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Just some of my notes from $Semtech(SMTC.US) Q2 earnings:

TLDR: Like $Applied Optoelectronics(AAOI.US), it's all about Semtech expanding capacity - CEO said the capacity they've secured "may not be enough" for FY28...

1. Q2 upside is from 1.6T qualifying early

- Pretty shocking (in a good way) how compressed the qualification timelines have become.

- Hyperscalers and everyone upstream are pulling timelines forward so quickly rn.

- We saw with $Lumentum(LITE.US), $Coherent Corp.(COHR.US), $Applied Optoelectronics(AAOI.US) especially that demand is just bulldozing any qualification barriers. Now seeing the same with Semtech.

2. FiberEdge is quite underappreciated

- I agree w/ mgmt that people are "overindexing on CopperEdge" - the better business is probably TIA/driver.

- 800G TIA share has gone from ~18% two years ago to well over 50%, and they expect >50% share at 1.6T by January.

- Impressive...

- Industry 800G units: they entered the year on a ~50M forecast and are now hearing 80-90M vs. ~20M two years ago.

- Impressive again...

3. Content per transceiver

- goes from high single digits to $80-90 at 3.2T.

- Quite funny - one analyst assumed that "high double digit" content meant teens. CEO corrected him with $80-90 lol. That's ~10x!

- Photonics fab capacity goes 3-4x by year-end (they picked up a fully facilitated fab next to the existing one).

- I don't think the market has modelled any of this. Even at half the claimed content, DC revenue stops scaling w/ transceiver units + starts scaling w/ units times content.

- And every merchant InP line being tripled is another pointer that InP demand is way ahead of supply.

- Which is the same signal $Applied Optoelectronics(AAOI.US) sent by clearing its HQ building for InP wafer expansion.

4. More capacity needed (obviously)

- Secured capacity "may not be enough" especially 2H FY28.

- Semtech are negotiating prepayments + joint capex with front/back-end partners, and qualifying additional OSATs to spread geopolitical risk.

- Pricing: no erosion expected near term and none in the booked backlog. Cost increases are being passed through. Just what you wanna see :)

5. Gross margins are pretty insane

- 54.5% in Q2 -> 58.3% guided -> 63.9% excl. the cellular module business being divested (closes Q4).

- CFO framed ~64% as the post-close starting point.

- I actually think 64% is the margin floor, not the target. Pretty sure they know they can do more lol. No reason to send out such a high target to the market otherwise.

CEO also said that "we have the financial capability" to fund the FY28 capacity push":

Looks like that's the case based on quick napkin maths:

- FCF was $61M in Q2

- Q3 EBITDA guided to $134M

- I'd say roughly $300M+ annualized FCF exiting the yr

- Add $204M cash + $62M coming from Compal for the cellular module unit closing in Q4

So would be surprised to see any more dilution on top of what they already did a year ago.

Overall though - pretty good earnings.

Zhongji Innolight's Interim Report covering optics:

> Silicon photonics penetration in the global datacom optical interconnect market is expected to rise further, from about 38% in 2025 to about 73% in 2030.

> Optical interconnects accounted for about 5% of global AI capex in 2025, and are expected to reach about 10% over the long term. The global datacom optical interconnect market is projected to grow from $19.4 billion in 2025 to $98.6 billion in 2030, a compound annual growth rate of 33.8% from 2026 to 2030.

Regarding CPO:

> CPO is described as currently viewed as one of the most highly integrated optical packaging solutions, assembling the switch ASIC chip and optical engine together on the same substrate.

> The report states CPO is still in the development stage, facing challenges around technology and ecosystem maturity, manufacturing consistency, cost, and maintainability.

> Over the long term, CPO will coexist with pluggable optical modules and other connectivity solutions (rather than fully replacing them).

$Lumentum(LITE.US) $Coherent Corp.(COHR.US) $Applied Optoelectronics(AAOI.US) $Broadcom(AVGO.US) $NVIDIA(NVDA.US)

The incentive structure behind Coherent talking about moving into 300mm SiC is the following, and it's not good:

For years, the Western SiC industry argued that China couldn't compete in 150mm SiC wafers. The moat was supposedly decades of SiC experience, crystal-growth know-how, defect control and, ultimately, yields.

Then Chinese suppliers flooded the market with 150mm SiC wafers.

So the narrative shifted to 200mm.Sure, China could make 150mm wafers, but could it do so with sufficiently low defect density, uniformity and yields to compete commercially on 200mm wafers?

And then, in a shorter amount of time than expected, Chinese wafer suppliers like TankeBlue and SICC achieved competitive 200mm SiC wafers.

So now Coherent is talking up their book; new 300m SiC wafers.

That makes sense strategically: as Chinese suppliers move up the wafer-size curve, Western suppliers need to establish the next layer of differentiation and justify a price premium.

But there is an important wrinkle. The emerging datacenter/HVDC opportunity may actually be more vulnerable to Chinese competition than automotive EV’s.

Why? HVDC power applications are industrial-grade, with lower qualification barriers than automotive traction inverters for EV's.

In other words, one of the markets expected to drive the next wave of SiC demand may also be one where Chinese suppliers can enter more easily. That makes the need for Western SiC suppliers to establish a real technological and economic moat even more important.

The question is whether 300mm provides that moat - or whether, once again, the industry is simply moving the goalposts in an attempt to stay relevant.

$Coherent Corp.(COHR.US) $Wolfspeed(WOLF.US)

@lithos_graphein thoughts?

Source: Chips & Wafers

📢 𝗝𝗨𝗦𝗧 𝗜𝗡: $Coherent Corp.(COHR.US) Coherent Begins Sampling 300mm SiC Substrates to Leading AI Semiconductor Partners

👉 𝗞𝗲𝘆 𝗛𝗶𝗴𝗵𝗹𝗶𝗴𝗵𝘁𝘀:

➤ 𝗖𝗼𝗵𝗲𝗿𝗲𝗻𝘁 begins sampling 𝟯𝟬𝟬𝗺𝗺 SiC substrates to leading AI chip partners.

➤ Customer sampling advances Coherent's 𝗔𝗜 and 𝗛𝗣𝗖 thermal-management platform.

➤ Substrates target rising heat challenges from higher-power 𝗔𝗜 processors.

➤ Coherent says SiC can improve heat spreading by up to 𝟮𝟱%.

➤ Technology remains compatible with existing 𝘀𝗲𝗺𝗶𝗰𝗼𝗻𝗱𝘂𝗰𝘁𝗼𝗿 manufacturing platforms.

➤ Coherent controls SiC 𝗰𝗿𝘆𝘀𝘁𝗮𝗹 𝗴𝗿𝗼𝘄𝘁𝗵, wafering, polishing, and characterization.

➤ Sampling moves the 𝟯𝟬𝟬𝗺𝗺 platform from development into customer evaluation.

➤ Platform is designed to support future 𝗵𝗶𝗴𝗵-𝘃𝗼𝗹𝘂𝗺𝗲 manufacturing.

➤ Coherent targets successive generations of 𝗔𝗜 and high-performance computing infrastructure.

👉 𝗪𝗵𝘆 𝗧𝗵𝗶𝘀 𝗠𝗮𝘁𝘁𝗲𝗿𝘀:

➤ Rising AI chip power makes 𝘁𝗵𝗲𝗿𝗺𝗮𝗹 𝗺𝗮𝗻𝗮𝗴𝗲𝗺𝗲𝗻𝘁 a critical performance bottleneck.

➤ Better heat spreading could improve 𝗽𝗲𝗿𝗳𝗼𝗿𝗺𝗮𝗻𝗰𝗲, reliability, and datacenter efficiency.

➤ Customer sampling represents an important step toward potential 𝗰𝗼𝗺𝗺𝗲𝗿𝗰𝗶𝗮𝗹 adoption.

➤ 𝟯𝟬𝟬𝗺𝗺 scalability could position Coherent within the expanding AI semiconductor supply chain.

👉 𝗘𝘅𝗽𝗲𝗿𝘁 𝗦𝘁𝗮𝘁𝗲𝗺𝗲𝗻𝘁:

𝗖𝗿𝗮𝗶𝗴 𝗠𝘂𝗹𝗹𝗮𝗻𝗲𝘆, Senior Vice President and General Manager at Coherent:

“AI performance is increasingly constrained by the industry’s ability to remove heat from next-generation processors,” said Craig Mullaney, Senior Vice President and General Manager at Coherent. “Advanced SiC thermal management materials can play an important role in addressing that challenge. By combining decades of silicon carbide expertise with a scalable 300mm manufacturing platform, Coherent is helping build the materials foundation for future AI infrastructure.”

Prices of Indium Phosphide (InP) substrates and epi-wafers are set to jump over 10% in the 4th quarter – the biggest price hike in history – as the AI-driven optical communications boom causes severe shortages, media report.

One supplier reportedly said inventory is so tight that “even with cash, you might not get anything.” InP substrate prices have risen for three consecutive quarters and are heading into a fourth, while epi-wafers are entering their third consecutive increase.

Valued for high-frequency, high-speed data transmission, InP is a critical material as AI data centers shift from copper to optical interconnects (optics in, copper out.) $AXT(AXTI.US) $SMTOF #SumitomoElectric 5802 $Lumentum(LITE.US) $Coherent Corp.(COHR.US) $Applied Optoelectronics(AAOI.US)

Source: Dan Nystedt

Breaking: NVIDIA Corp just filed its Q2 2026 13F

Here's everything you need to know about the recent 13F

All positions:

• Intel $Intel(INTC.US) (47.3%)

• SpaceX (33.1%) — NEW this filing

• CoreWeave $Coreweave(CRWV.US) (7.4%)

• Coherent $Coherent Corp.(COHR.US) (4.8%)

• Nokia $Nokia Oyj(NOK.US) (3.5%)

• Synopsys $Synopsys(SNPS.US) (3.4%)

• Nebius Group $Nebius(NBIS.US) (0.5%)

New positions:

• SpaceX, ~122.8M Class A shares, $20.98B stake

Full exits:

• None

Mizuho: InP & Memory

Supply Chain & Gating Factors

> InP Laser Supply: Remains tight into 2027E as multiple suppliers work to bring capacity online.

> NPO & CPO Dynamics: NPO continues to act as a near-term bridge for CPO, which is expected to ramp in 2H27/28E.

> CRDO Position: Believed to be the leader in Active Electrical Cables (AEC), with market ramping at a 98% 2024–29E CAGR, driven by additional upside from ZFO, ALC/MicroLED, and SiPho ramps.

> LITE Commentary: 1.6T ramps feature 200G accounting for >25% of revenues, with CPO delayed to 2H27. CRDO benefits from this alongside Neocloud strength for AEC.

Memory & Storage Pricing (NAND/DRAM)

> ASP Spikes: NAND/DRAM Average Selling Prices (ASPs) are projected up 406%/421% y/y in 2026E.

> Growth Moderation: Growth slows down in 2027E, with NAND expected to be flat and DRAM up 52% y/y.

AI DC Short-Reach Copper Cable Split

> Market Expansion: Total units grow steadily from 8M in 2024 to 23M by 2029.

> AEC Adoption: AEC units increase from 0M (2024) to 12M (2027) and 12M (2029), with total AEC penetration (including optical %) scaling to over 40% by 2029.

Estimated Wholesale 1.6T Cable Prices ($)

AEC: $225

ALC: $400

EML-based Transceiver: $700

CPO: $150

$Credo Tech(CRDO.US) $Lumentum(LITE.US) $Coherent Corp.(COHR.US) $Micron Tech(MU.US) $DDRAM $Sandisk(SNDK.US) $EWY

Photonics notes after $Lumentum(LITE.US), $Coherent Corp.(COHR.US), and $Applied Optoelectronics(AAOI.US) earnings:

TLDR: Earnings were bullish for photonics. The entire sector is sold out and LTAs are removing cyclicality.

1. Everything is sold out

Every single CEO highlighted that demand is strong and growing, with current revenues/margins mainly gated by limited capacity.

- $Lumentum(LITE.US): “Lasers will remain effectively sold out for the foreseeable future despite our rapid capacity expansion.”

- $Coherent Corp.(COHR.US): “The demand is robust across almost every single product across data center and comms, and it is really just a matter of whether we can sell as fast as we can ramp production.”

- $Applied Optoelectronics(AAOI.US): Revenue “bounded almost entirely by our production capacity and key component availability”

Very nice and very expected. But good to have confirmations from the horse's mouth.

I also wanted to remind everyone that historically, optics has been a deflationary business mainly due to ASP erosion over time. Similar to memory.

However, everyone being sold out completely flips that with Lumentum saying that they’ve “been surprised at our ability to price up” on CW lasers, holding a premium on spec tightness because of better transceiver yields.

Filtering down onto margins, when ASPs go up, gross margin rebuilds organically without any product mix help at all.

For example, Lumentum crossing to over 50% non-GAAP GM is a pricing power story instead of one “artificially” inflated by selling more pricey products.

At a high level, that’s a good sign of further margin expansion further down the line.

2. LTAs

Lumentum has customer LTAs extending through to 2030 with minimum demand guarantees and set pricing. AAOI is similarly negotiating three year laser LTAs with 2-3 large customers.

TLDR: These LTAs are critical for the longer term durability of the optics sector.

Ultimately, customer-funded capacity is negative working capital expansion, which highlights that the optics buyers are the ones bidding up for scarcity.

The Lumentum and $AXT(AXTI.US) deal from a couple of weeks ago is a pretty clean example where $87.5M of Lumentum deposits applied as shipment credits, reserving substrates through to 2031.

We're now seeing this pattern is everywhere e.g. hyperscalers pre-funding supplier capex in exchange for allocation, transferring volume risk onto the buyer. This is the same dynamic at a higher level with $NVIDIA(NVDA.US)’s $500B financing announcement to support “independent compute financing platforms”.

So, the whole AI buildout is shifting capex risk onto customers and capital markets. In optics that means suppliers get to expand capacity with someone else's balance sheet and a contractual demand floor.

That’s the best terms any capital intensive company can get and, as we're seeing, acts as a huge incentive to ramp capacity as fast as possible.

3. 1.6T ramp

Lumentum: 1.6T is “ramping incredibly fast. In fact, we have seen the 1.6T ramp only pull in, be stronger, demand increase. That ramp is even faster than what we thought, say, three months ago.”

With ~80% YoY laser output feeding it, Lumentum guided data center growth “to exceed 80%” this quarter. They initiated 1.6T production as planned and the CEO stated that “we appear to be first to market in many instances, ahead of larger competitors” with a signal-integrity team “widely acknowledged as the best in a competitive field.”

AAOI is the fourth supplier qualified for 1.6T at a major hyperscaler, qualification finishing “within the next couple of weeks” and a >$200M order book which looks to be just the start with the $471M monthly transceiver revenue by mid-2027 maintained from last quarter.

At 800G the laser was the binding constraint. At 1.6T it's the 3nm DSPs and the 200G TIAs and drivers. AAOI's management specifically said that the bigger constraint now is DSP and TIA supply, not lasers, because they make their own lasers (“good news, they are making our laser. Otherwise, laser is the biggest bottleneck”).

Does this then make $MRV and $Broadcom(AVGO.US), plus the TIA/driver suppliers $Semtech(SMTC.US) and $Macom Tech(MTSI.US), the kingmakers of the 1.6T ramp??

I think that'd make sense because allocation at the DSP and analog front-end seems to be the new share battle given how constrained the laser makers are. And it then decides which module houses ramp on schedule and grow earnings fastest.

So in my opinion, if you want to know who ships 1.6T in volume in 2027, DSP and TIA allocation is the real signal/alpha.

Looking at AAOI specifically now:

- Q2 800G revenue was $12.8M.

- The guide is ~5x sequential in Q3, then more than $70M of 1.6T in Q4.

- Building to roughly $471M/month month by mid-2027 - of which management pegs $217M monthly from 800G and $164M from 1.6T.

- That’s a roughly 12 month path from a ~$36M monthly DC run rate to a $471M one.

- Requiring capacity to climb from ~200,000 units/month now to >650,000 by end of 2026 to >930,000 by end of 2027, every qualification to land on time, and DSP/TIA allocation to be there at each step.

Essentially, that’s several consecutive flawless quarters of capacity, qualification and third-party allocation with zero slip ups. Personally, I’d be modelling the mid-2027 exit meaningfully below $471 million/month and treat the target as the ceiling rather than the base case.

Whether you want to trust AAOI’s management is up to you, but so far so good.

And just touching on the CW/EML mix:

This is basically a margin event for the laser owners whichever way the pendulum swings.

Lumentum is closing the CW vs. EML margin gap by shrinking CW die, 200G EMLs are already over 25% of EML revenue heading to a majority by mid-2027, with over 50% EML unit growth targeted by the December 2026 quarter. The CEO expects SiPh viable at 1.6T but EMLs “come back in a meaningful way” at 3.2T.

Ultimately, in a constrained environment, wherever a laser can be sourced will be used to support the buildout.

While everything is sold out, customers take whichever laser they can get, so EML vs. SiPho is a margin-mix question for the supplier, not a demand question.

4. NPO = TAM expansion

Lumentum’s CEO framed near-packaged optics as pure additive TAM: “The NPO opportunity is completely additive for us, significantly increasing the optical TAM” and noted even “our largest CPO customer is looking at NPO for specific new use cases, further increasing the optical TAM at that account.”

I actually think “additive” TAM holds quite well here with NPO:

- NPO and CPO first displace copper scale-up links inside and across racks, not front-panel pluggables on scale-out.

- That means pluggable/scale-out demand and integrated-optics/scale-up demand stack rather than substitute, at least through 2028.

- The TAM claim stops being true only if scale-out itself ever moves onto the substrate which doesn’t seem to be the case for the next few years at least.

In my opinion, this is a rare case where the bullish management framing survives various mechanism checks.

This is why the content-per-XPU maths is the entire point, and it is why the laser makers sound indifferent to the specific form factor of CPO or NPO etc. Moving from a shared front-panel module to per-package light sources multiplies discrete laser count and optical power per accelerator.

That’s the mechanical reason Coherent can say NPO and CPO carry “comparable content” - in both, Coherent is selling the laser, the external laser module, the isolators, the polarization-maintaining fiber it makes in-house, and the fiber-attach.

On standards: optically these are converging on OCI/MSA-based interfaces at 200G/lane, but the form factors are proprietary per customer (Wupen Yuen). That cuts in the incumbents' favour, because it raises qualification lock-in per socket even as the optical layer standardizes.

Ultimately, the CW laser supply names and VCSEL optionality matter here. Coherent is pushing a 200G VCSEL for NPO-type applications, which widens the playing field. In terms of who loses - retimed pluggable-only franchises see their share of the optical $ shrink in relative terms as integrated optics adds a new dollar pool on top.

After looking into it a bit more over the past few months, I do believe that NPO wins the first wave because it trades power and cost for simplicity around time to market.

That, in the end, doesn’t matter to whoever owns the lasers because they’re selling comparable content into whichever one customers pick.

—

Just a few of my personal notes which I filtered down into some of the main points.

There’s other things to be aware of too like the ongoing InP chokepoint, memory bottleneck, scale-across at Lumentum, and OCS type stuff.

But don’t want this post to become longer than it already is.