Over a year ago, CSI did a three-part deep dive on co-packaged optics after Nvidia dedicated an entire segment of its GTC keynote to the technology — naming Lumentum and Coherent as the primary beneficiaries. The analysis was right. They did not buy.

That mistake is now worth talking about directly.

Lumentum just reported fiscal Q3 2026 revenue up 90% year over year. Q4 guidance implies triple-digit year-over-year growth. Nvidia made a $2 billion investment in both Lumentum and Coherent, and separately announced a major fiber optic cable manufacturing expansion with Corning. Co-packaged optics products have not even begun shipping in volume yet — that catalyst hits in December 2026. The case for Lumentum continues to build.

But this is CSI, and true conviction in a business means covering what could go wrong as well as what is going right. There is a significant dilution story unfolding that every Lumentum shareholder needs to understand before adding to a position.

When the stock was trading at roughly one-tenth of its current price, Lumentum raised cash by issuing convertible notes — a type of debt that converts to equity when the stock reaches certain price milestones. The stock has now blown through those milestones. All of that convertible debt is now eligible to convert into stock at terms that are extremely favorable for the debt holders and extremely expensive for existing shareholders. The result: shares outstanding are expected to increase by approximately 20% over the next two quarters. Nick and Kasey explain the full mechanics clearly — why it happened, what it costs, and whether the revenue acceleration can outrun the dilution.

Also covered: the Qorvo fab acquisition in North Carolina that adds indium phosphide manufacturing capacity in two to three years, and what operating leverage looks like when a company goes from negative margins to all-time highs in the span of a few quarters.

What we cover:

— Why CSI did the deep dive on co-packaged optics and still did not buy — the honest lesson

— Lumentum fiscal Q3 2026: 90% revenue growth — what drove it and what comes next

— Q4 guidance: triple-digit YoY growth before CPO products even ramp

— Nvidia's $2B investment in Lumentum and Coherent — the supply chain signal

— Nvidia and Corning fiber optic expansion — Nvidia's hands all over the supply chain

— Co-packaged optics — the December 2026 catalyst that has not landed yet

— Operating leverage in action: from negative margins to all-time highs

— Convertible notes explained: why ~20% share dilution is coming in 2026

— Qorvo North Carolina fab acquisition — InP capacity coming in two to three years

— The bottleneck in laser module manufacturing and why Lumentum dominates it

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Disclosure: Nick and Kasey hold positions in Lumentum and Coherent. This content is for general information only and is not individual investment advice. All investing involves risk.

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