repurchase $581.1 million aggregate principal amounts of the 0.50% Convertible Senior Notes due in 2026 and $102.0 million of the net proceeds to pay the cost of the capped call transactions (the “2032 Capped Call Options”). We intend to use the remaining net proceeds for general corporate purposes, which may include the repayment or repurchase of our indebtedness, including any of our existing convertible notes, capital expenditures, working capital and potential acquisitions.
The 2032 Notes bear interest at a rate of 0.375% per year, payable semi-annually in arrears on March 15 and September 15 of each year. The 2032 Notes will mature on March 15, 2032, unless earlier redeemed, repurchased by us, or converted pursuant to their terms.
The initial conversion rate is 5.3257 shares of common stock per $1,000 principal amounts of the 2032 Notes (which is equivalent to an initial conversion price of approximately $187.77 per share). The conversion rate is subject to adjustment upon the occurrence of certain events specified in the 2032 Indenture but will not be adjusted for any accrued and unpaid interest. In addition, upon the occurrence of a make-whole fundamental change (as defined in the 2032 Indenture) or our issuance of a notice of redemption, we will, in certain circumstances, increase the conversion rate by a number of additional shares for a holder that elects to convert the 2032 Notes in connection with such make-whole fundamental change or notice of redemption.
Prior to the close of business on the business day immediately preceding December 15, 2031, holders of the 2032 Notes may convert their 2032 Notes only under the following circumstances:
•during any fiscal quarter (and only during such fiscal quarter), if the last reported sale price of the common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of the applicable conversion price of the 2032 Notes, or $244.10, on each applicable trading day;
•during the five consecutive business day period after any five consecutive trading day period (the “2032 measurement period”) in which the trading price per $1,000 principal amounts of 2032 Notes for each trading day of the 2032 measurement period was less than 98% of the product of the last reported sale price of our common stock and the applicable conversion rate on each such trading day;
•if we call any or all of the 2032 Notes for redemption, at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date; or
•upon the occurrence of specified corporate events as specified in the 2032 Indenture.
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On or after December 15, 2031 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their 2032 Notes at any time. Upon conversion, we are required to satisfy our conversion obligation with respect to such converted 2032 Notes by paying cash equal to the principal amounts of such converted 2032 Notes and paying or delivering, as the case may be, cash, shares of common stock or a combination of cash and shares of common stock, at our election, with respect to any conversion value in excess thereof, if any.
We may redeem for cash all or any portion of the 2032 Notes, at our option (subject to the partial redemption limitation set forth in the 2032 Indenture), on or after March 20, 2029, if the last reported sale price of our common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading-day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which we provide notice of redemption at a redemption price equal to 100% of the principal amounts of the 2032 Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. No sinking fund is provided for the 2032 Notes. If we elect to redeem fewer than all of the outstanding 2032 Notes, at least $100.0 million aggregate principal amount of the 2032 Notes must be outstanding and not subject to redemption as of the redemption notice date. Upon the occurrence of a fundamental change (as defined in the 2032 Indenture), holders may require us to repurchase all or a portion of their 2032 Notes for cash at a price equal to 100% of the principal amount of the 2032 Notes to be repurchased, plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date. Upon conversion, we are required to satisfy our conversion obligation with respect to such converted 2032 Notes by paying cash equal to the principal amounts of such converted 2032 Notes and paying or delivering, as the case may be, cash, shares of common stock or a combination of cash and shares of common stock, at our election, with respect to any conversion value in excess thereof, if any.
As of August 14, 2026, we have not received any early conversion requests with respect to the 2032 Notes.
2032 Capped Call Options
In September 2025, in connection with the issuances of the 2032 Notes, we entered into privately negotiated capped call transactions (the “2032 Capped Call Options”) with certain financial institutions (the “2032 Capped Call Counterparties”). The 2032 Capped Call Options cover, subject to anti-dilution adjustments substantially similar to those applicable to the 2032 Notes, the number of shares of our common stock that initially underlie the 2032 Notes and are generally expected to reduce potential dilution to our common stock upon any conversion of 2032 Notes and/or offset any cash payments we would be required to make in excess of the principal amounts of converted 2032 Notes, as the case may be, with such reduction and/or offset subject to a cap. The cap price of the 2032 Capped Call Options was initially $268.24 per share, and is subject to certain adjustments under the terms of the 2032 Capped Call Options. If the market price per share of our common stock, as measured under the terms of the 2032 Capped Call Options, exceeds the cap price of the 2032 Capped Call Options, there would be dilution and/or there would not be an offset of any potential cash payments in excess of the principal amounts of converted 2032 Notes, in each case, to the extent that such market price exceeds the cap price of the 2032 Capped Call Options.
Each of the 2032 Capped Call Options was executed pursuant to a separate agreement entered into by us and each of the 2032 Capped Call Counterparties. The 2032 Capped Call Options are not part of the terms of the 2032 Notes and will not affect any holder’s rights under the 2032 Notes. Holders of the 2032 Notes will not have any rights with respect to the 2032 Capped Call Options. We concluded that the 2032 Capped Call Options met the criteria for equity classification because they were indexed to our common stock and we have the discretion to settle the 2032 Capped Call Options by us receiving shares or cash subsequent to March 20, 2029. As a result, the $102.0 million amount paid was recorded as a reduction to additional paid-in capital within our consolidated balance sheets as of June 27, 2026, along with the offsetting associated current tax impact.
We made a tax election to integrate the 2032 Notes and the 2032 Capped Call Options for federal income tax purposes pursuant to applicable U.S. Treasury Regulations. Accordingly, the $102.0 million gross cost of the purchased 2032 Capped Call Options will be deductible for income tax purposes as original issue discount interest over the term of the 2032 Notes. At inception, we recorded a deferred tax asset. During the interim periods of fiscal year 2026, the deferred tax asset was fully offset by a valuation allowance, resulting in no net impact to additional paid-in capital. Based on our year-end assessment of the realizability of our U.S. deferred tax assets, we concluded that the current-year deferred tax asset attributable to the 2032 Capped Call Options was more likely than not realizable. Accordingly, as of June 27, 2026, the deferred tax asset was recognized without a valuation allowance, and the corresponding $25.0 million deferred tax benefit was recorded as an increase to additional paid-in capital, consistent with the accounting for the underlying equity transaction.
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2029 Notes
On June 16, 2023, we issued $603.7 million in aggregate principal amount of 2029 Notes in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. The 2029 Notes are governed by an indenture between us and U.S. Bank Trust Company National Association, (as successor in interest to U.S. Bank National Association), as a trustee (the “2029 Indenture”). The 2029 Notes are unsecured, rank equally with all of our existing senior unsecured indebtedness, and do not contain any financial covenants, restrictions on dividends, incurrence of senior debt or other indebtedness, or the issuance or repurchase of securities by us.
The 2029 Notes bear interest at a rate of 1.50% per year, payable semi-annually in arrears on June 15 and December 15 of each year, beginning on December 15, 2023. The 2029 Notes will mature on December 15, 2029, unless earlier redeemed, repurchased by us, or converted pursuant to their terms.
The initial conversion rate is 14.3808 shares of common stock per $1,000 principal amount of the 2029 Notes (which is equivalent to an initial conversion price of approximately $69.54 per share). The conversion rate is subject to adjustment upon the occurrence of certain events specified in the 2029 Indenture, but will not be adjusted for accrued and unpaid interest. In addition, upon the occurrence of a make-whole fundamental change or our issuance of a notice of redemption, we will, in certain circumstances, increase the conversion rate by a number of additional shares for a holder that elects to convert the 2029 Notes in connection with such make-whole fundamental change or notice of redemption.
Prior to the close of business on the business day immediately preceding September 15, 2029, holders of the 2029 Notes may convert their 2029 Notes only under the following circumstances:
•during any fiscal quarter commencing after September 30, 2023 (and only during such fiscal quarter), if the last reported sale price of the common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% if the applicable conversion price, or $90.40, on each applicable trading day;
•during the five consecutive business day period after any five consecutive trading day period (the “2029 measurement period”) in which the trading price per $1,000 principal amount of 2029 Notes for each trading day of the 2029 measurement period was less than 98% of the product of the last reported sale price of our common stock and the applicable conversion rate on each such trading day;
•if we call any or all of the 2029 Notes for redemption, at any time prior to the close of business on the second business day immediately preceding the redemption date; or
•upon the occurrence of specified corporate events as specified in the 2029 Indenture.
On or after September 15, 2029 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their 2029 Notes at any time. Following our irrevocable settlement method election made on September 25, 2024, upon conversion, we are required to satisfy our conversion obligation with respect to such converted 2029 Notes by delivering cash equal to the principal amount of such converted 2029 Notes and cash, shares of common stock or a combination of cash and shares of common stock, at our election, with respect to any conversion value in excess thereof.
We may redeem for cash all or any portion of the 2029 Notes, at our option (subject to the partial redemption limitation set forth in the 2029 Indenture), on or after June 22, 2026, if the last reported sale price of our common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading-day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which we provide notice of redemption at a redemption price equal to 100% of the principal amount of the 2029 Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. No sinking fund is provided for the 2029 Notes. If we elect to redeem fewer than all of the outstanding 2029 Notes, at least $100.0 million aggregate principal amount of the 2029 Notes must be outstanding and not subject to redemption as of the redemption notice date. Upon the occurrence of a fundamental change (as defined in the 2029 Indenture), holders may require us to repurchase all or a portion of their 2029 Notes for cash at a price equal to 100% of the principal amount of the 2029 Notes to be repurchased, plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date.
Refer to debt conversions and equitizations discussions above for further details.
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2028 Notes
In March 2022, we issued $861.0 million in aggregate principal amount of 2028 Notes in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. The 2028 Notes are governed by an indenture between us and U.S. Bank Trust Company National Association (as successor in interest to U.S. Bank National Association), as a trustee (the “2028 Indenture”). The 2028 Notes are unsecured, rank equally with all of our existing senior unsecured indebtedness, and do not contain any financial covenants, restrictions on dividends, incurrence of senior debt or other indebtedness, or the issuance or repurchase of securities by us.
The 2028 Notes bear interest at a rate of 0.50% per year, payable semi-annually in arrears on June 15 and December 15 of each year, beginning on June 15, 2022. The 2028 Notes will mature on June 15, 2028, unless earlier redeemed, repurchased by us, or converted pursuant to their terms.
The initial conversion rate is 7.6319 shares of common stock per $1,000 principal amount of the 2028 Notes (which is equivalent to an initial conversion price of approximately $131.03 per share). The conversion rate is subject to adjustment upon the occurrence of certain events specified in the 2028 Indenture, but will not be adjusted for accrued and unpaid interest. In addition, upon the occurrence of a make-whole fundamental change or our issuance of a notice of redemption, we will, in certain circumstances, increase the conversion rate by a number of additional shares for a holder that elects to convert the 2028 Notes in connection with such make-whole fundamental change or notice of redemption.
Prior to the close of business on the business day immediately preceding March 15, 2028, holders of the 2028 Notes may convert their 2028 Notes only under the following circumstances:
•during any fiscal quarter (and only during such fiscal quarter), if the last reported sale price of the common stock for at least 20 trading days (whether or not consecutive) during the 30 consecutive trading days ending on the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% if the applicable conversion price, or $170.34 on each applicable trading day;
•during the five consecutive business day period after any five consecutive trading day period (the “2028 measurement period”) in which the trading price per $1,000 principal amount of the 2028 Notes for each trading day of the 2028 measurement period was less than 98% of the product of the last reported sale price of our common stock and the applicable conversion rate on each such trading day;
•if we call any or all of the 2028 Notes for redemption, at any time prior to the close of business on the second business day immediately preceding the redemption date; or
•upon the occurrence of specified corporate events as specified in the 2028 Indenture.
On or after March 15, 2028 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their 2028 Notes at any time. Following our irrevocable settlement method election made on September 25, 2024, upon conversion, we are required to satisfy our conversion obligation with respect to such converted 2028 Notes by delivering cash equal to the principal amount of such converted 2028 Notes and cash, shares of common stock or a combination of cash and shares of common stock, at our election, with respect to any conversion value in excess thereof.
We may redeem for cash all or any portion of the 2028 Notes, at our option (subject to the partial redemption limitation set forth in the 2028 Indenture), on or after June 20, 2025, if the last reported sale price of our common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading-day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which we provide notice of redemption at a redemption price equal to 100% of the principal amount of the 2028 Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. No sinking fund is provided for the 2028 Notes. If we elect to redeem fewer than all of the outstanding 2028 Notes, at least $100.0 million aggregate principal amount of the 2028 Notes must be outstanding and not subject to redemption as of the redemption notice date. Upon the occurrence of a fundamental change (as defined in the 2028 Indenture), holders may require us to repurchase all or a portion of their 2028 Notes for cash at a price equal to 100% of the principal amount of the 2028 Notes to be repurchased, plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date.
We initially bifurcated the principal amount of the 2028 Notes into liability and equity components. The liability component of the 2028 Notes was initially valued at $629.8 million based on the contractual cash flow discounted at an appropriate comparable market on the non-convertible debt borrowing rate at the date of issuance, which was 5.7%, with the equity component representing the residual amount of the proceeds of $231.2 million, which was recorded as a debt discount.
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Upon adoption of ASU 2020-06 in the first quarter of fiscal year 2023, our 2028 Notes were accounted for as a single liability, net of unamortized debt issuance costs.
Refer to debt conversions and equitizations discussions above for further details.
2026 Notes
In December 2019, we issued $1,050.0 million in aggregate principal amount of the 2026 Notes in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act. The 2026 Notes are governed by an indenture between us and U.S. Bank Trust Company National Association (as successor in interest to U.S. Bank National Association), as trustee (the “2026 Indenture”). We used approximately $196.0 million of the net proceeds of the offering to repay in full all amounts outstanding under our term loan facility, and a portion of the net proceeds of the offering to purchase approximately $200.0 million of our common stock concurrently with the pricing of the offering in privately negotiated transactions. The 2026 Notes are unsecured, rank equally with all of our existing senior unsecured indebtedness, and do not contain any financial covenants, restrictions on dividends, the incurrence of senior debt or other indebtedness, or the issuance or repurchase of securities by us.
The 2026 Notes bear interest at a rate of 0.50% per year, payable semi-annually in arrears on June 15 and December 15 of each year, beginning on June 15, 2020. The 2026 Notes will mature on December 15, 2026, unless earlier redeemed, repurchased by us, or converted pursuant to their terms.
The initial conversion rate is 10.0711 shares of common stock per $1,000 principal amount of the 2026 Notes (which is equivalent to an initial conversion price of approximately $99.29 per share). The conversion rate is subject to adjustment upon the occurrence of certain events specified in the 2026 Indenture, but will not be adjusted for accrued and unpaid interest. In addition, upon the occurrence of a make-whole fundamental change or our issuance of a notice of redemption, we will, in certain circumstances, increase the conversion rate by a number of additional shares set forth in the 2026 Indenture or a holder that elects to convert the 2026 Notes in connection with such make-whole fundamental change or notice of redemption.
Prior to the close of business on the business day immediately preceding September 15, 2026, holders of the 2026 Notes may convert their 2026 Notes only under the following circumstances:
•during any fiscal quarter (and only during such fiscal quarter), if the last reported sale price of the common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of the conversion price of the 2026 Notes, or $129.08 on each applicable trading day;
•during the five business day period after any five consecutive trading day period (the "2026 measurement period") in which the trading price per $1,000 principal amount of the 2026 Notes for each trading day of the 2026 measurement period was less than 98% of the product of the last reported sale price of our common stock and the conversion rate for the 2026 Notes on each such trading day;
•if we call any or all of the 2026 Notes for redemption, at any time prior to the close of business on the second business day immediately preceding the relevant redemption date; or
•upon the occurrence of specified corporate events as specified in the 2026 Indenture.
On or after September 15, 2026 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert the 2026 Notes at any time. Following our entry into the First Supplemental Indenture, dated as of September 25, 2024, to the 2026 Indenture, upon conversion, we are required to satisfy our conversion obligation with respect to such converted 2026 Notes by delivering cash equal to the principal amount of such converted 2026 Notes and cash, shares of common stock or a combination of cash and shares of common stock, at our election, with respect to any conversion value in excess thereof.
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We may redeem for cash, for all or any portion of the 2026 Notes, at our option, on or after December 20, 2023, if the last reported sale price of our common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading-day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which we provide a notice of redemption at a redemption price equal to 100% of the principal amount of the 2026 Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. No sinking fund is provided for the 2026 Notes. Upon the occurrence of a fundamental change (as defined in the 2026 Indenture), holders may require us to repurchase all or a portion of the 2026 Notes for cash at a price equal to 100% of the principal amount of the 2026 Notes to be repurchased, plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date.
We initially bifurcated the principal amount of the 2026 Notes into liability and equity components. The liability component of the 2026 Notes was valued at $734.8 million based on the contractual cash flows discounted at an appropriate comparable market non-convertible debt borrowing rate at the date of issuance of 5.8% with the equity component representing the residual amount of the proceeds of $315.2 million, which was recorded as a debt discount. Upon adoption of ASU 2020-06 in the first quarter of fiscal year 2023, our 2026 Notes were accounted for as a single liability, net of unamortized debt issuance costs.
Refer to debt inducement, conversions, and equitizations discussions above for further details.
Our convertible notes consisted of the following components as of the periods presented (in millions):
June 27, 20262026 Notes2028 Notes2029 Notes2032 NotesTotal
Principal$54.8 $179.6 $54.9 $1,265.0 $1,554.3 
Unamortized debt discount and debt issuance costs(0.1)(0.5)(0.2)(8.9)(9.7)
Net carrying amount of the liability component$54.7 $179.1 $54.7 $1,256.1 $1,544.6 
June 28, 20252026 Notes2028 Notes2029 Notes2032 NotesTotal
Principal$1,050.0 $861.0 $603.7 $— $2,514.7 
Unamortized debt discount and debt issuance costs(1.7)(3.3)(3.5)— $(8.5)
Net carrying amount of the liability component$1,048.3 $857.7 $600.2 $— $2,506.2 
The following table sets forth interest expense information related to our convertible notes for the periods presented (in millions):
June 27, 2026June 28, 2025June 29, 2024
Contractual interest expense$16.9 $18.6 $19.2 
Amortization of the debt discount and debt issuance costs3.5 3.0 14.6 
Total interest expense$20.4 $21.6 $33.8 
The future principal and interest payments related to our convertible notes are as follows as of June 27, 2026 (in millions):
Fiscal Years2026 Notes2028 Notes2029 Notes2032 NotesTotal
2027$54.8 $0.3 $0.4 $4.7 $60.2 
2028— 179.90.4 4.8 185.1 
2029— — 0.5 4.7 5.2 
2030— — 55.1 4.8 59.9 
2031— — — 4.7 4.7 
Thereafter— — — 1,269.8 1,269.8 
Total payments$54.8 $180.2 $56.4 $1,293.5 $1,584.9 
The principal balances of our convertible notes are reflected in the payment periods in the table above based on their respective contractual maturities.
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Term Loans
SMBC Term Loan
On August 9, 2024, we entered into a term loan agreement (the “SMBC 2029 Term Loan”) with Sumitomo Mitsui Banking Corporation (“SMBC”). The SMBC 2029 Term Loan provides an aggregate principal amount of 6.4 billion Japanese yen (“JPY”). The loan requires monthly principal payments of approximately 53.3 million JPY, from August 31, 2024 to June 30, 2029 and interest based on a fixed annual interest rate of 0.88%, with the remaining principal of approximately 3.3 billion JPY due on the loan maturity date of July 31, 2029. Under the loan agreement, we cannot prepay the outstanding loan without SMBC’s approval. In the event we prepay the outstanding loan with SMBC’s approval, we shall pay SMBC a settlement amount calculated pursuant to the terms of the loan agreement. The SMBC 2029 Term Loan is secured by the real estate owned in Sagamihara, Japan.
On December 18, 2025, we entered into another term loan agreement (the “SMBC 2026 Term Loan”) with SMBC. The SMBC 2026 Term Loan provides an aggregate principal amount of 7.5 billion JPY. The loan requires monthly principal payments of 125.0 million JPY and interest based on a fixed annual interest rate of 1.44%, with the remaining principal of approximately 6.1 billion JPY due on the loan maturity date of December 19, 2026, subject to repayment pitch of 60 months. Under the loan agreement, we cannot prepay the outstanding loan without SMBC’s approval. In the event we prepay the outstanding loan with SMBC’s approval, we shall pay SMBC a settlement amount calculated pursuant to the terms of the loan agreement. The SMBC 2026 Term Loan is secured by the real estate owned in Sagamihara, Japan.
The SMBC 2029 Term Loan and the SMBC 2026 Term Loan are collectively referred to as SMBC Term Loans. We have maintained a debt service coverage ratio of at least 1.2 for our Japan entity for fiscal year 2026 and maintained a U.S. dollar deposit account with a balance, translated into JPY, equal to or greater than the outstanding principal amount of the SMBC 2026 Term Loan both in accordance with the terms of the SMBC term loan agreements.
As of June 27, 2026, we had $74.8 million in principal amount outstanding on our SMBC Term Loans, of which the short-term portion of $46.8 million is recorded as current liabilities while the long-term portion of $28.0 million is recorded as long-term debt in our consolidated balance sheets.
Mizuho Term Loan
On September 20, 2024, we entered into a term loan agreement (the “Mizuho Term Loan”) with Mizuho Bank, Ltd. (“Mizuho”), in order to finance our planned manufacturing expansions. The Mizuho Term Loan provides for borrowings of 4.5 billion JPY with a 5-year term from the funding date of September 20, 2024. The loan requires quarterly principal payments of approximately 225.0 million JPY commencing on December 20, 2024 with the final payment on September 20, 2029. The Mizuho Term Loan bears interest at a fixed annual rate of 0.90%. The Mizuho Term Loan is secured by the real estate assets owned by NeoPhotonics Semiconductor GK. The Mizuho Term Loan agreement requires that we and certain domestic subsidiaries comply with covenants relating to customary matters, including obtaining approval from Mizuho prior to transferring, creating a security interest, or disposing of the collateral assets; obtaining approval from Mizuho prior to a business transfer, business acquisition, corporate reorganization or changes such as mergers, company splits, share exchanges or share transfers or capital structure changes; obtaining approval from Mizuho prior to changing our indirect ownership in Lumentum Japan, Inc; and obtaining approval from Mizuho prior to a distribution of dividends by Lumentum Japan, Inc. to its shareholders. In addition, under the Mizuho Term Loan, we maintain certain balance in U.S. dollar time and savings deposit accounts in accordance with the terms of the Mizuho Term Loan Agreement.
As of June 27, 2026, we had $18.0 million in principal amount outstanding on our Mizuho Term Loan, of which the short-term portion of $5.6 million is recorded as current liabilities while the long-term portion of $12.4 million is recorded as long-term debt in our consolidated balance sheets.
The SMBC Term Loans and the Mizuho Term Loan are collectively referred to as Japan Term Loans.
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Revolving Credit Facility
On December 19, 2025, we entered into a credit agreement (the “Credit Agreement”) with the lenders party thereto and Wells Fargo Bank, National Association, as administrative and collateral agent. The Credit Agreement provides for a senior secured revolving credit facility in an aggregate principal amount of $400.0 million, including a $23.0 million sublimit for the issuance of letters of credit. The Credit Agreement provides that we have the right at any time and from time to time to incur one or more incremental revolving commitments and/or incremental term loans up to an unlimited amount, subject to certain customary conditions precedent and other requirements. The proceeds of the loans under the Credit Agreement may be used for working capital and general corporate purposes.
Revolving loans under the Credit Agreement may be borrowed, repaid and reborrowed, without premium or penalty (subject to customary breakage costs), until their maturity date under the Credit Agreement, at which time all amounts borrowed must be repaid. Revolving loans under the Credit Agreement will mature on December 19, 2030, subject to earlier maturity on the date that is 91 days prior to the final scheduled maturity date of our existing outstanding convertible notes, if on such date, we are unable to satisfy certain liquidity and/or total net leverage requirements.
At our option, borrowings bear interest at either a base rate plus an applicable margin ranging from 0.50% to 1.50%, or a term Secured Overnight Financing Rate (“SOFR”) plus a margin ranging from 1.50% to 2.50%, in each case with such margin based on our secured net leverage ratio, as determined in accordance with the terms of the Credit Agreement. Interest is payable quarterly in arrears with respect to borrowings bearing interest at the alternate base rate or on the last day of an interest period, but at least every three months, with respect to borrowings bearing interest at a term SOFR rate. We are required to pay to the Administrative Agent for the account of each Lender a commitment fee on a quarterly basis in an amount equal to 0.15% to 0.35% (depending on our secured net leverage ratio) of unused availability under the revolving facility. We are also obligated to pay other fees customary for revolving credit facilities of this size and type.
The Credit Agreement contains customary representations, warranties, affirmative and negative covenants, and events of default. The negative covenants include, among others, restrictions on liens, investments, indebtedness, fundamental changes, restricted payments, transactions with affiliates and prepayments of subordinated debt, all subject to certain exceptions. In addition, the Credit Agreement contains financial covenants, tested at the end of each fiscal quarter, requiring us to maintain a secured net leverage ratio of less than or equal to 3.25:1.00, subject to a 0.50:1.00 step-up for four fiscal quarters in connection with a material acquisition, and an interest coverage ratio of no less than 3.00:1.00.
The obligations under the Credit Agreement are required to be guaranteed by certain of our material domestic subsidiaries and are secured by substantially all of our and subsidiary guarantors assets, subject to customary exceptions.
As of June 27, 2026, there were no borrowings outstanding under the revolving credit facility.
We incurred financing costs of about $2.4 million in connection with the revolving credit facility, which was presented as other non-current assets in our consolidated balance sheets and are amortized to interest expense over the term of the facility. As of June 27, 2026, the remaining unamortized financing costs was about $2.2 million.
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Note 11. Accumulated Other Comprehensive Income (Loss)
Our accumulated other comprehensive income (loss) consists of the accumulated net unrealized gains or losses on foreign currency translation adjustments, defined benefit obligations, and available-for-sale securities.
The changes in accumulated other comprehensive income (loss), net of tax, were as follows for the periods as presented (in millions):
Foreign currency translation adjustments, net of tax  (1)
Defined benefit obligations, net of tax (2)
Unrealized gain (loss) on available-for-sale securities, net of tax  (3)
Total
Balances as of July 1, 2023$10.4 $(0.4)$(5.9)$4.1 
Other comprehensive income (loss)(0.6)1.1 4.7 5.2 
Balances as of June 29, 2024$9.8 $0.7 $(1.2)$9.3 
Other comprehensive income (loss)0.1 (2.3)1.9 (0.3)
Balances as of June 28, 2025$9.9 $(1.6)$0.7 $9.0 
Other comprehensive income (loss)(0.3)3.0 (1.7)1.0 
Balances as of June 27, 2026$9.6 $1.4 $(1.0)$10.0 
(1) In fiscal year 2019, we established the functional currency for our worldwide operations as the U.S. dollar. Translation adjustments reported prior to fiscal year 2019 remain as a component of accumulated other comprehensive income in our consolidated balance sheets, until all or a part of the investment in the subsidiaries is sold or liquidated. In fiscal year 2023, we acquired IPG telecom transmission product lines. The functional currency of the Brazilian entities acquired as part of this acquisition was the local currency. In fiscal year 2026, we sold our Brazilian entities, and therefore, recognized the related accumulated translation adjustments to earnings.
(2) We evaluate the assumptions over the fair value of our defined benefit obligations annually and make changes as necessary. During fiscal years 2026, 2025 and 2024, our income (loss) on defined benefit obligations is presented net of tax of $0.6 million, nil, and $0.4 million, respectively.
(3) In fiscal years 2026, 2025 and 2024, our unrealized gain (loss) on available-for-sale securities is presented net of tax of $0.6 million, nil and $1.7 million, respectively.
Note 12. Restructuring and Related Charges
We have initiated various strategic restructuring actions primarily to reduce costs, consolidate our operations, rationalize the manufacturing of our products and align our business in response to market conditions and as a result of our acquisitions.
The following table summarizes the activities of restructuring and related charges during the periods presented (in millions):
Years Ended
June 27, 2026June 28, 2025June 29, 2024
Balance as of beginning of period$2.5 $11.1 $5.0 
Charges11.4 22.8 72.6 
Payments and other adjustments(11.5)(31.4)(66.5)
Balance as of end of period$2.4 $2.5 $11.1 
During the year ended June 27, 2026, we recorded restructuring and related charges of $11.4 million, primarily related to reduction in forces during the period in order to enhance operational efficiency and realign our investments toward the most critical initiatives.
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During the year ended June 28, 2025, we recorded restructuring and related charges of $22.8 million. This included $14.6 million of assets written off, including property, plant and equipment, right-of-use assets, prepayments and other current assets as well as charges for other contractual commitments associated with site closures, and $4.3 million of employee severance primarily due to efforts to consolidate our sites and focus on other market opportunities, including cloud and AI markets. In addition, we also recorded $3.0 million of charges related to the discontinuation of our in-house development of coherent Digital Signal Processors (“DSPs”) and Radio Frequency Integrated Circuits (“RFICs”).
During the year ended June 29, 2024, we recorded restructuring and related charges of $72.6 million. We discontinued our in-house development of coherent DSPs and RFICs. As a result, we recorded $35.8 million of restructuring and related charges during the fiscal fourth quarter of 2024, which includes $29.1 million write-off of IPR&D assets, as well as $6.7 million of contract exit costs and asset write-offs. The remaining $36.8 million of restructuring and related charges are primarily due to company-wide cost reduction initiatives, as well as our integration efforts to consolidate our manufacturing sites. We have shut down our factories in China which were acquired as part of the NeoPhotonics acquisition and are ramping up production of most of the related products at our Thailand facility.
Restructuring and related charges are presented in our consolidated statements of operations for the years ended June 27, 2026, June 28, 2025 and June 29, 2024.
Any changes in the estimates of executing our restructuring activities will be reflected in our future results of operations.
Note 13. Income Taxes
Our loss before income taxes consisted of the following (in millions):
Years Ended
June 27, 2026June 28, 2025June 29, 2024
Domestic$(8,018.7)$(174.4)$(219.6)
Foreign845.9 2.3 (186.1)
Loss before income taxes$(7,172.8)$(172.1)$(405.7)
Our income tax (benefit) provision consisted of the following (in millions):
Years Ended
June 27, 2026June 28, 2025June 29, 2024
Federal:
      Current$0.2 $(8.4)$(10.6)
      Deferred(226.9)— 124.0 
(226.7)(8.4)113.4 
State:
      Current1.4 1.8 1.3 
      Deferred(69.6)— (8.0)
(68.2)1.8 (6.7)
Foreign:
      Current55.5 55.5 52.1 
      Deferred1.7 (246.9)(18.0)
57.2 (191.4)34.1 
Total income tax (benefit) provision$(237.7)$(198.0)$140.8 
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The following table reconciles the income tax benefit recorded for fiscal year 2026 to the amount computed by applying the U.S. federal statutory income tax rate of 21% to loss before income taxes after the adoption of ASU 2023-09 (in millions, except percentages):
Year Ended June 27, 2026
AmountPercentage
Income tax benefit computed at U.S. federal statutory rate$(1,506.3)21.0 %
State and local income tax, net of federal income tax effect (1)
(70.3)1.0 
Foreign tax effects
    Switzerland
        Income not subject to local corporate income tax(138.1)1.9 
        Other(2.2)0.0 
    Other foreign jurisdictions7.5 (0.1)
Effects of cross-border tax laws
    GILTI100.6 (1.4)
    Other(23.0)0.3 
Tax credits(37.8)0.5 
Changes in valuation allowances(181.4)2.5 
Nontaxable or nondeductible items
    Nondeductible loss on extinguishment of debt1,628.6 (22.7)
    Other(36.1)0.5 
Changes in unrecognized tax benefits14.5 (0.2)
Other adjustments6.3 (0.1)%
Total income tax benefit$(237.7)3.2 %

(1) The state and local jurisdictions that contribute to the majority (greater than 50%) of the tax effect in this category include California and Georgia.
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Prior to our adoption of ASU 2023-09, the reconciliation of the U.S. federal statutory income tax rate to our effective income tax rate for fiscal year 2025 and 2024 was presented as follows (in millions):
Years Ended
June 28, 2025June 29, 2024
Income tax provision computed at federal statutory rate$(36.1)$(85.2)
Foreign rate differential(49.9)58.9 
Change in valuation allowance(161.5)150.1 
Tax credits(2.2)(1.8)
Stock-based compensation22.3 17.8 
Permanent items0.3 (3.2)
Transaction costs— 1.3 
Subpart F and GILTI22.4 0.2 
Unrecognized tax benefits8.5 11.7 
Change in Tax Rates0.5 (9.9)
BEAT
— — 
Audit settlement(4.4)— 
State taxes1.9 — 
Other0.2 0.9 
Total income tax (benefit) provision$(198.0)$140.8 
Effective tax rate115.04 %(34.71)%
Our benefit for income taxes for fiscal year 2026 differs from the 21% U.S. statutory rate primarily due to the non-deductible loss on debt extinguishment and the income tax expense on U.S. income inclusions from GILTI and Subpart F, partially offset by the income tax benefit associated with the release of valuation allowances on certain U.S. deferred tax assets.
Our benefit for income taxes for fiscal year 2025 differs from the 21% U.S. statutory rate primarily due to the income tax benefit associated with the release of a valuation allowance on our U.K. deferred tax assets, earnings of our foreign subsidiaries being taxed at rates that differ from the U.S. statutory rate, partially offset by the income tax expense from U.S. income inclusions from Subpart F and GILTI, non-deductible stock-based compensation and changes in unrecognized tax benefits.
Our provision for income taxes for fiscal year 2024 differs from the 21% U.S. statutory rate primarily due to the income tax expense associated with the recognition of a valuation allowance on our U.S. federal and state deferred tax assets, earnings of our foreign subsidiaries being taxed at rates that differ from the U.S. statutory rate and non-deductible stock-based compensation. Additionally, our provision for income taxes includes changes in unrecognized tax benefits, partially offset by the income tax benefit from a change in the applicable statutory income tax rate in certain jurisdictions.
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The components of our net deferred taxes consisted of the following (in millions):
Years Ended
June 27, 2026June 28, 2025
Gross deferred tax assets:
      Intangibles$22.8 $20.3 
      Tax credit carryforwards149.1 143.2 
      Net operating loss carryforwards187.4 232.1 
      Inventories9.8 14.9 
      Accruals and reserves42.7 28.1 
      Fixed assets22.6 17.2 
      Capital loss carryforwards13.7 11.2 
      Capitalized and unclaimed R&D expenditure 239.5 178.1 
      Convertible notes22.1 — 
      Stock-based compensation7.5 8.9 
      Lease liabilities7.1 7.5 
      Other1.0 2.4 
      Gross deferred tax assets725.3 663.9 
      Valuation allowance(189.0)(440.8)
Deferred tax assets536.3 223.1 
Gross deferred tax liabilities:
      Intangible amortization(3.0)(10.5)
      Right-of-use assets(5.9)(5.8)
      Inventories(3.0)(3.6)
      Other(0.6)(0.1)
Deferred tax liabilities(12.5)(20.0)
Total net deferred tax assets$523.8 $203.1 
We regularly assess our ability to realize our deferred tax assets on a quarterly basis and will establish a valuation allowance if it is more-likely-than-not that some portion of the deferred tax assets will not be realized. We weigh all available positive and negative evidence, including our earnings history and results of recent operations, reversals of deferred tax liabilities, projected future taxable income, and tax planning strategies. In fiscal year 2026, after considering both positive and negative evidence, we determined that there is sufficient objectively verifiable positive evidence to conclude that it is more-likely-than-not that our U.S. deferred tax assets are realizable in the future. As a result, we released a valuation allowance against such deferred tax assets except for the federal foreign tax credit carryforwards and California research and development credit carryforwards, resulting in an income tax benefit of $236.3 million.
We continue to maintain our valuation allowance on Canada deferred tax assets, and a partial valuation allowance on our U.K. deferred tax asset. The total valuation allowance against our deferred tax assets decreased by $251.7 million in fiscal year 2026. We will continue to assess the realizability of our remaining deferred tax assets and may increase or decrease our valuation allowance in the future. Any such change will be recognized as a component of the provision for income taxes in the period in which the change in assessment occurs.
As of June 27, 2026, we had federal, state and foreign net operating loss carryforwards of $100.1 million, $176.4 million, and $686.2 million respectively. These carryforwards will begin to expire in the fiscal year ending 2027. The federal and foreign tax attributes carried forward are subject to various rules which impose limitations on the utilization. Additionally, we have federal, state, and foreign research and other tax credit carryforwards of $52.8 million, $99.5 million, and $34.5 million, respectively. The federal credits will begin to expire in the fiscal year ending 2027 and California credits can be carried forward indefinitely. The foreign tax credits will begin to expire in the fiscal year ending 2027. Our U.S. federal and state net operating loss and credit carryforwards are subject to annual limitations due to ownership change provisions of Section 382 of the Internal Revenue Code and similar state provisions.
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We have certain tax incentives with respect to our operations in China. These tax incentives require compliance with certain conditions and have expired at various dates through calendar year 2025. In fiscal year 2026, 2025 and 2024, the impact of these tax incentives reduced our income tax expense by $0.0 million, or $0.00 per share, $0.5 million, or $0.01 per share, and $3.1 million or $0.05 per share respectively.
Certain of our Thailand operations are eligible for corporate income tax exemptions under incentives granted by the Thailand Board of Investment (“BOI”). During fiscal year 2026, we concluded that we satisfied the substantive requirements to qualify for exemptions relating to two BOI-promoted projects for fiscal year 2025, and three BOI-promoted projects for fiscal year 2026. In fiscal years 2026, 2025 and 2024, the impact of these tax incentives reduced our income tax expense by $1.9 million, or 0.03 per share; $1.9 million, or 0.03 per share; and $0.0 million, or $0.00 per share respectively.
Current U.S. tax law generally provides greater flexibility for us to access and utilize our cash held by certain of our foreign subsidiaries. We intend to repatriate all or a portion of the earnings of our subsidiaries in the Cayman Islands, the British Virgin Islands and Hong Kong as wells as certain subsidiaries in China and Japan and intend to indefinitely reinvest the earnings of our other foreign subsidiaries. Accordingly, U.S. income taxes and foreign withholding taxes have not been provided on approximately $44.1 million of undistributed earnings of the foreign subsidiaries for which we have asserted indefinite reinvestment. If those earnings were repatriated, we estimate that approximately $4.7 million of additional foreign withholding taxes would be incurred before consideration of any foreign tax credits or deductions that may be available to reduce U.S. income tax liabilities.
The aggregate changes in the balance of our unrecognized tax benefits between June 28, 2025 and June 27, 2026 are as follows (in millions):
Balance as of July 1, 2023$113.9 
Increases based on tax positions related to prior year19.6 
Decreases based on tax positions related to prior year(9.4)
Decreases related to Statute of Limitations(24.8)
Additions based on tax positions related to current year7.3 
Increases due to acquisition
9.1 
Balance as of June 29, 2024$115.7 
Increases based on tax positions related to prior year10.4 
Decreases based on tax positions related to prior year(4.9)
Decreases related to Statute of Limitations(13.6)
Additions based on tax positions related to current year14.8 
Increases due to acquisition
4.4 
Decreases due to audit settlement(13.9)
Decreases due to reclass(14.3)
Balance as of June 28, 2025$98.6 
Increases based on tax positions related to prior year1.1 
Decreases based on tax positions related to prior year(2.5)
Decreases related to Statute of Limitations(4.8)
Additions based on tax positions related to current year16.2 
Decrease due to divestitures(0.2)
Balance as of June 27, 2026$108.4 
As of June 27, 2026, we had $93.8 million of unrecognized tax benefits, which, if recognized, would affect the effective tax rate. We are subject to examination of income tax returns by various domestic and foreign tax authorities. The timing of resolutions and closures of tax audits is highly unpredictable. Although it is possible that certain tax audits may be concluded within the next 12 months, we cannot reasonably estimate the impact to tax expense and net income from tax exams that could be resolved or closed within next 12 months. However, we believe that we have adequately provided under GAAP for potential audit outcomes. Subject to audit timing and uncertainty, we expect the amount of unrecognized tax benefit that would become recognized due to expiration of the statute of limitations and affect the effective tax rate to be $4.5 million over the next 12 months.
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Our policy is to recognize accrued interest and penalties related to unrecognized tax benefits within the income tax provision. The amount of interest and penalties accrued as of June 27, 2026 and June 28, 2025 were $14.8 million and $12.5 million, respectively.
The major tax jurisdictions where we file tax returns are the U.S. federal government, the state of California, Japan, the United Kingdom, Thailand, China and Canada. As of June 27, 2026, our fiscal years 2012 to 2025 tax returns are open to potential examination in one or more jurisdictions. In addition, certain net operating loss and credit carryforwards may extend the ability of the tax authorities to examine our tax returns beyond the regular limits.
The amounts of cash income taxes paid by us were as follows (in millions):
Year Ended
June 27, 2026
Federal$12.3 
State and Local1.2 
Foreign
    Thailand12.2 
    Switzerland11.0 
    Japan4.6 
    China4.5 
    All other foreign 0.9 
Income taxes, net of amounts refunded$46.7 
Note 14. Equity
Series A Convertible Preferred Stock
On March 2, 2026, we completed the issuance and sale of approximately 2.9 million shares of our Series A Convertible Preferred Stock, par value $0.001 per share (the “Preferred Stock”) to NVIDIA Corporation (“NVIDIA”), in a private placement pursuant to a Securities Purchase Agreement. The shares of Preferred Stock were sold at a price of $695.31 per share for an aggregate purchase price of $2.0 billion in cash. The Preferred Stock has the following terms which are set forth in the Certificate of Designation filed with the Secretary of State of the State of Delaware (the “Certificate of Designation”):
Conversion. The Preferred Stock will convert on a one-for-one basis into shares of our common stock (i) at the option of the holder, provided, that, no holder may exercise this conversion right until the expiration or termination of the applicable waiting period (or any extension thereof) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder or (ii) automatically immediately before the closing of a qualified sale. A qualified sale is defined as the bona fide sale of the Preferred Stock to the Company or a non-affiliate of the holder.
Dividends. Each holder of Preferred Stock will be entitled to receive dividends in the same manner as holders of our common stock, as determined on an as-converted basis, assuming all outstanding shares of Preferred Stock have converted pursuant to the terms of the Certificate of Designation as of immediately prior to the record date of the applicable dividend.
Voting Rights. Other than with respect to the election of directors, for which the Preferred Stock will not be entitled to vote, holders of Preferred Stock will vote together with holders of our common stock on an as-converted basis. We may not alter or change adversely the powers, preferences or rights of the Preferred Stock or alter or amend the Certificate of Designation without the affirmative vote or consent of a majority of the outstanding shares of Preferred Stock.
Dissolution, Liquidation or Winding Up. In connection with a dissolution, liquidation or winding up of the Company, distributions to our stockholders shall be made among the holders of Preferred Stock and our common stock pro rata in proportion to number of shares held by each such holder. All shares of Preferred Stock shall be treated as if they had been converted to our common stock pursuant to the terms of the Certificate of Designation immediately prior to such event.
No Preemptive or Redemption Rights. The holders of Preferred Stock have no preemptive or redemption rights.
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Description of Lumentum Stock-Based Benefit Plans
Equity Incentive Plan
We adopted the 2015 Equity Incentive Plan (the “2015 Plan”) in connection with our separation from JDS Uniphase Corporation (“JDSU” and now, Viavi Solutions Inc.) in July 2015. The 2015 Plan provided for the grant of incentive stock options, within the meaning of Section 422 of the Internal Revenue Code, to our employees and any parent and subsidiary corporations’ employees, and for the grant of non-statutory stock options (“stock options”), restricted stock awards (“RSAs”), restricted stock units (“RSUs”), stock appreciation rights (“SARs”), performance units (“PSUs”) and performance shares to our employees, directors and consultants and any parent or subsidiary corporations’ employees and consultants.
In November 2023, we adopted and assumed the Amended and Restated Share Option Scheme of Cloud Light Optoelectronics Limited (the “Cloud Light Scheme” and together with the 2015 Plan, the “Prior Plans”) in connection with the Cloud Light acquisition. The Cloud Light Scheme provides for the grant of stock options, RSAs, RSUs, SARs, and performance shares to eligible employees and other service providers.
In February 2025, our board of directors approved the 2025 Inducement Equity Incentive Plan (the “Inducement Plan”) in accordance with Listing Rule 5635(c)(4) of the corporate governance rules of the Nasdaq Stock Market, which became effective in February 2025. The Inducement Plan has substantially the same terms and conditions as the 2015 Plan, however, the Inducement Plan may only be used for grants to new employees and not for existing employees, executives, directors or consultants. The Inducement Plan provides for the grant of stock options, RSAs, RSUs, SARs, PSUs and performance shares to eligible employees and other service providers.
In November 2025, our stockholders approved the 2025 Equity Incentive Plan (the “2025 Plan”), under which the number of shares of common stock reserved for issuance was 3.2 million shares plus up to 3.9 million shares subject to awards granted under Prior Plans that, after the effective date of the 2025 Plan: (x) are forfeited, canceled or expire (whether voluntarily or involuntarily) or settled in cash, or (y) issued under the Prior Plans pursuant to an award that is forfeited, or repurchased by us as unvested, for an amount not greater than the original purchase price. The 2025 Plan became effective upon receiving stockholder approval. Upon the effective date of the 2025 Plan, the 2015 Plan and the Cloud Light Scheme terminated and no further grants will be made thereunder, but such plans continue to govern the terms of outstanding awards previously granted under such plans. The 2025 Plan has substantially the same terms and conditions as the 2015 Plan. The 2015 Plan, the Inducement Plan, the Cloud Light Scheme and the 2025 Plan are collectively referred to as the “Equity Incentive Plans.”
As of June 27, 2026, we had 3.0 million shares subject to stock options, restricted stock units, and performance stock units issued and outstanding under the Equity Incentive Plans. Restricted stock units and performance stock units have vesting that is performance-based, market-based and time-based or any combination thereof, and are expected to vest within four years. The exercise price for stock options is equal to the fair value of the underlying stock at the date of grant. We issue new shares of common stock upon exercise of stock options. Options generally have a vesting period of three years. As of June 27, 2026, 3.4 million shares of common stock under the Equity Incentive Plans were available for grant.
Stock Options
We granted certain employees with stock options, the vesting of which is based on the requisite service requirement and expected to vest within three years. We calculate the fair value of stock options using the Black-Scholes option-pricing model, which requires us to make estimates of assumptions such as expected volatility, expected term, risk-free interest rate, expected dividend yield, and forfeiture rates. We issue new shares of common stock upon exercise of stock options.
Restricted Stock Units
Restricted stock units (“RSUs”) are grants of shares of our common stock, the vesting of which is based on the requisite service requirement. Generally, our RSUs are subject to forfeiture and are expected to vest within four years. For annual refresh grants, RSUs generally vest ratably on an annual, or combination of annual and quarterly, basis over three years.
During fiscal year 2026, our board of directors approved grants of 1.1 million shares, which primarily vest over three years. The fair value of these grants is based on the closing market price of our common stock on the date of grant.
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Performance Stock Units
PSUs under the Equity Incentive Plans are grants of shares of our common stock that vest upon the achievement of certain performance and service conditions. For PSUs with performance-based conditions, the fair value of these grants is based on the closing market price of our common stock on the date of grant, and we begin recognizing compensation expense when we conclude that it is probable that the performance conditions will be achieved. We reassess the probability of vesting at each reporting period and adjust our compensation cost based on this probability assessment. For PSUs with market-based conditions, the fair value of these grants is estimated using a Monte-Carlo simulation model, and the compensation expense is recognized ratably over the requisite service period regardless of whether or not the market condition is satisfied, provided the requisite service is rendered. Our PSUs are subject to risk of forfeiture until performance and service conditions are satisfied and generally vest within three years.
During fiscal year 2026, our board of directors granted 0.1 million PSUs with an aggregate grant date fair value of $15.3 million to certain executive officers and senior management. These PSUs will vest subject to the achievement of earnings per share targets, as well as service conditions, over three years. The number of shares may be increased or decreased based on the results of these measurement targets ranging between 0% and 200% in accordance with the terms established at the date of grant. In addition, the board of directors also approved a grant of 0.1 million PSUs with an aggregate grant date fair value of $36.6 million to certain executive officers and senior management. These PSUs will vest subject to the achievement of our total shareholder return (or “TSR”) relative to specified peer group, as well as service conditions, over three years. The number of shares that ultimately vest may be increased or decreased based on the results of these measurement targets ranging between 0% and 200% in accordance with the terms established at the date of grant. We estimated the grant date fair value of these PSU awards using a Monte-Carlo simulation model, which was calculated at $282.85 per share.
Stock-based compensation expense related to PSUs are categorized as AIP PSUs, TSR PSUs and Other PSUs. AIP PSUs relates to the shares granted to executive and non-executive employees as part of our Annual Incentive Plan (“AIP PSUs”) during fiscal year 2025, which were subject to performance targets and service conditions and vested in August 2025. TSR PSUs relate to shares granted to certain executive officers and senior management, which will vest subject to the achievement of our TSR relative to specified peer group while Other PSUs relate to shares granted to certain executive officers and senior management, which are subject to financial performance targets (such as revenue and EPS) and service conditions. Refer to the table below for a presentation of stock-based compensation expense by equity awards for more details.
Employee Stock Purchase Plan
The ESPP provides eligible employees with the opportunity to acquire an ownership interest in us through periodic payroll deductions and provides a 15% purchase price discount as well as a 6-month look-back period. The ESPP is structured as a qualified employee stock purchase plan under Section 423 of the Internal Revenue Code of 1986, as amended. The ESPP will terminate upon the date on which all shares available for issuance have been sold. Of the 3.0 million shares authorized under the 2015 Purchase Plan, 0.3 million shares remained available for issuance as of June 27, 2026.
Stock-Based Compensation
The impact on our results of operations of recording stock-based compensation by function during the periods presented was as follows (in millions):
Years Ended
June 27, 2026June 28, 2025June 29, 2024
Cost of sales$39.5 $36.9 $31.7 
Research and development38.8 43.3 38.1 
Selling, general and administrative91.9 97.0 59.0 
Total stock-based compensation$170.2 $177.2 $128.8 
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Our stock-based compensation by equity awards for the periods presented were as follows (in millions):
Years Ended
June 27, 2026June 28, 2025June 29, 2024
RSUs$106.5 $101.8 $114.3 
   AIP PSUs4.8 29.8 0.8 
   TSR PSUs17.1 3.2 — 
   Other PSUs26.1 31.6 5.8 
Total PSUs48.0 64.6 6.6 
Options4.6 6.1 3.3 
ESPP6.1 4.9 4.7 
Sub-total165.2 177.4 128.9 
Change in stock-based compensation capitalized to inventory5.0 (0.2)(0.1)
Total stock-based compensation$170.2 $177.2 $128.8 
Stock-based compensation for fiscal years 2026, 2025 and 2024 includes $48.0 million, $64.6 million and $6.6 million, respectively, of expenses related to PSUs. The amount of stock-based compensation expense recognized in any one period related to PSUs with performance-based conditions can vary based on the achievement or anticipated achievement of the performance conditions. If the performance conditions are not met or not expected to be met, no compensation expense would be recognized on the underlying PSUs, and any previously recognized compensation expense related to those PSUs would be reversed.
During the year ended June 28, 2025, the total PSU expense of $64.6 million includes $18.2 million of additional stock-compensation expense resulting from modifications. On February 2, 2025, we and our former President and Chief Executive Officer mutually agreed to modify the terms of previously granted equity awards by changing the level of remaining service condition required for vesting. In accordance with ASC 718, Compensation - Stock Compensation, we accounted for the change as a modification as we determined the remaining service conditions were non-substantive.
Approximately $9.6 million and $14.6 million of stock-based compensation was capitalized to inventory as of June 27, 2026 and June 28, 2025, respectively.
Total income tax benefit associated with stock-based compensation recognized in our consolidated statements of operations during the years presented was as follows (in millions):
Years Ended
June 27, 2026June 28, 2025June 29, 2024
Income tax benefit associated with stock-based compensation$72.1 $2.5 $7.5 
The table below summarizes the unrecognized stock-based compensation cost related to unvested shares and the weighted-average period over which it is expected to be recognized as of June 27, 2026:
Unrecognized stock-based compensation (in millions)
Weighted-average period
(in years)
RSUs$167.7 1.7
PSUs72.8 2.0
Stock options1.4 0.4
ESPP4.0 0.4
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Stock Award Activity
The following table summarizes our awards activity in fiscal years 2026, 2025 and 2024 (in millions, except per share amounts):
Stock OptionsRestricted Stock UnitsPerformance Stock Units
Number of SharesWeighted-Average Exercise Price per ShareNumber of SharesWeighted-Average Grant Date Fair Value per ShareNumber of SharesWeighted-Average Grant Date Fair Value per Share
Balance as of July 1, 2023— $— 2.6 $85.0 0.6 $89.1 
Replacement Awards Issued1.1 $8.0 — — — — 
Granted— — 2.0 52.2 0.7 52.8 
Vested/Exercised— 8.2 (1.3)85.7 (0.1)87.7 
Canceled/Forfeited— — (0.6)68.7 (0.3)78.7 
Balance as of June 29, 20241.1 $8.0 2.7 $62.5 0.9 $65.5 
Granted— — 2.0 60.2 1.3 60.5 
Vested/Exercised(0.5)7.8 (1.7)64.4 (0.1)83.5 
Canceled/Forfeited— — (0.4)60.3 (0.5)61.4 
Balance as of June 28, 20250.6 $8.1 2.6 $59.9 1.6 $61.0 
Granted— $— 1.1 160.9 0.2 122.4 
Vested/Exercised(0.4)$8.2 (1.5)61.9 (0.9)57.2 
Canceled/Forfeited— $— (0.2)71.6 (0.1)82.2 
Balance as of June 27, 20260.2 $8.1 2.0 $114.6 0.8 $84.0 
A summary of awards available for grant for fiscal years 2026, 2025 and 2024 is as follows (in millions):
Awards Available for Grant
Balance as of July 1, 20232.7 
Authorized in connection with Cloud Light acquisition1.5 
Replacement options in connection with Cloud Light acquisition(1.1)
Authorized3.0 
Granted(2.7)
Canceled/Forfeited0.9 
Balance as of June 29, 20244.3 
Authorized0.7 
Granted(3.3)
Canceled/Forfeited0.9 
Balance as of June 28, 20252.6 
Authorized3.2 
Removed(1.4)
Granted(1.3)
Canceled/Forfeited0.3 
Balance as of June 27, 20263.4 
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Employee Stock Purchase Plan Activity
The ESPP expense for fiscal years 2026, 2025 and 2024 was $6.1 million, $4.9 million, and $4.7 million, respectively. The expense related to the ESPP is recorded on a straight-line basis over the relevant subscription period. There were 0.1 million, 0.3 million, and 0.4 million shares issued to employees through the ESPP during fiscal years 2026, 2025 and 2024, respectively.
We estimate the fair value of the ESPP shares on the date of grant using the Black-Scholes option-pricing model. The assumptions used to estimate the fair value of the ESPP shares during the periods presented were as follows:
June 27, 2026June 28, 2025
Expected term (years)0.50.5
Expected volatility69.4 %69.8 %
Risk-free interest rate3.67 %4.22 %
Dividend yield— %— %

Note 15. Employee Retirement Plans
Defined Contribution Plans
In the United States, we sponsor the Lumentum 401(k) Retirement Plan (the “401(k) Plan”), a defined contribution plan under the Employee Retirement Income Security Act of 1974 (“ERISA”), which provides retirement benefits for its eligible employees through tax deferred salary deductions. The 401(k) Plan allows employees to contribute up to 50% of their annual compensation, with contributions limited to $24,500 (or $32,500 for employees over 50 years of age) in calendar year 2026 as set by the Internal Revenue Service. Employees are eligible for matching contributions after completing 180 days of service. Our match is contributed on a per-pay-period basis and is based on employees’ before-tax contributions and compensation each pay period. All matching contributions are made in cash and vest immediately under the 401(k) Plan. In fiscal years 2026, 2025 and 2024, our contribution expense to the 401(k) Plan was $3.3 million, $2.7 million, and $3.8 million, respectively.
We also have defined contribution plans in most of the other countries in which we operate, either as required by statutory law or as provided by our supplemental offering. Our contribution expense to all defined contribution plans outside the United States were $16.5 million, $11.4 million, and $7.4 million for fiscal years 2026, 2025 and 2024, respectively.
Defined Benefit Plans
We sponsor defined benefit pension plans covering employees in Japan, Switzerland and Thailand. Pension plan benefits are based primarily on participants’ compensation and years of service credited as specified under the terms of each country’s plan. Employees are entitled to a lump sum benefit upon retirement or upon certain instances of termination. The funding policy is consistent with the local requirements of each country.
We account for our defined benefit obligations in accordance with the authoritative guidance which requires us to record our obligation to the participants, as well as the corresponding net periodic cost. We determine our obligation to the participants and our net periodic cost using actuarial valuations provided by third-party actuaries. As of June 27, 2026, our projected benefit obligations, net, in Japan, Switzerland and Thailand were $2.3 million, $0.3 million and $5.6 million, respectively. They were recorded in our consolidated balance sheets as accrued payroll and related expenses for the short-term portion while other non-current liabilities for the long-term portion, and represent the total projected benefit obligation (“PBO”) less the fair value of plan assets.
As of June 27, 2026, the defined benefit plans in Switzerland were partially funded, while the defined benefit plans in Japan and Thailand were unfunded.
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The change in the benefit obligations of pension plans in Japan, Switzerland, and Thailand, and the change in plan assets in Switzerland were as follows (in millions):
June 27, 2026June 28, 2025
Change in projected benefit obligation:
  Benefit obligation at beginning of year$29.6 $24.5 
     Service cost2.3 1.7 
     Interest cost0.4 0.5 
     Plan participants’ contributions0.1 0.8 
     Actuarial (gains) losses (1)
(0.9)3.0 
     Curtailments(1.0)— 
     Net benefits payment(3.5)(2.0)
     Settlements— (1.6)
     Plan amendments— (0.2)
     Foreign exchange impact(0.6)2.9 
  Benefit obligation at end of year$26.4 $29.6 
Change in plan assets:
  Fair value of plan assets at beginning of year$17.8 $14.9 
     Actual return on plan assets2.8 1.1 
     Employer contribution0.5 2.8 
     Plan participants’ contribution0.1 0.8 
     Net benefits payment(3.4)(2.0)
     Settlements— (1.6)
     Foreign exchange impact(0.3)1.8 
  Fair value of plan assets at end of year$17.5 $17.8 
Funded status (2)
$(8.9)$(11.8)
Changes in benefit obligations and plan assets recognized in other comprehensive income:
     Prior service cost$0.1 $— 
     Amortization of accumulated net actuarial gain(0.1)— 
     Gain recognized due to curtailment(0.9)— 
     Net actuarial loss (gain)$(3.1)$2.4 
     Loss recognized due to settlement0.3 (0.4)
$(3.7)$2.0 
Accumulated benefit obligation$20.9 $23.2 
(1) Actuarial losses are primarily driven by changes in discount rates.
(2) The current portion of the projected benefit obligation is $1.0 million and $0.9 million, respectively, as of June 27, 2026 and June 28, 2025, which was recorded under accrued payroll and related expenses in the consolidated balance sheets. The non-current portion of the projected benefit obligation is $7.2 million and $11.0 million, respectively, as of June 27, 2026 and June 28, 2025, which was recorded under other non-current liabilities in the consolidated balance sheets. Refer to “Note 7. Balance Sheet Details.”

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Net periodic pension costs in Japan, Switzerland and Thailand include the following components for the periods presented (in millions):
Years Ended
June 27, 2026June 28, 2025June 29, 2024
Service cost$2.3 $1.7 $1.9 
Interest cost0.4 0.5 0.4 
Amortization of prior service cost(0.1)(0.1)(0.1)
Expected return on plan assets(0.5)(0.5)(0.4)
Curtailment gain(0.1)— — 
Amortization of net loss0.1 — — 
Settlement (gain) losses (0.2)0.4 0.1 
Net periodic pension cost$1.9 $2.0 $1.9 
Assumptions
Underlying both the calculation of the projected benefit obligation and net periodic cost are actuarial valuations. These valuations use participant-specific information such as salary, age and assumptions about interest rates, compensation increases and other factors. At a minimum, we evaluate these assumptions annually and make changes as necessary.
The discount rate reflects the estimated rate at which the pension benefits could be effectively settled. In developing the discount rate, we consider the yield available on an appropriate AA or AAA corporate bond index, adjusted to reflect the term of the plan’s liabilities.
The expected return on assets was estimated by using the weighted average of the real expected long-term return (net of inflation) on the relevant classes of assets based on the target asset mix and adding the chosen inflation assumption.
The following table summarizes the weighted-average assumptions used to determine net periodic cost and benefit obligation for our defined benefit plans in Japan, Switzerland and Thailand:
Years Ended
June 27, 2026June 28, 2025
Assumptions used to determine net periodic cost:
Discount rate1.6 %2.0 %
Expected long-term return on plan assets3.0 %3.0 %
Salary increase rate3.9 %3.9 %
Assumptions used to determine benefit obligation at end of year:
Discount rate1.7 %1.3 %
Salary increase rate2.9 %3.0 %
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Fair Value Measurement of Plan Assets
The following table sets forth the plan assets of our defined benefit plan in Switzerland at fair value and the percentage of assets allocations as of June 27, 2026 and June 28, 2025 (in millions, except percentage data):
Fair value measurement as of
June 27, 2026
Target allocationTotal Percentage of plan assetQuoted prices in active markets for identical assets
(Level 1)		Significant other observable inputs
(Level 2)
Assets:
     Global equity37 %$6.5 37 %$— $6.5 
     Fixed income25 %4.2 24 %— 4.2 
     Alternative investment14 %2.3 13 %— 2.3 
     Cash1 %0.3 2 %0.3 — 
     Other assets23 %4.2 24 %— 4.2 
  Total Assets100 %$17.5 100 %$0.3 $17.2 
Fair value measurement as of
June 28, 2025
Target allocationTotalPercentage of plan assetQuoted prices in active markets for identical assets
(Level 1)		Significant other observable inputs
(Level 2)
Assets:
   Global equity35 %$6.5 34 %$— $6.5 
   Fixed income27 %5.1 27 %— 5.1 
   Alternative investment14 %2.7 14 %— 2.7 
   Cash1 %0.2 1 %0.2 — 
   Other assets23 %4.6 24 %— 4.6 
Total Assets100 %$19.1 100 %$0.2 $18.9 
Our pension assets consist of multiple institutional funds (“pension funds”) of which the fair values are based on the quoted prices of the underlying funds. Pension funds are classified as Level 2 assets since such funds are not directly traded in active markets. Global equity consists of several funds that invest primarily in Swiss and foreign equities; fixed income consists of several funds that invest primarily in investment grade domestic and overseas bonds; alternative investment consists of several funds that invest primarily in hedge funds, infrastructure funds and private equity and debt; and other assets consist of several funds that invest primarily in real estate funds.
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Future Benefit Payments
We estimate our expected benefit payments to participants in the defined benefit pension plans based on the same assumptions used to measure our PBO at year-end which includes benefits attributable to estimated future compensation increases.
The following benefit payments are estimated to be paid from our defined benefit pension plans (in millions): 
Fiscal YearsTotal
2027$2.1 
20281.7 
20291.6 
20301.8 
20312.5 
Next five years14.5 
Total expected benefit payments$24.2 
We expect to contribute $1.8 million to our defined benefit pension plans in fiscal year 2027.
Note 16. Commitments and Contingencies
Purchase Obligations
Purchase obligations of $2.4 billion as of June 27, 2026 represent legally-binding commitments to purchase inventory and other commitments made in the normal course of business to meet operational requirements. Although open purchase orders are considered enforceable and legally binding, the terms may allow the option to cancel, reschedule and adjust the requirements based on our business needs prior to the delivery of goods or performance of services. Obligations to purchase inventory and other commitments are generally expected to be fulfilled within one year.
We depend on a limited number of contract manufacturers, subcontractors and suppliers for raw materials, packages and standard components. We generally purchase these single or limited source products through standard purchase orders or one-year supply agreements and have no significant long-term guaranteed supply agreements with these vendors. While we seek to maintain a sufficient safety stock of such products and maintain on-going communications with our suppliers to guard against interruptions or cessation of supply, our business and results of operations could be adversely affected by a stoppage or delay of supply, substitution of more expensive or less reliable products, receipt of defective parts or contaminated materials, increases in the price of such supplies, or our inability to obtain reduced pricing from our suppliers in response to competitive pressures. In addition, the imposition of tariffs on certain imported goods and materials may increase our costs and place upward pressure on the cost of sales.
Product Warranties
We provide reserves for the estimated costs of product warranties at the time revenue is recognized. We typically offer a twelve-month warranty for most of our products. However, in some instances depending on the product, product components or application of our products by the end customer, our warranties can vary and generally range from six months to five years. We estimate the costs of our warranty obligations based on our historical experience of known product failure rates, use of materials to repair or replace defective products, and service delivery costs incurred in correcting product failures. In addition, from time-to-time, specific warranty accruals may be made if unforeseen technical problems arise with specific products. We assess the adequacy of our recorded warranty liabilities and adjust the amounts as necessary.
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The following table presents the changes in our warranty reserve during the periods presented (in millions):
Years Ended
June 27, 2026June 28, 2025
Balance as of beginning of period$14.4 $13.2 
Warranties assumed in Cloud Light acquisition— 0.8 
Provision for warranty25.9 10.2 
Utilization of reserve(15.6)(9.8)
Balance as of end of period$24.7 $14.4 
Environmental Liabilities
Our research and development, manufacturing and distribution operations involve the use of hazardous substances and are regulated under international, federal, state and local laws governing health and safety and the environment. We apply strict standards for protection of the environment and occupational health and safety to sites inside and outside the United States, even if not subject to regulations imposed by foreign governments. We believe that our properties and operations at our facilities comply in all material respects with applicable environmental laws and occupational health and safety laws. However, the risk of environmental liabilities cannot be completely eliminated and there can be no assurance that the application of environmental and health and safety laws will not require us to incur significant expenditures. We are also regulated under a number of international, federal, state and local laws regarding recycling, product packaging and product content requirements. The environmental and product content/disposal and recycling laws are gradually becoming more stringent and may cause us to incur significant expenditures in the future.
Legal Proceedings
We are subject to a variety of claims and suits that arise from time-to-time in the ordinary course of our business. While management currently believes that resolving claims against us, individually or in the aggregate, will not have a material adverse impact on our financial position, results of operations or statements of cash flows, these matters are subject to inherent uncertainties and management’s view of these matters may change in the future. We accrue for loss contingencies when it is both probable that we will incur the loss and when we can reasonably estimate the amount of the loss or range of loss. As of June 27, 2026, the accrual for expected settlement of litigation matters was not material.
Regulatory Matters
In August 2024, we received inquiries from the Bureau of Industry and Security of the U.S. Department of Commerce (“BIS”) and Department of Justice (“DOJ”) following our voluntary disclosure to BIS in December 2023, and supplemented in April 2024. We continue to cooperate with both agencies on this matter. We are unable to predict the likely outcome of these matters.
Indemnifications
In the normal course of business, we enter into agreements that contain a variety of representations and warranties and provide for general indemnification. Exposure under these agreements is unknown, because claims may be made against us in the future, and we may record charges in the future as a result of these indemnification obligations.
In March 2025, we completed a sale of net assets located in an entity in Shenzhen, China. We have reclassified a $21.4 million unrecognized tax position to other non-current liabilities in the consolidated balance sheets as of June 28, 2025 for an indemnification liability related to the sale of certain assets. This does not impact our results of operations for the year ended June 28, 2025. We did not have any other material indemnification claims that were probable or reasonably possible.
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Audit Proceedings
We are under audit by various domestic and foreign tax authorities with regards to income tax and indirect tax matters. In some, although not all cases, we have reserved for potential adjustments to our provision for income taxes and accrual of indirect taxes that may result from examinations by these tax authorities or final outcomes in judicial proceedings, and we believe that the final outcome of these examinations, agreements or judicial proceedings will not have a material effect on our results of operations. If events occur which indicate payment of these amounts is unnecessary, the reversal of the liabilities would result in the recognition of benefits in the period when we determine the liabilities are no longer necessary. If our estimates of the federal, state, and foreign income tax liabilities and indirect tax liabilities are less than the ultimate assessment, it could result in a further charge to expense.
Note 17. Operating Segments and Geographic Information
Prior to fiscal year 2026, we operated in two reportable segments: Cloud & Networking and Industrial Tech. During the first quarter of fiscal year 2026, we implemented a reorganization and are now managed as a single, integrated enterprise. A unified management team oversees operations across the entire company rather than through discrete operating segments. The Chief Operating Decision Maker (“CODM”) is our Chief Executive Officer, who reviews financial information presented as a single enterprise to allocate resources and evaluate financial performance.
The CODM assesses performance and allocates resources based on consolidated net (loss) income from our consolidated statements of operations. This metric is used to set budgets, evaluate performance, review actual results, and determine whether to reinvest profits, pursue acquisitions, or make other capital management decisions. Segment expenses are reflected in our consolidated statements of operations and cash flows, while segment assets are measured through the consolidated assets on the consolidated balance sheets. Accordingly, we operate in a single reporting segment. Comparative prior-period segment information has been updated to reflect this structure, with no impact on previously reported consolidated results of operations, financial position or cash flows.
We disaggregate revenue by type of product, which are Components and Systems, and by geography. A Components product is defined as one of the individual building blocks that goes into creating a larger solution. It is typically not a complete solution on its own but rather a specialized element that enables system functionality. This includes semiconductor laser chips, laser sub-assemblies, line subsystems and wavelength management systems. These are supplied to customers who then integrate them into their own full system solutions. Components represent foundational parts that support or enable that system’s operation and include optical chips and subsystems that are supplied to cloud data center operators, AI/ML infrastructure providers, and network equipment manufacturer customers.
A Systems product is defined as a complete, stand-alone solution that delivers full functionality to the end customer. It is typically self-contained and ready to operate within a customer’s network or application environment. This includes optical modules, optical circuit switches, and industrial lasers such as short-pulse solid-state lasers and kilowatt-class fiber lasers. These products integrate multiple technologies and subsystems into a finished solution that directly addresses a customer’s needs. A system represents the end-product that can be deployed and used independently.
Our products enable high-capacity optical links for cloud computing, AI/ML workloads, and data center interconnect (“DCI”) applications, as well as for communications service provider networks. Our offerings support access (local), metro (intracity), long-haul (intercity and global), and submarine (undersea) network infrastructure. Our products serve enterprise network infrastructure needs, including storage area networks (“SANs”), local area networks (“LANs”), and wide area networks (“WANs”). Demand for our products is fueled by the ongoing expansion of network capacity required to support cloud services, AI/ML processing, streaming video, video conferencing, wireless and mobile connectivity, and the internet of things (“IoT”). In addition, our industrial laser products are used for precision material processing across diverse industries, including semiconductor and microelectronics fabrication, electric vehicle and battery production, metal cutting and welding, and advanced manufacturing that emphasize greater manufacturing precision, flexibility, and sustainability.
Refer to “Note 18. Revenue Recognition” for a presentation of disaggregated revenue by type of product.
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Concentrations

We operate in three geographic regions: Americas, Asia-Pacific, and EMEA (Europe, Middle East, and Africa). Net revenue is assigned to the geographic region and country where our product is initially shipped to. For example, certain customers may request shipment of our product to a contract manufacturer in one country, which may differ from the location of their end customers.
The following table presents net revenue by the three geographic regions we operate in and net revenue from countries that represented 10% or more of our total net revenue (in millions, except percentage data):
Years Ended
June 27, 2026June 28, 2025June 29, 2024
Amount% to TotalAmount% to TotalAmount% to Total
Net revenue:
Americas:
United States
$627.9 20.8 %$312.3 19.0 %$356.1 26.2 %
Mexico443.7 14.7 148.5 9.0 91.7 6.7 
Other Americas
13.2 0.4 20.1 1.2 3.4 0.3 
Total Americas
$1,084.8 35.9 %$480.9 29.2 %$451.2 33.2 %
Asia-Pacific:
Thailand$626.6 20.8 %$291.8 17.7 %$183.8 13.5 %
Hong Kong
519.3 17.2 398.6 24.2 261.9 19.3 
China284.8 9.4 95.5 5.8 68.2 5.0 
Japan
104.6 3.5 78.3 4.8 84.6 6.2 
Other Asia-Pacific
216.9 7.3 136.4 8.4 181.3 13.4 
Total Asia-Pacific
$1,752.2 58.2 %$1,000.6 60.9 %$779.8 57.4 %
EMEA$177.0 5.9 %$163.5 9.9 %$128.2 9.4 %
Total net revenue
$3,014.0 100.0 %$1,645.0 100.0 %$1,359.2 100.0 %
During the years ended June 27, 2026, June 28, 2025, and June 29, 2024, net revenue from a single end customer which represented 10% or greater of total net revenue is summarized as follows:
Years Ended
June 27, 2026June 28, 2025June 29, 2024
Customer A26.6 %15.4 %18.9 %
Customer B15.0 %16.0 %11.4 %
The following table sets forth accounts receivable from a single customer that represented 10% or greater of the total accounts receivable for the periods presented:
June 27, 2026June 28, 2025
Customer 130.4 %13.2 %
Customer 210.7 %11.0 %
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Long-lived assets, namely property, plant and equipment, net, were identified based on the physical location of the assets in the corresponding geographic areas as of the periods indicated (in millions):
June 27, 2026June 28, 2025
Property, plant and equipment, net
United States
$153.0 $123.0 
Thailand
450.6 218.6 
Japan232.1 144.3 
United Kingdom139.1 109.4 
China129.9 76.8 
Other countries
54.4 54.3 
Total property, plant and equipment, net$1,159.1 $726.4 
We purchase a portion of our inventory from contract manufacturers and vendors located primarily in Thailand, Taiwan and Malaysia. The following table sets forth inventory purchase from a single contract manufacturer that represented 10% or greater of our total net inventory purchases for the periods presented:
June 27, 2026June 28, 2025
Contract Manufacturer A18.2 %25.1 %
Note 18. Revenue Recognition
Disaggregation of Revenue
We disaggregate revenue by type of products and by geography. We do not present other levels of disaggregation, such as by customer, markets, contracts, duration of contracts, timing of transfer of control and sales channels, as this information is not used by our CODM to manage the business.
The table below discloses our total net revenue by type of product (in millions, except percentage data):
Years Ended
June 27, 2026June 28, 2025June 29, 2024
Amount% to TotalAmount% to TotalAmount% to Total
Components$2,005.6 66.5 %$1,116.3 67.9 %$822.1 60.5 %
Systems1,008.4 33.5 %528.7 32.1 %537.1 39.5 %
Net revenue$3,014.0 100.0 %$1,645.0 100.0 %$1,359.2 100.0 %
Refer to “Note 17. Operating Segments and Geographic Information” for a presentation of disaggregated revenue by geography.
Contract Balances
We record accounts receivable when we have an unconditional right to consideration. Contract liabilities are recorded when cash payments are received or due in advance of performance. Contract liabilities consist of advance payments and deferred revenue, where we have unsatisfied performance obligations. Contract liabilities are classified as deferred revenue and customer deposits and are included in other current and non-current liabilities within our consolidated balance sheets. Payment terms vary by customer. The time between invoicing and when payment is due is not significant.
The following table reflects the changes in contract balances for the periods presented (in millions, except percentages):
Contract balancesBalance sheet locationJune 27, 2026June 28, 2025ChangePercentage Change
Accounts receivable, net Accounts receivable, net $520.3 $250.0 $270.3 108.1%
Deferred revenue and customer deposits (1)
Other current liabilities
$15.4 $0.7 $14.7 n/a
Deferred revenue and customer deposits
Other non-current liabilities
$1.4 $— $1.4 n/a
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LUMENTUM HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(1) We recorded a $9.9 million below-market contract liability related to our acquisition of a business in March 2026 in our consolidated balance sheets, which will be amortized and recorded as revenue over the term of the supply agreement. During the twelve months ended June 27, 2026, we have recognized approximately $2.3 million of this amount to net revenue. The remaining balance of about $7.6 million was recorded as other current liabilities in our consolidated balance sheets as of June 27, 2026. Refer to “Note 4. Business Combination” for details.
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ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES 
(a) Evaluation of Disclosure Controls and Procedures
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Management, with the participation of our chief executive officer and our chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of June 27, 2026. The term “disclosure controls and procedures,” as defined in Rules 13a-15 and 15d-15 under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well-designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of June 27, 2026, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective at a reasonable assurance level.
(b) Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Management conducted an assessment of the effectiveness of our internal control over financial reporting based on the criteria set forth in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on the assessment, management has concluded that its internal control over financial reporting was effective as of June 27, 2026 to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with U.S. GAAP.
Deloitte & Touche LLP, the independent registered public accounting firm that audited the consolidated financial statements included in this Form 10-K, has issued a report, included herein, on the effectiveness of the Company’s internal control over financial reporting as of June 27, 2026.
(c) Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting as defined in Exchange Act Rules 13a-15(f) and 15d-15(f), identified in connection with the evaluation required by Exchange Act Rules 13a-15(d) or 15d-15(d) that occurred during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
(d) Inherent Limitations on Effectiveness of Controls
Our management, including the CEO and CFO, recognizes that our disclosure controls and procedures or our internal control over financial reporting cannot prevent or detect all possible instances of errors and all fraud. A control system, no matter how well-designed and operated, can provide only reasonable, not absolute, assurance that the control system's objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of Lumentum Holdings Inc.
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Lumentum Holdings Inc. and subsidiaries (the “Company”) as of June 27, 2026, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of June 27, 2026, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended June 27, 2026, of the Company and our report dated August 17, 2026, expressed an unqualified opinion on those financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.


/s/ DELOITTE & TOUCHE LLP
San Jose, California   
August 17, 2026  
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ITEM 9B.    OTHER INFORMATION
Securities Trading Plans of Directors and Executive Officers
During our last fiscal quarter, the following officers, as defined in Rule 16a-1(f), adopted a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement,” each as defined in Regulation S-K Item 408.
On May 19, 2026, Wupen Yuen, our President, Global Business Units, adopted a modification of his Rule 10b5-1 trading arrangement entered into on November 5, 2025, providing for the sale from time to time of an aggregate of up to 18,422 shares of our common stock (based on PSUs vesting at target). The actual number of shares sold under the trading arrangement will depend on achievement of performance targets applicable to the PSUs subject to the trading arrangement, be subject to vesting of the PSUs and RSUs subject to the trading arrangement, and be net of shares withheld for taxes upon vesting and settlement of the PSUs and RSUs subject to the trading arrangement. The trading arrangement is intended to satisfy the affirmative defense in Rule 10b5-1(c). The duration of the trading arrangement is until May 19, 2027, or earlier if all transactions under the trading arrangement are completed.
On May 26, 2026, Wajid Ali, our Executive Vice President and Chief Financial Officer, adopted a modification of his Rule 10b5-1 trading arrangement entered into on November 28, 2025. The modified plan provides for the sale from time to time of an aggregate of up to 61,936 shares of our common stock (based on PSUs vesting at target). The actual number of shares sold under the trading arrangement will depend on achievement of performance targets applicable to the PSUs subject to the trading arrangement, be subject to vesting of the PSUs and RSUs subject to the trading arrangement, and be net of shares withheld for taxes upon vesting and settlement of the PSUs and RSUs subject to the trading arrangement. The trading arrangement is intended to satisfy the affirmative defense in Rule 10b5-1(c). The duration of the trading arrangement is until May 26, 2027, or earlier if all transactions under the trading arrangement are completed.
On May 28, 2026, Michael Hurlston, our President and Chief Executive Officer, adopted a Rule 10b5-1 trading arrangement providing for the sale from time to time of an aggregate of up to 1,096 shares of our common stock. The trading arrangement is intended to satisfy the affirmative defense in Rule 10b5-1(c). The duration of the trading arrangement is until May 28, 2027, or earlier if all transactions under the trading arrangement are completed.
ITEM 9C.    DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
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PART III
The SEC allows us to include information required in this Annual Report by referring to other documents or reports we have already filed or will soon be filing. This is called “incorporation by reference.” We intend to file our definitive proxy statement for our 2026 annual meeting of stockholders (the “Proxy Statement”) pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this Annual Report, and certain information to be contained therein is incorporated in this Annual Report by reference.
ITEM 10.    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 
The information required for this Item will be set forth in the Proxy Statement and is incorporated herein by reference.
ITEM 11.    EXECUTIVE COMPENSATION
The information required for this Item will be set forth in the Proxy Statement and is incorporated herein by reference.
ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information required for this Item will be set forth in the Proxy Statement and is incorporated herein by reference.
ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required for this Item will be set forth in the Proxy Statement and is incorporated herein by reference.
ITEM 14.    PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required for this Item will be set forth in the Proxy Statement and is incorporated herein by reference.
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PART IV
ITEM 15.    EXHIBIT AND, FINANCIAL STATEMENT SCHEDULES
1. Financial Statements
The financial statements filed as part of this Annual Report are listed in the section titled “Financial Statements and Supplementary Data” under Part II, Item 8 of this Annual Report.
Page
2. Financial Statement Schedules
The following additional financial statement schedules should be considered in conjunction with our consolidated financial statements. All other financial statement schedules have been omitted because the required information is not present in amounts sufficient to require submission of the schedule, not applicable, or because the required information is included in the consolidated financial statements or notes thereto.
LUMENTUM HOLDINGS INC.
FINANCIAL STATEMENT SCHEDULES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(in millions)
Balance at beginning of periodIncrease (decrease) in Consolidated Statements of OperationsWrite-offs and other adjustmentsBalance at end of period
Allowance for credit losses:
Fiscal year ended June 27, 2026$3.5 $0.1 $(0.1)$3.5 
Fiscal year ended June 28, 2025$0.2 $3.4 $(0.1)$3.5 
Fiscal year ended June 29, 2024$— $0.2 $— $0.2 
(in millions)
Balance at beginning of period
Additions charged to costs/expenses (1)
Deductions credited to costs/expenses (2)
Balance at end of period
Deferred tax valuation allowance:
Fiscal year ended June 27, 2026$440.8 $21.9 $(273.7)$189.0 
Fiscal year ended June 28, 2025$490.4 $128.6 $(178.2)$440.8 
Fiscal year ended June 29, 2024$303.4 $205.4 $(18.4)$490.4 
(1) Additions include current year additions charged to expenses and current year build due to increases in net deferred tax assets, return to provision true-ups, other adjustments to deferred taxes.
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(2) Net deductions include current year releases credited to expenses and current year reductions due to decreases in net deferred tax assets, return to provision true-ups, other adjustments to deferred taxes.
3. Exhibits
The following exhibits are filed herewith or are incorporated by reference to exhibits previously filed with the Securities and Exchange Commission.
Incorporated by ReferenceFiled
Exhibit No.Exhibit DescriptionFormExhibitFiling DateHerewith
2.18-K2.18/6/2015
2.28-K2.28/6/2015
2.38-K2.110/30/2023
3.18-K3.18/6/2015
3.28-K3.28/6/2015
3.38-K3.13/2/2026
4.110-K4.48/27/2019
4.28-K4.112/12/2019
4.38-K4.212/12/2019
4.410-Q4.111/8/2024
4.58-K4.13/8/2022
4.68-K4.23/8/2022
4.78-K4.16/16/2023
4.88-K4.26/16/2023
4.98-K4.19/8/2025
4.108-K4.19/8/2025
10.18-K10.18/6/2015
10.2*8-K10.28/6/2015
10.38-K10.38/6/2015
10.4*8-K10.111/22/2024
10.5*S-899.27/29/2015
10.6*8-K10.311/9/2016
10.7*10-Q10.111/8/2023
10.8*10-K10.89/25/2015
10.9*10-Q10.15/7/2019
10.10*8-K10.12/3/2025
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10.11*8-K10.22/3/2025
10.12*10-Q10.15/9/2023
10.13*10-Q10.25/9/2023
10.14*S-84.32/6/2025
10.15*S-84.42/6/2025
10.16*S-84.52/6/2025
10.178-K10.19/8/2025
10.18*S-84.311/19/2025
10.19*10-Q10.32/4/2026
10.20*10-Q10.42/4/2026
10.218-K10.112/22/2025
19.110-K19.18/21/2024
21.1X
23.1X
31.1X
31.2X
32.1†X
32.2†X
97.110-K97.18/19/2025
101The following financial information from Lumentum Holdings Inc.’s Annual Report on Form 10-K for the fiscal year ended June 27, 2026 formatted in Inline XBRL (eXtensible Business Reporting Language): (i) Consolidated Statements of Operations for the fiscal years ended June 27, 2026, June 28, 2025 and June 29, 2024; (ii) Consolidated Statements of Comprehensive Income for the fiscal years ended June 27, 2026, June 28, 2025 and June 29, 2024; (iii) Consolidated Balance Sheets as of June 27, 2026 and June 28, 2025; (iv) Consolidated Statements of Cash Flows for the fiscal years ended June 27, 2026, June 28, 2025 and June 29, 2024; (v) Consolidated Statements of Stockholders’ Equity for the fiscal years ended June 27, 2026, June 28, 2025 and June 29, 2024; and (vi) Notes to the Consolidated Financial Statements X
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104The cover page from Lumentum Holdings Inc.’s Annual Report on Form 10-K for the fiscal year ended June 27, 2026, formatted in Inline XBRL (included as Exhibit 101).X
* Indicates management contract or compensatory plan or arrangement.
† The certifications furnished in Exhibits 32.1 and 32.2 that accompany this Annual Report on Form 10-K, are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of the Registrant under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Annual Report on Form 10-K, irrespective of any general incorporation language contained in such filing.
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ITEM 16.    FORM 10-K SUMMARY.
None.
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SIGNATURES
 Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.
Date:August 17, 2026LUMENTUM HOLDINGS INC.
By: /s/ WAJID ALI
By: Wajid Ali
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)

POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Wajid Ali and Jae Kim, and each of them individually, as his or her attorney-in-fact, each with full power of substitution, for him or her in any and all capacities to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorney-in-fact, or his or her substitute, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
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 SignatureTitleDate
/s/ MICHAEL HURLSTONPresident, Chief Executive Officer and Director (principal executive officer)August 17, 2026
Michael Hurlston
/s/ WAJID ALIExecutive Vice President, Chief Financial Officer (principal financial officer)August 17, 2026
Wajid Ali
/s/ ERIC CHANGChief Accounting Officer (principal accounting officer)August 17, 2026
Eric Chang
/s/ PAUL LUNDSTROMDirectorAugust 17, 2026
Paul Lundstrom
/s/ JULIE JOHNSONDirectorAugust 17, 2026
Julie Johnson
/s/ PENELOPE HERSCHERDirectorAugust 17, 2026
Penelope Herscher
/s/ THAD TRENTDirectorAugust 17, 2026
Thad Trent
/s/ BRIAN LILLIEDirectorAugust 17, 2026
Brian Lillie
/s/ IAN SMALLDirectorAugust 17, 2026
Ian Small
/s/ ISAAC HARRISDirectorAugust 17, 2026
Isaac Harris
/s/ PAMELA FLETCHERDirectorAugust 17, 2026
Pamela Fletcher

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