Good day, everyone, and welcome to the Lumentum Holdings' Third Quarter Fiscal Year 2024 Earnings Call. All participants will be in a listen-only mode. Please also note, today's event is being recorded for replay purposes. At this time, I would now like to turn the conference call over to Kathy Ta, Vice President of Investor Relations. Ms.

Ta, please go ahead..

Thank you, and welcome to Lumentum's fiscal third quarter 2024 earnings call. This is Kathy Ta, Lumentum's Vice President of Investor Relations.

Joining me today are Alan Lowe, President and Chief Executive Officer; Wajid Ali, Executive Vice President and Chief Financial Officer; and Chris Coldren, Senior Vice President and Chief Strategy and Corporate Development Officer.

Today's call will include forward-looking statements, including statements regarding our expectations and beliefs regarding recent acquisitions, including Cloud Light and NeoPhotonics, macroeconomic trends, trends and expectations for our products and technologies, our end markets, market opportunities and customers, and our expected financial and operating performance, including our guidance, as well as statements regarding our future revenues, financial model, and margin targets.

These statements are subject to risks and uncertainties that could cause actual results to differ materially from our current expectations, particularly the risk factors described in our SEC filings.

We encourage you to review our most recent filings with the SEC, particularly the risk factors described in our most recent [10-Q] (ph) and in our 10-Q that will be filed soon. The forward-looking statements provided during this call are based on Lumentum's reasonable beliefs and expectations as of today.

Lumentum undertakes no obligation to update these statements, except as required by applicable law. Please also note that unless otherwise stated, all financial results and projections discussed in this call are non-GAAP. Non-GAAP financials are not to be considered as a substitute for or superior to financials prepared in accordance with GAAP.

Lumentum's press release with the fiscal third quarter results and accompanying supplemental slides are available on our website at www.lumentum.com under the Investors section. With that, I'll turn the call over to Alan..

one, the smaller size of our 3D sensing business will have a less significant impact on our overall revenue profile; and two, we expect an uptick in industrial fiber laser shipments after the severe inventory correction experienced during Q3.

To summarize, the combination of explosive growth in cloud data center and AI-driven demand, our customer traction and capacity additions for new data center products and strong early demand for our new telecom products makes me confident and bullish about calendar 2025.

We expect significant growth next calendar year as our investments in new data center products and manufacturing capacity this year translates into significant new revenues. This, combined with the telecom industry inventory correction abating, makes the outlook for calendar 2025 and beyond very promising.

We have multiple cloud customer engagements which will drive meaningful revenue growth and drive total company quarterly revenue to exceed $500 million exiting calendar 2025. Additionally, we expect that significant growth will continue into 2026 and 2027.

We are working on several significant opportunities today that we expect will propel our cloud business into a multi-billion dollar annual run rate business in the coming years. Given all of this, it's clear that the future is bright for Lumentum.

Before turning it over to Wajid, I would like to thank our employees and our customers around the world for their focus and dedication as they continue to collaborate and partner with Lumentum.

With that, Wajid?.

Cloud & Networking to be down sequentially. This decline includes an approximate incremental $40 million reduction at the midpoint due to the recent broad-based demand softness in telecom. And Industrial Tech to be up slightly sequentially with increased industrial laser shipments partially offset by typical 3D sensing seasonality.

Based on this, we project fourth quarter non-GAAP operating margins to be in the range of negative 3% to positive 1%, and diluted net income per share to be in the range of negative $0.05 to positive $0.10. Our non-GAAP EPS guidance for the fourth quarter is based on a non-GAAP annual effective tax rate of 14.5%.

These projections also assume an approximate share count of 68.5 million shares.

These projections also exclude certain unusual expenses, including factory under absorption due to factory consolidations and transitions, restructuring, other synergy attainment and integration activities, and inventory reduction activities related to prior acquisitions and the COVID-19 pandemic.

These expenses are related to one-time events and we expect these will in general decline over the coming quarters. These expenses for our third fiscal quarter can be found in our GAAP to non-GAAP reconciliation tables. With that, I'll turn the call back to Kathy to start the Q&A session.

Kathy?.

Thank you, Wajid. Before we start the Q&A session, I'd like to ask everyone to keep to one question and one follow-up. This should help us get to as many participants as possible before the end of our allotted time. Now, let's begin the Q&A session..

Of course. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from the line of Simon Leopold with Raymond James. Your line is now open..

Thank you. Thank you very much for taking the question. First thing, I wanted to see if you could clarify the commentary on the Cloud & Networking incremental $40 million reduction. Because in the prior quarter, you talked about roughly $30 million decline due to a product transition that was occurring in the Cloud Light business.

And I want to understand, is that $30 million part of the new $40 million number you cited today? Just help us unpack that a little bit? And then, I've got a follow-up..

Sure, Simon. This is incremental to the datacom module transition we talked about on the last call. So, this is a change in the outlook for telecom spending -- carrier spending that happened over the last three months that are impacting our ability to burn off inventory in the channel and at our customers.

So, this is incremental to what we talked about last time..

Thanks. And then, in terms of your ZR business, it sounds like that's gotten better. But I think we don't really have a good sense of what the baseline is.

So, could you help us understand how much revenue are you generating through ZR and ZR-related sales, selling lasers to others as well as your own products? And where do you see that going over the next, let's say, two to four quarters? Thank you..

Yeah. The narrow line with tunable lasers was up dramatically last quarter, as we talked about in the pre-recorded -- or in the script rather, that we believe that inventory in many of our customers has been depleted as the strength in ZR has really picked up over the last several quarters and burned off that inventory.

So, we're back to where kind of we were pre-pandemic on the narrow line with timber lasers. And then, on the ZR, ZR+, it's still in the single digits of overall revenue. But we expect, as we are getting a lot of traction on the 800-gig ZR and ZR+ that, that should grow as we start deploying those in a meaningful way..

Thank you..

Thanks, Simon..

Thanks, Simon..

Thank you for your question -- sorry. Thank you for your question. Our next question comes from the line of Samik Chatterjee with JPMorgan. Your line is now open. Samik, your line is now open.

Can you try one more time for me, please?.

Yes, I think, Victoria, we can take the next question unless Samik says something right now..

All right. We'll go ahead and move on. Our next question comes from the line of George Notter with Jefferies. Your line is now open..

Hi, guys.

Can you hear me?.

Yes, we can..

Yes..

Can you guys hear me? Hello? Okay. Great. Super..

Yes, we can..

All right, thanks. Hey, look, I am interested in better understanding the manufacturing expansions here. Alan, I think you said that just in the last three months, you guys have increased your expectation for the size of the manufacturing operation.

Can you talk a little bit more about what you're doing down in Thailand? How much capacity are you adding? What's driving that incremental requirement to expand manufacturing more than you previously thought? I think obviously a lot of folks are looking for the opportunity to win additional cloud customers with the Cloud Light business.

Is that an element of what's driving the incremental outlook there? Thanks..

Yeah, absolutely. And as I said, I was in Thailand to see how things were progressing. And we're setting up today the qualification line in Thailand, and today we make transceivers in China. But most of our customers are very interested in building up capacity outside of China. So that's what we have done there.

Qualification line is going in the first floor of our existing building that had not been used yet for some of our other products is being facilitized.

And then, through this quarter, based on the traction and the interest and the pull that we're getting from cloud and AI infrastructure customers, we started construction on a new building that we can phase in over time. So, basically a building that will have three stories.

And we can -- we're planning on facilitating the first floor and have the capability to facilitate the second and third floor as we see fit. So, it's really a change in traction and customer demand that has given us confidence that we're building the right level of infrastructure for them..

Got it.

And then, are you adding that floor space on spec, or are you adding it based on new customer wins? What's driving the incremental investment?.

What do you mean by spec? Oh, speculation. Oh, I mean....

Yeah, sure..

Is that what you -- well, you want to clarify, George?.

Correct. I'm just....

I want to make sure I answer the right question..

I guess, specifically, I'd like to know if you're adding the additional floor space, adding the new building, is that based on contracts or wins that you've got incrementally on the cloud provider side of the business?.

No, I think with -- I mean, we have certainly some orders and some customers today that we're working on bringing up capacity for -- in Thailand. That said, a lot of this incremental capacity is really new customers and diversified customers, both in the cloud space as well as the AI infrastructure space.

And so, the challenge is it's a chicken and egg thing in that if you don't have the floor space and capacity, you're not going to get the orders. And if you don't have the orders and -- if you have the orders and you don't have the floor space, you're not going to be able to perform.

So, we're working hand in hand with our customers to make sure that we're pulling the trigger at the right time to not have too much capacity, but at the same time to build confidence that we're making the investments on behalf of them and the growth that they see in calendar 2025 and beyond..

Great. Thank you..

Yeah. And just to -- we are having customers visit and see for themselves what we're doing. And so far the feedback has been extremely positive with respect to facilitization, the line setup, the level of automation. So, we're pretty happy and confident in our future expectations there..

Thanks, George..

Thank you for your question, George. Samik dialed back in. So, our next question will be from the line of Samik Chatterjee with JPMorgan. Your line is now open..

Hi.

Can you hear me now?.

Yes, we can hear you..

Okay, great. Sorry about that. So, I had a couple on datacom, and I'll start with the more near-term question, if you don't mind. I know you've talked about the product transition for Cloud Light with its primary customer with revenues in the March quarter about sort of $90 million going to $60 million in June.

Just want to clarify if that's still holding true in terms of your engagement with your customer there? And any thoughts in terms of the magnitude of the rebound as you ramp with the new product in the September quarter? And I have a longer-term question on datacom after that. Thank you..

Yeah. I'm not going to comment on any specific customer, but I'd say that the transition is playing out as we had expected in the last call..

Okay. Alan, I know you talked about the datacom business being a....

Sorry. No, I was going to answer the second part of your question about September. We expect some incremental increase in the September quarter, but that's still yet to be seen on the datacom side..

Okay. And for my longer-term question, Alan, I know you talked about the datacom business being a multi-billion business in the future.

Wondering if you can give us a few more milestones, be your medium-term milestones to track that by? For example, like when you think about fiscal '25 over '24, does this business double in size? Or even when you reference the $500 million of revenue for the aggregate company exiting calendar '25, how much of datacom business should be expect in that mix? Any thoughts just to give us more medium-term milestones on that ramp? Thank you..

Yeah. I'll give you my thoughts on it, then I'll ask Chris to chime in. I'd say that the milestones are really the qualification samples that I talked about earlier, getting into our customers hands and having them test them.

So, we're in control of a lot of that, but at the same time, we're still relying on third-party suppliers of DSPs and other components. And so that's a little bit out of our control. And so, I'd say summertime qualification samples qualification sometime in the December quarter and ramp starting really in the December quarter and into calendar 2025.

As far as your question on $500 million by the end of next calendar year, I would say that we would certainly be disappointed if we don't more than double our datacom business by then from today's or from the Q3 run rate..

Yeah. I think the only thing I would add is just to highlight that each of the individual customer opportunities we're chasing are very significant, so that one or two customers' sockets essentially can double revenue. And so that's what confidence that as we win, there's a lot more than one or two customers and one or two sockets out there.

So, our ability to win new and materially move the revenue upwards is ample, as opposed to a type of application or market where we need to land hundreds of customers, for example..

Thank you..

Thank you, Samik..

Thank you for your question. Our next question comes from the line of Meta Marshall with Morgan Stanley. Your line is now open..

Great. Thanks.

Maybe building on Simon's question from earlier, just getting a sense of the $40 million headwind from telco, and just what that conversation is like with customers? Like, do you have a greater sense of where their inventory levels are? Or are there areas where they've worked out inventory more than others? Just trying to get a sense of, do you have more clarity on when some of that business could come back? And then maybe just a specific question on -- did you outline what the Cloud Light specific contribution was to the quarter? And that's it for me..

Yeah. So, on the $40 million headwind, really, it's a combination of two things, one of which is the slowdown in carrier spending and the duration of the inventory burn-off that will take longer since they're not spending quite as much.

So, I'd say that as we've seen in the March quarter, we saw our inventory at our customers coming down, but still pockets of inventory of -- that's still going to take at least this quarter and probably into the September quarter before it's all consumed. And again, it has to do with product by product and which customers they're selling to.

I would say that the cloud -- the products that are destined for the cloud are burning off certainly faster than the ones that are going to the carriers. So, I'd say that's kind of the only different dynamic. But the telco carriers are slower than what we thought three months ago..

And whether there was a Cloud Light specific contribution you guys were calling out as part of datacom?.

Yeah. No, we're not going to break out the specific products, but certainly it was a full quarter of production, and so it was more than the prior partial quarter..

All right. Great. Thanks..

Thanks, Meta..

Thank you for your question. Our next question comes from the line of Christopher Rolland with SIG. Your line is now open..

Hey, guys. Thanks for the question. Mine's around DC. So, the 200-gig laser market, seems like there's a bunch of things that might be slowing that down now. Can you remind us when you would be capable of supplying 200-gig lasers? I assume EML at launch.

And then, when you think others in the supply chain might be able to ramp? I'm just trying to get a sense of what a realistic timetable for this true 200-gig lane ramp might be..

Yeah. We're shipping qualification units last quarter and feedback from customers was extremely strong and very positive. So, they need to then take those lasers and put them into transceivers. And again, they rely on third-party DSPs in most cases. So that's going to take a couple of quarters.

And so, I would say that by the December quarter, those should all be in place, and ramp up of those EML chips should begin really in our fiscal Q2 and then in a meaningful way into calendar '25..

Excellent. And then, Alan, while I have you, you said a meaningful increase in your calendar 2025 revenue. Maybe you could put a finer point on meaningful? Are we talking single digits, double digits? Any color there would be great..

Yeah. I mean, I think what we said is we expect to exit the calendar year 2025 at greater than $500 million of company revenue. So, if you look at where we are today, at midpoint of just over $300 million to exit rate of calendar '25 of $500 million, that's a meaningful increase.

And it won't be linear between now and then because I think we still have a couple of quarters of inventory burn-off in telecom, and the qualification work that has to happen in new sockets for datacom.

And as you're -- from your first question on the 200-gig per lane, a lot of the products we're going to launch are going to be 200-gig per lane out of our Nava facility. So that's really a late calendar '24 and into calendar 2025.

So, not a lot of big volume in the December quarter, but more meaningful in the March and June quarter as we ramp up those qualified products.

Does that answer your question, Christopher?.

Thank you so much. That does. Thank you, Alan..

All right. Thanks..

Thanks, Chris..

Thank you for your question..

Thanks, guys..

The next question -- oops, sorry about that. The next question comes from a line of David Vogt with UBS. Your line is now open..

Great. Thanks, guys.

Can you guys hear me?.

Yes, we can..

Hey, thanks, Kathy. So, I have two questions. One longer term in terms of this trajectory to get to this $500 million run rate. Just kind of the way that we're trying to pencil in the numbers, obviously, it looks like your telco -- core telco business needs obviously a steep recovery as well.

And given that customers are taking longer to place orders and digest, I'm just trying to get a sense for, where are you going to see the growth or how are you thinking about the growth to come back in the core telecom side? And given the strength -- the second question is, given the strength in the datacom that you just laid out, how does it affect gross margin given the manufacturing capacity that you're adding is clearly skewed towards datacom -- potential datacom customers going forward? Are we still thinking about this consistent with what Wajid laid out at OFC? I'm just trying to get a sense for how you're thinking about that.

Thanks..

Yeah. I'll take the telecom question and I'll let Wajid comment on the gross margins. Yeah, as I said, I think we have a couple of quarters at a minimum of burn-off of telecom inventory and really exacerbated by the slower telco spend.

That said, on the new products, like the higher speed, 130 gigabaud, 200 gigabaud and highly-integrated ROADMs, there is no inventory. And so, as for instance, the three China carriers deploy their next-generation networks, those ramps are well underway today and don't have that burden of inventory.

So, I'd say there's really two aspects of our telecom business, all those new products that are ramping today, but at a -- from a small base and then growing fast.

But -- and then those other products that are still in the channel, by the end of the calendar year, I'd say, that those are probably taken care of, and that gives us confidence in the strength of telecom in calendar 2025 as that inventory has burned off. Wajid, do you want to comment on the....

Yeah. No, from a gross margin standpoint, pretty much what we laid out at OFC contemplated the type of product mix we were expecting to get to a nearer-term model as well as a longer-term model.

So, I think that those gross margins that we laid out pretty well hold under what Alan spoke about with the $500 million a quarter exiting run rate for next year..

So, the shift in telco out a little bit doesn't have an impact? Just trying to think through that..

Well, it's -- I think the timing of the telco return as well as the step function increases we're expecting to see on the datacom side, will line up together.

Now, we'll probably have a little bit of a tailwind because 200G revenues will come in before -- 200G EML chip revenues will come in before some of the transceiver revenue will, just given where we are in the qualification cycle between the two products. So, there might be a quarter or two where we're on the higher end of that model because of that.

But when the revenues do kick in for those transceiver products, we will start to see a normalization of the margins back to the model we presented at OFC..

Yeah. I think just to echo what you said earlier, Wajid, the consolidation of our two Japanese wafer fabs in the first half of fiscal '25 will certainly help gross margins as well..

Thanks, David..

Thank you for your question. The next question comes from the line of Ananda Baruah with Loop Capital. Your line is now open..

Yeah. Good afternoon, guys, and thanks for taking the question. I guess, yeah, two on datacom quickly, if I could.

With the expansion that you're -- the capacity expansion in your Japan fab, at least anecdotally, any context you can share with regards to where you think that business ultimately can go relative to what you were thinking prior to inventory digestion a couple of years ago? And then, I have a quick follow-up. Thanks..

Yeah. We're still adding capacity. We had a record EML shipment last quarter. And then, as we ramp the 200-gig per lane product that certainly will grow the revenue without necessarily growing units, although we do plan on growing units further.

So, I think that there's no reason that, that kit couldn't be a $300 million a year type run rate and more, given that we'll be providing both EMLs as well as CW lasers and VCSELs -- datacom VCSELs for the multimode transceivers..

That's more context than I'd even hoped for, Alan. I appreciate that.

And the follow-up is, for the $500 million kind of December '25, kind of guide or at least guideline, how many -- all things [indiscernible] on the telco business, how many qualifications with Tier 1s or Tier 2s, I guess, whichever way you think is useful to think about it would be necessary? I'm just trying to gauge how conservative your qualification assumptions might be in that $500 million.

Thanks a lot..

Are you talking about datacom or telecom?.

Datacom. Yeah, how many incremental hyperscalers....

Datacom..

...or Tier 2, like -- yeah. Thanks..

I mean, it doesn't take many. If we land three, I'd be very, very happy, and we're working with more than that. So, I think from my perspective, we have to bet $500 million on the engagements that we're in. And I think we're positioned to do quite a bit better than that given the customer pull and the desire to have a U.S.

headquartered company with manufacturing outside of China. That's why we're being aggressive with respect to putting in place the capacity needed for these customers..

That's great. I appreciate it. Thanks a lot..

Thank you for your question. The next question comes from the line of Tom O'Malley with Barclays. Your line is now open..

Hey, guys. Good afternoon. Thanks for taking my question. I wanted to focus on just what's built into the ramp here on the datacom side. So, you guys have talked about some big opportunities that you could potentially win that gets you to that $500 million run rate through the end of this year and into next year.

But I want to understand what you have visibility to right now. You talked on the last call about a transition at your existing customer. And I know that you're saying that the datacom downtick is related to telecom.

But are you seeing further weakness there? Are you baking in a return to growth with that customer? And how good is your visibility with the existing customer such that you get comfortable around the growth profile that you're laying out already?.

Yeah, Tom. We're not going to comment on specific customers, but I'd say as I mentioned earlier, our expectations are a slight uptick in datacom revenues in the September quarter and then more rapid increase in the December and into calendar 2025 as the new products at 1.6T really start ramping into -- very late this year and into calendar 2025.

I wouldn't say that we have everything locked up, but certainly indications of interest and customers spending time with our engineering teams, customers taking visits to Thailand and to our wafer fab in Sagamihara, Japan, and they don't do that if they're not intending to partner with us. And so that's what gives me confidence.

And when I have purchase orders, I'll have a lot more confidence, but that's where we are today..

Helpful. And then, my second one is kind of a broader question just on the evolution of 200G per lane and 1.6T. So, you're talking about the lasers coming first, which kind of aligns with what we've been hearing, but like in terms of the broader systems, it seems like it's more middle of '25, maybe even second half of '25.

And there's really only two customers that can do that even in that timeframe.

So, can you talk about why you would be able to ship in the kind of December quarter? Do you see actual production shipments of 200G per lane in Q1 of '25? Or are you just seeing kind of token shipments in Q4 that really get to volume maybe in the second half of '25? I just want to understand your view of the timing of 200G per lane. Thank you..

Yeah, Tom, let me try to help out here on maybe confusion of fiscal year or calendar year here. Certainly, we have today, as we've highlighted, the laser components, other optical components that are in qualification with other either transceiver manufacturers or AI infrastructure providers.

Those qualifications will continue and we expect that those customers will be in a position later this calendar year, so i.e., the beginning of our fiscal '25, they will be in a position if all other parts of the ecosystem are able to start ramping up.

Even if they do start ramping up in that timeframe, obviously, it doesn't overnight become the predominant set of volumes. And so, we do expect through calendar '25, a continual ramp of both the components and the transceivers. The components may lead transceivers for two reasons.

One is you are earlier in supply chains in general, so you're shipping a quarter or two ahead ultimately of when transceivers are shipping. But secondly, the nature of who the customers are maybe the most early leading adopters maybe folks that built transceivers themselves and need components.

And I think as Alan alluded to, all these timelines are clearly dependent on whether it be DSPs, switching silicon, processor silicon, things that are beyond our control, we are closely monitoring, we are unaware of anything that impacts the timelines that we're outlining here based on those other elements becoming available either late this calendar year or the beginning of calendar '25..

Thanks, Tom..

Thank you for your question. The next question comes from the line of Karl Ackerman with BNP Paribas. Your line is now open..

Yes, thank you. I have a clarification question and a follow-up.

For the clarification question, does the $40 million headwind from telco reflect any broadening impact from the chip supply band beyond the initial telecom products you outlined last quarter?.

Chip supply..

Are you referring to restrictions on customers declining....

That is correct..

Somewhat. As of today, we're not shipping to that large customer and there were some shipments in the March quarter. So that has some impact, but not a meaningfully large impact relative quarter to quarter. Now year-over-year, major impact of the U.S. restrictions on our ability to sell to that customer..

Yeah. Okay, understood. And then, you spoke about some updated views on the timing of EML shipment. Would you have any update on the timing of 100-gig VCSEL? I think last quarter you indicated that you would start production in the second half of 2024. I'm just curious if there's any update on that. Thank you..

Yes. We're making continued progress on our 100-gig VCSEL. Now with having Cloud Light be part of the Lumentum team, we have an in-house way of getting our VCSELs tested in transceivers and hopefully qualified in, as you said, in the second half of the calendar year in these multimode transceivers.

So, continued progress, but I'd say we're still on track for really the end second half of the calendar year for 100-gig VCSELs and VCSEL arrays..

Thanks, Karl. Victoria, I think we have time for just one more question..

Of course. Our next question comes from the line of Tim Savageaux with Northland Capital Markets. Your line is now open..

Great. Snuck in there. I want to compare your 1.6 terabit opportunity or at least ask a question about. For 800 gig, we seem to have seen the very short reach kind of within the rack connectivity market developed first, and then, broader market maybe for switch to switch transceivers inside the data center appears to be developing now.

As you look at the 1.6 opportunity, I guess, is there any reason that would develop differently? It seems like most of what you're targeting are traditional transceivers versus short reach cables or what have you. But I'd just be interested in your perspective on comparing and contrasting what we've seen at 800 and what you expect at 1.6 terabit.

Thanks..

Yeah, Tim. It's a little bit of nuance, but I would say that something we highlighted at the OFC presentation and point investors, there's a little more detail in that slide deck that we had shared. But the key point is that as you go to higher speeds, the distances you can go decrease very rapidly.

So, we do anticipate as we move to 1.6T and beyond that you'll see more single mode in the mix than you've seen historically. Maybe these are simpler single mode, the [DR-type spec] (ph) transceivers, whether they're using silicon photonics or EMLs.

And so, therefore, a lot more single mode, where maybe perhaps there would have been multimode historically. It doesn't mean multimode is going away. It just means that we will see more single mode in those sockets and, therefore, right out of the gate..

Tim, did you have a follow-up?.

Great. And if I -- sure. I do. And I don't want to misinterpret this.

Alan, did you say you're targeting 50% share of this 1.6 terabit market to kind of get where you need to be or was that 50% comment around something else?.

No, that was a comment around -- we don't need to hit on all of the sockets. And any given socket, we're not going to get 100% of.

So, I'm just -- I was indicating that we have a lot of qualification work and customer interaction going on today in order to achieve what we talked about at $500 million exiting calendar 2025, we don't need to be successful in all of those slots that we're engaged with today.

Now, if we're more successful than half of them, then it will be more revenue than that. And I think that will come down to us executing better than our competitors and having a value proposition that makes it compelling for our customers to buy more from us..

Okay. Thanks very much..

Thank you, Tim..

Thank you for your question. There are no additional questions waiting at this time. I would now like to pass the conference back to Alan Lowe for any closing remarks..

Great. Thank you, Victoria. I would like to leave you with a few thoughts as we wrap up this call. Our agility and leadership position gives us confidence in navigating the current market environment.

Lumentum stands at the forefront of the data center revolution, pioneering advancements in chip scale photonics, automated manufacturing, and partnerships with hyperscale cloud customers. To capitalize on these compelling cloud opportunities, we are rapidly deploying both manufacturing capacity and R&D capabilities.

This ensures we are well-positioned to help customers meet the escalating data rate demands of AI architectures. The Cloud Light acquisition has been a resounding success.

Our combined teams has propelled our high-speed transceiver production plans forward, enabling us to meet the surging market demand, which we expect will drive our cloud revenue into a multi-billion dollar run rate in the coming years. Thank you for joining our call today.

We look forward to seeing you again at investor conferences and upcoming meetings later this quarter..

That concludes today's call. Thank you for your participation, and enjoy the rest of your day..