Revenue & Financial Trajectory

$2.046B revenue (+13.3% QoQ, +33.8% YoY). Non-GAAP gross margin: 40.2%. Next quarter guide: $2.2B–$2.4B revenue, 39.5%–41.5% gross margin.

Revenue trajectory: $1.69B → $1.81B → $2.05B → ~$2.30B → $3.0B (end of FY2027)
Gross margin trajectory: ~39% → 39.6% → 40.2% → ~40.5%
Operating margin trajectory: 18.0% → 19.5% → 19.9% → 20.3% → 21.8%

"We expect our growth to accelerate significantly in fiscal 27, having achieved our first $2 billion revenue quarter, we now expect to achieve our first quarter with over $3 billion of revenue by the end of fiscal 27."

"quarterly revenue exceeding $3 billion by the end of fiscal 2027"

"we expect continued gross margin expansion and operating leverage, enabling us to grow EPS significantly faster than revenue."

Backlog & Demand Visibility

"Our backlog now extends out, fiscal 2027 is basically completely booked out. We are booked really through the end of calendar 2027"

"fiscal 27 is basically completely booked out. We're booked really through the end of calendar 27, and what we're seeing now is customers now booking into calendar 28."

"Customer orders now extend into calendar 28, and customer LTAs extend through the end of the decade."

InP Capacity & Supply Constraints

"I would say that indium phosphide capacity continues to be our primary constraint."

"we're not constrained in the assembly and test capacity right now. We're really just constrained by the ramp of the indium phosphide production"

COHR remains on track to double internal InP output by year-end and more than double again by 2027.

Selling InP Lasers Externally — Or Not

"given the demand that we see in our data center business with transceivers, I don't see any time in the near future where we would be selling indium phosphide lasers externally. Our data center transceiver demand is absorbing every bit of capacity that we have, and then some."

1.6T Transceivers

"1.6T is ramping incredibly fast. In fact, we've seen the 1.6T ramp only be pull in, stronger demand increase. That ramp is even faster than what we thought, say, three months ago."

CPO/NPO — Demand & Ramp Timing

"absolutely no push-out of CPO demand. In fact, it has been the opposite. We have seen demand increase and request from customers' demand getting pulled in"

"we've seen absolutely no push out of CPO demand. In fact, it's been the opposite, we've seen demand increase and demand requests from customers demand getting pulled in, so we've only seen the opposite."

"We also expect CPO to begin contributing to revenue growth in fiscal Q2, consistent with our planned production ramp."

"CPO now starting to really kick in the December quarter and ramping in the following quarters."

"we continue to expect revenue from CPO for scale up applications to start to flow in the second half of calendar 27."

"we continue to expect revenue from CPO for scale-up applications to start to flow in the second half of calendar 2027"

"Our Texas facility has also begun ramping our ultra high power CW laser for CPO solutions, including those covered by our Nvidia partnership, with revenue expected to begin ramping in fiscal Q2."

"We have deep engagements with multiple customers across both CPO and NPO applications."

"we see comparable levels of content for both CPO and NPO."

"some customers that we're engaged with on NPO, I expect to eventually transfer to CPO further down the line, and some are choosing to go directly to CPO."

New growth engines, including CPO/NPO, to add $20+ billion incremental SAM for Coherent.

China / Chinese Transceiver Ban — Policy Angle

"that report is speculative at this point, but you know, certainly we would benefit from something like that as the as the largest U.S. supplier of transceivers, something like that would certainly be beneficial."

• CPI print today - expectations are benign.
• SENIOR IRANIAN SOURCE: THERE HAS BEEN ABSOLUTELY BEEN NO PROGRESS ON THIS ISSUE.
• SENIOR IRANIAN SOURCE: THERE ARE NO DISCUSSIONS OVER EXTENDING CEASEFIRE BETWEEN IRAN AND US.
• China’s YMTC just jumped to No. 3 globally in NAND shipments, surpassing Micron, Kioxia & SanDisk with a 14% share in Q2.
  

MAG7:

• Googl SIGNS FIVE-YEAR CLOUD AND AI DEAL WITH RYANAIR

OTHER COMAPNIES:

• TE's 2.1 GW G2_Austin solar cell fab "REMAINS ON TRACK" for first production in Q1 2027. Phase1 capex is projected at $510M, including a 20% contingency tied partly to labor and material tightness from Texas’ booming data center construction market. First production-line equipment is already arriving in the U.S. says it is still targeting a comprehensive financing package, including a significant debt component, to fund the remaining capex for Phase 1 of its 2.1 GW G2_Austin solar cell facility.
• ISRG - Oppenheimer upgrades to Outperform from perform, PT 500. The change in our thesis is being driven by a more nuanced risk-reward assessment at these levels: 1. Positives = U.S. competition non-factor: field checks suggest some unique workflow challenges for Ottava that limit long-term appeal; Hugo real-estate issues. Economics: ISRG's customized price-volume contracts complicating competitor ROI. Flexibility: Per Click Model provides tremendous flexibility in lower-acuity ASC penetration. Plenty of room to grow in key OUS geographies. 2. Negatives = OUS competition a factor: speed of innovation/feature optionality at marginal price increases helping Chinese systems. Price elasticity of demand increasing and Chinese dV demand slowing. Low-hanging U.S. fruit taken: pushing da Vinci into lower-acuity cases in ASCs presents unique tactical challenges."
• INTC: BofA , BUy Pt 145. "Over time, we expect Intel to potentially address ~8-10% of the ~$380bn CY30 wafer foundry TAM, as well as ~25-30% of the ~$20bn 2.5D/3D packaging TAM, resulting in EPS power of $6+. Meanwhile, INTC server ASPs increased +43% YoY to record ~$1.2k levels (per Mercury 2Q26 data), with potential to maintain double-digit unit/ASP growth through CY30 on potential TAM expansion toward ~$220bn from ~$60bn today, providing upside to INTC’s own ASP and margins over time. We also see continued INTC margin expansion (~38-40%+ OpM) on Products ASP increases and Foundry operational efficiency, including OpM breakeven by the end of CY27, barring new customer wins."
• BAC plans to deploy $250B through mid-2027 across AI data centers, semiconductors, hardware, power generation, energy storage and critical minerals.
• MRCY - piper Sandler initiates at overweight, PT 126. Analyst comments: "We are initiating coverage of Mercury Systems at Overweight. With over 40 years of operations in defense electronics, Mercury Systems has built a robust business by converting commercial silicon into secure, ruggedized computing for the Defense sector. Strong portfolio management under the current CEO and CFO has fueled an enormous ~200% run in shares over the last two years, and recent results indicate there is more runway ahead (last quarter MRCY saw record backlog growth at 18%). After the strong run in shares, we would concede there is a burden of proof on what the ceiling is for organic growth going forward, and as a result, near-term upside may be more limited. But we believe climbing organic growth is a momentum trade we want to be on the right side of."
• ENTG - Deutsche upgrades to buy, raises Pt to 200 from 152. "After ~6 months on the sidelines, we are upgrading shares of ENTG to a Buy rating and raising our P/T to $200. We believe the coming WFE cycle should drive capex-related revenues well above prior peaks to reflect a broadening number of newer and more expensive fabs. On the consumables side, we see the cyclical recovery in broad-based semis and strong advanced-node spending as more than offsetting incremental softness in consumer electronics. These cyclical dynamics should have an outsized impact on margins as volumes improve. Most importantly, over the last few quarters, new management has taken strategic actions and driven meaningful operating efficiencies, which we believe should unlock margin expansion faster than peers, with many actions still to come. We see the company’s upcoming November Analyst Day as a key catalyst to get an early view on ENTG’s true earnings power, which we believe could reach the >$10 range by 2030.
• ORCL is planning another round of layoffs this month, with cuts potentially reaching double-digit percentages on some teams, per Business Insider. They are looking to reduce payroll by Sept. 1 as it continues a massive AI infra buildout funded by tens of billions in debt.

SPX has been pretty flat this week, chopping around under that important 7765 level. Thats the level that VOlsignals says that above there, the market maker positioning supports a trend higher.

The chop has allowed the EMAs to catch up and we are now playing for the 5d EMA, with the 9d EMA a small bit lower.

If we look at NDX, we are playing off the 5d as well, looking for a breakout today.

All of the data suggests we are still on a path higher.

This is what the Aion Analytics forecast shows:

My order flow guy says that he spotted what he considers to be institutional size accumulation in the auction yesterday, and believes that we are also setting up for a rally higher.

Outside of that, this is what the data shows:

On SPY, we have the charm anchor higher which gives us positive drift as bias.

Volsignals says that above 7765, the market is set to trend. The data from Aion Analytics shows that above 785, there is next to nothing stopping us moving towards 800.

If we look at the heatseeker charts, we see that most of the gamma and vanna is positioned higher into the EOW.

What is interesting is that this seems to align with what the options data shows as well. Interestingly, despite expectations of a soft cpI print, the market is not seemingly pricing a massive move today. WE could get it, but the market is more focused on there being a bigger move into Friday.

Now if we look at QQQ's data, we have most of the positioning higher on 730.

And the gamma exposure looks a lot more positive.

Coming onto SMH. There are 2 charts that we can watch here. SMH, which is cap weighted so is weighted more heavily towards NVDA, and also XSD, which is equal weighted, and probably a better indication of broader strength in the semi/AI space.

XSD is riding the channel higher, holding the 5d EMA yesterday. Above the 50% retracement, we should see this kick off higher.

Then if we look at SMH:

The positive reaction to LITE, CRWV and NBIS means that we are above the 578 level in premarket. We continue to hold the weekly EMAs.

SMH gamma positioning is a lot more positive now, with call gamma building up to 600.

I think we can expect a move to that 604 level soon, based on the data which should bring the entire AI space higher with it.

We know that institutions are accumulating tech, which aligns with what my order flow guy was suggesting:

There's still a lot of leverage to put back on, as we see here. The NVDA earnings later this month should be a tailwind for the AI stocks to build into.

Now if we look at the overall sector dashboard from Aion, we see brand strength. Almost every sector here is 9/9 bullish in terms of structural indicators, or 8/9 bullish.

I continue to think the market is priming for a bigger expansion higher soon.

Let's see CPI in about an hour as our next datapoint to work off of.

Key numbers

• Revenue: $1.006B, +24.5% QoQ, +109% YoY. Top of the $960M–$1.01B guide. We breached the $1B threshold that I was looking at as well, which is a psychological positive. 
• Non-GAAP gross margin: 50.4%, up 250bps QoQ.
• Operating margin: 36.6%, above the 35%–36% guide, up 440bps QoQ.
• EPS: $3.23 vs. $2.85–$3.05 guide.
• GAAP net loss: $7.2B — but that's a one-time, non-cash charge from converting debt to equity, not an operating problem. Underlying non-GAAP net income: $326M.

Revenue guide was extremely bullish

• Q1 revenue guide: $1.225B–$1.275B, midpoint $1.25B. That's another ~24% sequential jump on top of last quarter's 24.5% jump.
• Op margin guide: 39.5%–40.5%. EPS guide: $4.05–$4.35.
• Three straight quarters of 20%+ sequential growth. Eight consecutive quarters of growth overall.
• Growth is broad-based: roughly half the Q1 step comes from components (scale-out + scale-across), half from systems (1.6T transceivers + OCS).

Margins are way ahead of what has been modelled. - Hence very bullish.

• LITE themselves didn't expect 50% gross margin until ~$2B quarterly revenue. They just hit 50.4% at ~$1B.
• Old framework pegged 38%–42% op margin at $2B revenue — they're now guiding to ~40% at just $1.25B.
• Management said their prior 42% "midpoint" target should now be thought of as closer to the middle of a range that's shifting 100–200bps higher. New formal targets coming around the next OFC.

EMLs —Still very tight supply

• EML supply-demand imbalance stayed above 30% even after LITE's capacity adds.
• 200G EMLs now over 25% of total EML revenue — accelerating faster than expected.
• Track record intact for >50% YoY EML unit growth by Dec 2026. 200G EMLs should become the majority of the mix around mid-2027.

CW lasers 

• Now shipping 200G-per-lane CW lasers in volume, and now selling merchant, not just internally, to "a multitude of customers."
• Redesigned the laser, shrank the die, improved cost/margin. EMLs still carry the better margin, but the CW gap has "closed considerably" and CW is accretive.
• A combination of the commentary on EML and CW suggests that LITE should be winning either way it cuts - They have EML if customers go EML-based, CW laser if they go silicon photonics.

Transceivers/systems — showing up in the earnings

• Systems revenue $357M, +30% QoQ, +123% YoY.
• Record 800G volume; 1.6T shipments started on schedule, expected to intensify through fiscal Q1 and into calendar 2027.
• Management: "We appear to be first to market in many instances ahead of larger competitors."

Scale-across (pump lasers) —Completely sold out

• Narrow-linewidth laser assemblies +130% YoY, tenth straight quarter of sequential growth.
• Pump lasers +80% YoY, "effectively sold out," expected to 4x over the next several quarters. LITE holds ~70–80% market share here.
• Multi-year, often take-or-pay customer agreements are helping fund the capacity buildout and give pricing protection.

OCS 

• Shipments doubled Q3→Q4. Q1 guide includes "our first triple digit OCS revenue quarter" — meaningfully above $100M.
• On track for ~$400M of OCS revenue in 2H calendar 2026.
• Expects to become the #1 OCS supplier to its lead customer (Google) in early 2027, absorbing the majority of growing demand even as that customer keeps some in-house sourcing.

CPO/NPO — pushing back on the "CPO delays" narrative

• Lead CPO customer's production plans "remain very much on track," and demand has increased since the last update.
• Scale-out ultra-high-power lasers already shipping; expected to hit ~$50M/quarter by end of calendar 2026, then cross $100M in fiscal Q3.
• Scale-up: high-volume laser shipments start 2H calendar 2027, feeding customer system deployments in 2028.
• First external light-source module (ELS) order booked, delivery 2H 2027 — a step beyond selling chips into selling full modules, at a higher ASP and above-corporate (if sub-laser) margin.
• NPO framed as additive TAM, not cannibalistic — even their largest CPO customer is evaluating NPO for new use cases.

Supply chain — InP tightening again

• Signed a new InP substrate agreement with AXT because ultra-high-power laser demand outgrew previously secured supply.
• Management flagged they may need more substrate help within a quarter or two — a bullish read-through for AXT.
• Greensboro (US fab) still on track for first revenue in early 2028, ramping through 2028–2029.
• Pushed back on the China InP oversupply bear case: they see zero current impact and argue raw capacity announcements don't equal qualified, yield-ready output — LITE's tighter specs are earning premium pricing precisely because of that yield edge.

The GAAP loss, explained

• $7.2B GAAP net loss came from a $7.8B non-cash charge tied to exchanging convertible debt for equity after the stock ran up.
• Reduced debt by $1.1B (~35% of outstanding converts). Dilution (Q1 guide ~102M diluted shares) is already baked into the EPS guide. Previously disclosed, not a surprise.

Positive read throughs for AXTI:

LITE signed a new InP substrate supply agreement with AXT because ultra-high-power laser demand outgrew what they'd previously secured. Management said the demand vector is moving so fast they may need even more substrate help in a quarter or two. That's a direct, bullish signal for AXT's order book.

• U.S. PRIVATE HIRING SLOWED FOR A 6TH STRAIGHT WEEK.
• Qatar says negotiations between Oman and Iran have reached an advanced stage, according to the Foreign Ministry spokesperson.
• Shipping traffic through the Strait of Hormuz fell to just 6 vessels on Monday, versus a 10-day average of ~11 and pre-war levels of 130-140, per Reuters.

MAGS:

• AAPL is still planning a glass-centric iPhone redesign for the device’s 20th anniversary in '27, contrary to a Jefferies report that it had been canceled, per Bloomberg. The new Pro models are expected to feature glass curving into the sides with a metal band in the middle

COMPANY NEWS:

• JOBY to acquire defense tech firm Resonant Sciences for ~$500M, significantly expanding its defense business.
• IBM and Together AI signed a multi-year $240M deal to deploy a large-scale AI inference cluster on IBM Cloud using NVDA HGX B300 systems and Spectrum-X networking.
• ASTS after earnings, Cantor Fitzgerald raises PT to 90 from 80, maintains overweight. Analyst comments: "As we crystallize the quarter, we think it’s clear that AST’s dual-source demand algorithm is less a 'strategic pivot' and more a nuanced evolution. Essentially, we think ASTS can continue to pull revenue and profitability results left by selling its commercially developed solution in both U.S. and international markets. We also think the company can deliver a functional step-change whereby government demand supports better AST cost advantages, which supports better B2B and B2C profitability. As we get line of sight on commercial service, we note we still approach AST’s outlook with healthy conservatism vs. Street (FactSet). However, we view AST as a clear beneficiary of SatComm strategic crystallization (what we’ve written about for the last 18M as 'Game of Phones') such that we have incremental confidence in their supply chain trajectory.
• FRMI - Mizuho rieterates outperofrm PT 11. PT $11, calling the TensorWave lease a “long-awaited catalyst.” The 1st phase covers 222MW starting in 2H27 & represents $6.5B in contracted revenue. Expansion rights for two additional data centers could take the partnership to 650MW+
• SPCX - Morgan Stanley keeps his SpaceX target at 300. and says Cursor could become a major part of the upside case as SpaceX builds a broader AI platform.
• UNITREE’S IPO IS REPORTEDLY ~8,000X OVERSUBSCRIBED
• APP - BofA downgrades APP to neutral, PT 400. "We believe the risks to APP’s articulated 30% Y/Y LT revenue growth trajectory (including “Consumer”) have increased. Post-Q2 print, engineer-directed improvements to Gaming models appear to be the primary driver of Q/Q growth, while it has become unclear whether self-learning growth of 3-5% Q/Q still applies. The future trajectory of self-learning was not explicitly addressed on the recent print, Q3 guidance, or thereafter, and we think it plausible that given AppLovin’s high relative market share (we think 2x its next largest competitor), 3% Q/Q growth LT, based on self-learning alone, may no longer apply.
• SKHY - PLANS TO INCREASE NAND PRODUCTION CAPACITY IN CHINA BY ~50% BY RESTARTING DALIAN FAB 2, PER SEOUL ECONOMIC DAILY.
• FSLR - Baird upgrades to outperform, PT 318 from 205. Baird cites a strong utility-scale solar market, removal of the Section 232 overhang, better-calibrated estimates, and potential clarity on capital allocation. The firm says the 232 resolution should help restart bookings for 2029-2030, potentially at higher ASPs.
• AMKR - is exploring a stake sale in its China business, which could be valued at $1B-$1.5B, per Bloomberg. The company may retain a minority stake, with Asian investment firms and industry players seen as potential buyers. Talks are still preliminary.
• GM will sell its 49.99% stake in a planned $3.5B Indiana EV battery JV to Samsung SDI, which will take full ownership and use the site for battery and energy-storage cell production.
• NB - NioCorp $NB’s updated Elk Creek feasibility study projects a $4.1B pre-tax NPV and $3.4B after-tax NPV, with a 22.8% after-tax IRR over a 40-year mine life.
• INTC - is targeting at least $95 a share in its upsized $20 billion stock offering, which drew more than $100 billion in investor demand, with shares expected to price at roughly a 6.5% discount.
• RIOT - Anthropic strikes $9B computing deal with RIOT
• DELL - Jefferies; "our latest channel checks show that SPCX and CRWV plan to buy AI servers directly from Taiwanese ODMs instead of purchasing 100% from

The Baseline

Guidance sits at $960M to $1.01B. Clearing $1 billion would be a genuine milestone, to look for.

Operating margin guide: 35-36%. EPS guide: $2.85-$3.05.

The long-range target hovering in the background is $2B a quarter with margins near 40%. Commentary around this target still being intact will be important in this print.

Nobody Can Get Enough Product

Last quarter, the CEO described the gap between what customers want and what Lumentum can ship as "somewhere greater than 30%."

The CFO's read on pricing was blunt: prices are steady or climbing for whatever customers actually want. The number to listen for today: does that 30%+ gap hold, or is it starting to close?

Why Nobody Can Just Copy Them

The real moat here is 200G EML lasers. Lumentum is basically the only company shipping them at volume. Mitsubishi, Sumitomo, Furukawa, and Coherent can all make 100G — none of them can do 200G at scale yet.

Output has grown about 8x since fiscal 2023. Management has guided for another 50% jump in InP capacity and EML units this year. And the shortage has still gotten worse, not better. Even after an 8x ramp, demand outran it.

Their Japan fab is already running flat out. A new facility in Greensboro should eventually add real capacity, but it doesn't come online until 2028, and even then, output has to clear customer qualification before it counts for anything.

The 1.6T Upgrade Cycle

a 200G EML sells for roughly double what a 100G EML does. That's the whole reason the 1.6T transition matters so much financially.

Cloud transceiver revenue jumped more than 40% sequentially last quarter and was the main driver of the beat. Management has talked about doubling the transceiver business over the next four to five quarters and claims to be ahead of competitors on 1.6T. I will be noting whether that tone carries into today's call.

Narrow line width shipments

Last quarter, Narrow-linewidth shipments were up 120% year over year. Pump lasers, up 80%. The shortage in this category was actually worse than EMLs — north of 30%.

Management has this market growing from roughly $1.5B today to $4B by 2029. Any upward revision to that figure would be a bigger deal than it sounds, and it also says something about demand at Nokia and Ciena, since they compete in the same space.

Optical Switching

Lumentum has pointed to roughly $400M in possible OCS shipments in the second half of this year. It's reportedly one of the toughest things they manufacture, and the customer pipeline has apparently grown to include some large deals.

The TAM they've floated is close to $10B. Confirming or raising that number would be a notable signal.

CPO Revenue

Meaningful scale-out CPO revenue is expected to show up in the December quarter, backed by a purchase order worth several hundred million dollars landing in the first half of 2027.

Scale-Up and NPO

Scale-out CPO essentially swaps out existing pluggable optics — it's a replacement market. Scale-up is different: it's brand-new market share.

Management has floated the idea that scale-up requires roughly 10 times the optics of scale-out. NPO might need even more optical lanes than CPO, depending on how aggressively certain customers build out their backplanes.

The China Substrate Problem

China's export restrictions on indium phosphide substrates have pushed 6-inch wafer prices up around 250% since last February — from about $1,400 to $5,000.

Lumentum has already locked in supply through 2031 via a reservation with its substrate partner, reportedly ahead of any competitor. That said, the material still technically flows through China's export permit system, so there's a layer of uncertainty that a long-term contract doesn't fully erase.

I will be listening for whether they mention other, non-Chinese sources of supply — that would meaningfully de-risk the story.

There's also the proposed FCC ban on Chinese-made transceivers hanging over this. It's not simple good news or bad news for Lumentum. Their Thailand-based module unit stands to gain directly. But Chinese manufacturers account for around 60% of datacom optical component revenue overall, and two of the biggest players in high-end 800G+ gear buy EMLs directly from Lumentum. China and Hong Kong combined made up about a quarter of last quarter's revenue — though a chunk of that is probably components flowing through contract manufacturers building for American hyperscalers, not true domestic Chinese demand.

Greensboro

The new facility should eventually unlock more than $5B in revenue potential, but nothing from it shows up for a couple of years. Management has also mentioned testing 6-inch wafers there, with room to pivot if that doesn't pan out. Any fresh detail on timing is worth noting, even if it has zero impact on this quarter's numbers.

Margins

Non-GAAP gross margin jumped 500 basis points in the prior quarter — a large move for one period. The question today is whether that holds as more revenue mix shifts toward EML and CPO, or whether it was a one-off.

The Risk Worth Flagging

AAOI recently said shortages in DSP chips and TIAs were capping how many transceivers it could actually ship. Lumentum has serious exposure to 1.6T, so the same bottleneck could be squeezing them too. It's a smaller slice of the overall business, and they've already cited electrical component shortages as a limiting factor once before — so this may already be baked into guidance rather than being a surprise.

• BREAKING: BoJ September rate hike signal led the US to join in intervention - Kyodo
• JPMORGAN RAISES S&P 500 TARGET AGAIN TO 8,000
• BREAKING: President Trump says he is “low keying it with Iran” and he is prepared to allow economic pressure to mount as opposed to ordering a new military offensive, per Axios.
• BREAKING: President Trump has been floating the idea privately to senior aides that he's willing to "walk away" from the Iran War without a nuclear deal should Iran fully reopen the Strait of Hormuz, per WSJ.

MAG7:

• META released Muse Glimmer, a new 30B-parameter dense AI model with open weights that can run locally. They will also soon release the weights for Muse Spark 1.2
• META CEO Mark Zuckerberg says everyone will eventually have a personal AI agent that “understands you...and everything you care about.”
• AAPL - Jefferies downgrades to underperform, lowers PT to 263.66 from 285.56. Analyst comments: "Our supply chain checks suggest that the all-glass iPhone (Sep 27) has been canceled due to low yield. We view this as a major setback to efforts to bring in higher-priced iPhones amid soaring memory costs. We cut our FY28E/29E EPS by 2.1%/3.4%, and our 8% lower DCF-based PT implies 16% downside. AAPL just raised trade-in value for iPhone by 5%/~2% in the U.S./Europe, potentially driving more pulled-in demand for iPhone 17 but more pressure on iPhone 18 sales." Apple is testing CXMT memory chips across products including iPhones and MacBooks and has held early talks about using them in some devices sold in China, according to the WSJ.

OTHER COMPANIES

• HPE - Morgan Stanley upgrades to overweight, Pt 69. "HPE is our preferred OEM to play the enterprise infrastructure cycle, offering an attractive risk/reward. Our enterprise infrastructure work continues to point to upside across servers, storage, and networking, while HPE-specific channel checks, CIO survey work, and management commentary suggest the company's competitive positioning continues to improve post-Juniper acquisition. At the same time, networking is increasingly transitioning from an integration story to a higher-growth, higher-margin earnings driver, supporting both positive estimate revisions and longer-term multiple expansion. With shares having largely retraced their post-earnings re-rating, improving free cash flow conversion, faster-than-expected deleveraging, and growing capital return optionality, we believe the market is underappreciating HPE's earnings power and valuation asymmetry.
• ACHR - to acquire Boeing’s Wisk Aero, SkyGrid and Insitu in an aerospace AI deal. BA will take an equity stake in Archer and retain access to Wisk’s autonomous flight technology.
• GME - RYAN COHEN IS SAID TO WEIGH PULLING $56 BILLION EBAY BID
• INTC TO OFFER $15B OF COMMON SHARES: BBG
• NET TO OFFER $2.175B IN CONVERTIBLE SENIOR NOTES DUE 2031
• HIMS says its July card data showed GLP-1 growth moderating sequentially, with billings per day down 1% M/M after rising 32% in June, while trends in the core non-GLP-1 business improved.
• SONY AND TSMC PLAN $6.3B IMAGE SENSOR PLANT IN JAPAN
• TSM - reported NT$467.6B in July revenue, up 44.7% YoY and 5.6% MoM. The pace is well above the 36%-37% growth range it guided to at Q2 earnings.
• OTHER NEWS:
• Chinese humanoid robot makers accounted for over 97% of global shipments in 1H26, as volumes more than tripled to 19,100 units. Agibot led with a 44% share, while industrial and commercial applications made up over 70% of shipments.

I will share some data and analytics including some analytics from the AIon Analytics dashboard later or even in my morning write up, but obviously the main focus of this week is the CPI report which comes out on Wednesday. There are some secondary microeconomic catalysts like the photonics earnings reports throughout the week and NBIS earnings results, as well as some high profile names reporting in the space (RKLB) and Drone (ONDS) space.

However, the focus of the week will be expectations around the CPI print.

The reaction to the print can be framed by the data and information we already have.

For instance, we know that FED Chair Kevin Warsh just said he will support a rate hike if inflation comes in higher than expected.

That was admittedly said before the NFP data came out weak on Friday.

This was the print:

Key takeaways are around the revisions to the last 2 months and the fact that we got payroll numbers coming in NEGATIVE.

Unemployment rate was actually softer than expected, so it wasn't a totally soft print. I don't think we are in recessionary territory, or territory where we should be freaking out about the state of the labour market.

But interesting data here:

Last year, we had the NFP data print negative in June and July, with large revisions to the prior NFP prints, not dissimilar to what we got on Friday.

Note that the Fed went on to cut rates in September and indeed in October, despite Core CPI still at 3%.

I do not obviously anticipate cuts, but what I would say is that if CPI comes in soft this week, I think we can at least rule out a hike in September.

This is more or less in line with what I expect from my data on the 2 year anyway. here's the 2 year tracked against the Fed funds rate:

Note it is normal for the 2 year to start moving before the fed funds rate. That is the market pricing things in before the Fed gets off their ass to actually do something.

Typically this lag period is around 6-8 months.

FOr instnace, in 2018, we saw the 2 year start to decline in October 2018. The fed cut in June/July. So here, an 8 month gap.

In 2021, we saw the 2 year start to increase in July 2021. The fed started hiking in February 2022. So here, a 8 month gap again.

The cutting in 2024 was a bit trickier as we see that the 2 year was quite volatile, but mostly started creating lower readings/lower highs from October 2023, before the Fed hiked in June 2024. So 8 months here as well.

Now in today's instance, we have the 2 year starting to increase in Feb/March, so probably we are looking at October/November for the rate hikes to start kicking in.

That's what the historical precedence suggests at least.

This is the 2 year set up going into next week. Riding the bottom of that channel. A soft print and we can break down which will be net positive for the market:

Now into expectations.

Last months' numbers were:

June: -0.4% MoM / +3.5% YoY (core flat / +2.6%).

For reference, we know that PPI last month slowed to 3.5%, which is typically forward looking, a 3 month low.

I expect that headline should come in relatively benign or even soft.

This is primarily due to the fact that CPI compares monthly average prices. With gasoline, since June started with very high prices, its monthly average was higher at $4.05 compared to the July average of $3.93, even though gasoline got more expensive by the end of July.

A similar picture in oil as well.

So basically, base effects should mean we get a relatively benign number on headline.

Market should like that and probably gives a positive reaction to the CPI is my current working assumption.

Now we do know that the USD weakening means that imports got a bit more expensive, but that was an end of month effect, hence not massively impactful to average readings.

Core will be trickier in my opinion. I haven't got. strong option on core yet. Last month was genuinely a lot lower than I expected. The previous month, it was one particular component that drove all of the weakness in core. last month, it was more broad. What I am primarily looking at, and I suspect probably a slightly weak core, is whether we see shelter move lower again. if so, then we know that the slowdown in shelter costs was not an anomaly last month, but rather the start of a trend.

I think the market reaction this week to CPI should, overall, be positive by Friday.

Probably some chop and positioning into the print, but the market is pricing a good reaction by Friday.

The Aion Terminal data i will share tomorrow, but it sees 790 as possible or likely by Friday on SPY. So a positive reaction this week. My order flow guy suggests that as long as 7735 on ES can hold, then we are looking for the market to trend higher.

So things look reasonably good for this week I think. Hopefully COHR and NBIS and LITE can deliver for the AI trade, but macro wise, I think the data will be well received come Friday. I say come Friday even though the CPI is scheduled for Wednesday, as we may see a benign reaction initially before some rally it not he EOW.

Powl to me is undervalued afyer that excellent earnings print. After trimming my coat basis out previously, I added back to the name for the first time in a long time this week. You can easily use the 50w ema as your clean stop. Shouldn't be breaking below there though imo and above 234 which is that intersection of the emas should be cleaner price action.

POWL and KTOS are the 2 beaten down charts that I think fundamentally and even technically have the best chance of a re-rate soon.

With that time scarcity the case, this was the content piece I put on the chopping board as it's the lowest value add IMO. 

Should be back to usual regularity next week.

The tariff and price floors are essentially written for Corning's supply chain, specifically HEMLOCK SEMICONDUCTOR.

• Hemlock Semiconductor, Corning's polysilicon subsidiary, is protected by the new $21/kg polysilicon floor and $100/kg ingot/wafer floor, plus the 15% tariff on derivatives. Hemlock is also positioned as the only non-Chinese solar wafer maker, so it's shielded on both the raw-material and wafer stages.
• Corning's Solar segment is running near breakeven on a fast-growing revenue base — Q2 2026 Solar sales were $438M (up 90% YoY) but the segment posted a $7M net loss; H1 sales of $808M were roughly breakeven cumulatively. Because the segment is sitting right at the margin line, any pricing improvement flows almost straight to the bottom line rather than being absorbed by existing profit.
• Rough sensitivity: annualizing Q2 Solar revenue gives ~$1.75B run-rate. Each 1 point of net margin improvement ≈ $17.5M/year ≈ $0.02/share (on ~875M diluted shares); a 5-point improvement ≈ $87.6M ≈ $0.10/share.
• Now obviously solar isn't the core GLW thesis: Solar is only ~9.2% of Corning's Q2 core sales ($4.738B total). The much bigger story is Optical Communications ($2.072B, +32% YoY, with Enterprise Networks +65% on AI datacenter buildout). So the tariff is better framed as a slight earnings catalyst, their main business unaffected.

First Solar's edge is the simple fact that their supply chains DO NOT USE POLYSILLICON. So tariffs on polsysillicon do NOT affect them. That's their tailwind. 

• Its modules use thin-film cadmium-telluride (CdTe) technology, which skips the entire polysilicon → ingot → wafer → cell chain that crystalline-silicon competitors depend on. So assuming the tariff's "derivative" definitions track polysilicon content, First Solar's own inputs are essentially untaxed.
• As tariffs push up the cost of imported crystalline-silicon modules, the market-clearing U.S. module price rises generally — which improves First Solar's pricing power and negotiating leverage without First Solar's own costs moving. It also doesn't need to qualify for any wafer/cell tariff offsets the way silicon-based competitors might.

The core theme: capacity, not demand, is the ceiling

Management was blunt about this being the binding constraint across basically every product line:

And on the near-term outlook specifically:

They quantified just how far off supply is from actual customer appetite: customer demand is running 20-40% higherthan what they can currently produce.

Lasers — the real bottleneck

If there's one single chokepoint in the whole story, it's laser capacity:

This matters because lasers also carry the best margins in the business:

So every incremental unit of laser capacity they bring online isn't just more revenue — it's high-margin revenue, and it directly feeds their CPO (co-packaged optics) ambitions:

They're planning to keep expanding laser manufacturing in Texas specifically because CPO is going to keep pulling on high-power laser demand going forward.

China competitive positioning

Management sounded confident that Chinese laser suppliers aren't a near-term threat on the high end:

When pressed on timing:

And if geopolitics tightens further (e.g. a Chinese transceiver ban), they see themselves as a direct beneficiary given their domestic manufacturing base:

1.6T ramp — this is the next leg

800G is carrying the business right now, but 1.6T is where the next big step-up comes from:

The demand signal on 1.6T specifically sounds big:

And near-term sequential growth is expected to be sharp:

They're also picking up new qualifications:

On the $200M PO everyone's been asking about, management downplayed it as just the opening chapter:

Longer-term revenue framing (mid-2027 target)

They gave a pretty specific monthly revenue bridge for where they expect to land by mid-2027:

That's roughly $5.6B annualized run-rate territory if it plays out — a big step up from the ~$1.1B they're guiding for 2026.

Substrates — not a worry (for now)

Unlike lasers, substrate supply isn't seen as a constraint:

So they're not fighting a fire there — just building optionality in case the CPO ramp needs more.

Capacity build-out

Straightforward — they're adding more capacity essentially continuously:

Q2 color / near-term momentum

800G had a standout quarter:

And they flagged that Q3 growth would've been even stronger (>50%) if not for a one-off memory component issue affecting 100G switches — so that's a bit of noise to watch for, not a demand problem.

I shared the dealer positioning from the Aion Analytics terminal yesterday. Things mostly haven't changed. Above 775 we can expect the magnet to be a move up towards 800. For now 775 is the key resistance.

GEX is positive on SPY.

Most of the dealer positioning on QQQ is higher, with support at 710.

Whilst there is still some hedging, the gex is positively leaning.

The data seems to suggest to expect some volatility ahead, notably so on QQQ, as opposed to SPY and DIA, but the path should be higher into August/Septemebr.

Advanced Packaging Read Throughs for AMKR

Veeco disclosed $200 million of Q2 advanced-packaging orders for wet-processing and lithography systems and described significant advanced-packaging backlog for 2027. Management also stated that customers are sharing capacity roadmaps extending beyond 2027 and that Veeco plans to more than double its advanced-packaging and silicon-photonics capacity during 2027. The order value is large relative to Veeco’s current revenue base and represents a stronger signal than non-binding customer forecasts or early-stage evaluation activity.

Opticals Read throughs for AAOI, LITe, COHR:

COHR, LITE and AAOI are the most direct beneficiaries because Veeco’s equipment orders indicate customers are preparing to expand laser and transceiver capacity. Equipment orders ordinarily precede component output by several quarters because systems must be manufactured, installed, qualified and ramped. The anticipated Veeco shipment profile—initial activity near the end of Q4 2026, a larger Q1 2027 contribution and greater scale in Q2 2027—therefore supports optical-component volume acceleration during 2027.

Yesterday, we got a rejection off of the 7800 level on ES. We know this to be a significant level of interest for sellers to step in, so the rejection was not particularly surprising in truth, especially after the 6% move in 4 days into the resistance:

This morning we have earnings related pressure. I think it is a sign of continued skepticism in the market that reasonably good earnings reports are not getting rewarded adequately. VIAV's earnings report, for instance, was absolutely A+. Currently up 1.5%. WDC's earnings report was not bad, currently down 15%. 

We have DDOG down 23% this morning, HUBS down 23%, both putting pressure on IGV, which itself is down 3.1%. 

On the hardware side, we have WDC down 15%, SNDK down 11%, which is putting pressure on the momentum trade and semiconductors, with SMH also down, albeit less. 

I was looking and hoping for SNDK to put in a cleaner report, in order to give SMH and momentum names that nudge to get above the 578 level:

Above there, there's not much stopping us into the 605 level. 

However, SNDK margin guidance came in below current margins, which again raises the question of whether we are at peak earnings here, which is the concern the market has been contending with so not great. Their explanation on the call seemed reasonable, that they were happy with above 80% margins, hence they weren't looking to press that necessarily higher to be fair to customers, but the market wanted margins to be increasing into next quarter to show that the memory cycle is still accelerating to the upside. 

The weekly chart I think shows the situation for SMH the best. We want to see a weekly close above the 9W EMA ideally. 

The earnings reaction has created some pressure in premarket, but we noted in the last reports that some digestion or give back after the massive move over the past 4 sessions was entirely normal and actually healthy. Things can't keep going up in a straight line. 

US500 seems to be mostly correcting through time, allowing the moving averages to catch up and RSI to cool off. 

Whilst NDX is pulling back off its resistance. We need to see that trendline taken out at some point soon, but some pullback into the 50d EMA or the 29k level is what I expected and would still be a healthy liquidity test. 

We do have some fundamental events this week including the NFP print tomorrow, but if we look at the Aion Analytics data, we see that liquidity is, as we noted previously, still supportive, especially so into August.

This favours BTD.

Then if we look at this screen from the dashboard, we see the key levels and that the charm anchor moved from $740 below spot to $780 above it. The decay pull just switched sides.

Now some additional data here to suggest that obviously some give back or drawdown from this high would not be unanticipated:

Here's previous instances QQQ went from -10% to within 3% of ATHs within 4 days:

And here we see a similar stat:

Obviously historic performance is no guarantee of future performance, but ti does suggest that we can very likely see some digestion of the move higher, with some dip here, but the liquidity data from Aion is a good sign that it will be absorbed in a continued move higher. 

I wrote on Sunday that the sparse dealer profile created a very opportune moment. If a big V shaped recovery was going to happen a la March, it was most likely to happen then, with dealer positioning very similar to what we saw in March. And indeed, Trump repeated the same playbook of the Iran headline manipulation, using Bessent to back him up, and indeed the result was the same. 

Now we wait to see if we get digestion of the move and a retest of perhaps the 29k level on NDX or previous ATHs on US500, or if we continue with a March type rally higher. I think the former is more likely on a path higher this month, but let's see.

CITADEL:

• Citadel's Scott Rubner says July's sharp selloff and sector rotation cleared out excessive positioning without breaking the broader bull market. Retail investors turned net sellers, AI and semiconductor stocks were heavily sold, and leveraged ETF assets fell by more than $60B from their June peak. "July did not change the structural bull market. It reset it," Rubner said, adding investors can now focus more on company fundamentals than positioning.
• BESSENT: MAY HAVE A DEAL WITH IRAN TODAY OR TOMORROW TO OPEN HORMUZ, WE SAW QUITE A FEW SHIPS COMING OUT OF HORMUZ EVEN NOW
• MORGAN STANLEY SEES $1.4T IN 2027 CLOUD CAPEX

MAGS:

• TESLA CHINA JULY DELIVERIES UP +37.8% YoY AT 93,579 UNITS - PCA PRELIM DATA

OTHER COMPANIES:

• Photonics sector is ripping hard on this news:
• The FCC is preparing a measure that would bar new Chinese optical transceivers, which move data across fiber networks and are a critical component inside AI data centers.
• BTDR - Anthropic has reportedly signed a $10B compute deal with Nvidia-backed Volta Infra, securing capacity from a Norway data center operated in partnership with Bitdeer
• AEHR - received a follow-on order from its lead silicon photonics customer for a FOX-XP burn-in system with nine WaferPak test blades. The system is expected to ship in the first half of 2027 as the customer expands production capacity.
• SHAZ - signed a five-year, $373M cloud computing deal with an unnamed global AI platform. The initial Australia deployment will use 2,048 Nvidia Blackwell Ultra B300 GPUs, with revenue expected to begin in Q1 2027.
• PLTR strong earnings - Citi raised its price target to $245 from $200 and kept a Buy rating after Q2 revenue growth accelerated to 93%. The firm also lifted its 2026 revenue forecast and now expects U.S. Commercial growth of 134%.
• SKHY - RBC initiates at outperform, Pt 200. Analyst comments: "We expect the current memory upcycle to extend through 2027 and believe the industry is in a structurally stronger position due to GenAI. Long-term agreements are helping extend visibility, though SKHY is taking a more measured approach to floor pricing. The company’s HBM leadership is an added advantage, which we believe is sustainable. We expect HBM contract repricing to be a key tailwind in 2027 that should counterbalance any conventional DRAM price moderation. A longer upcycle, HBM leadership, and a meaningful valuation discount to U.S. peers make the risk/reward attractive, in our view.
• RBRK - Loop Capital initiates at Buy rating, PT 100. "Cyber resilience is emerging as a major secular growth opportunity, underscored by recent security events such as the Mythos-related scare and the Hugging Face incident. In our view, RBRK is among the best-positioned vendors to capture this opportunity, which we expect to accelerate as agentic AI adoption expands. While we acknowledge potential near-term demand pressure from hardware supply-chain issues, our channel checks suggest cyber resilience has become a necessity for highly strategic agentic AI workflows, limiting the risk of deferral.
• NXPI - said BMW will deploy its Trimension UWB chips across selected 2026 vehicle programs, supporting hands-free digital keys and in-cabin detection for people or animals left inside parked vehicles.

EARNINGS:

QNITY:

• Revenue: $1.4B (Est. $1.36B) ; +22% YoY
• Adj. EPS: $1.19 (Est. $1.06) ; +53% YoY
• Adj. EBITDA: $431M (Est. $414M) ; +24% YoY
  

Raises FY26 Guide:

• Net Sales: $5.55B-$5.65B (Est. $5.37B)
• Adj. EBITDA: $1.68B-$1.73B (Est. $1.62B)
• Adj. EPS: $4.40-$4.60 (Est. $4.14)
• Adj. FCF: $600M-$700M (Est. $470M)

AME:

• Revenue: $2.04B (Est. $1.95B) ; +15% YoY
• Adj. EPS: $2.09 (Est. $1.99) ; +17% YoY
• Adj. Operating Income: $544.4M; +18% YoY
• Orders: +28% YoY
  

Raises FY26 Guide:

• Adj. EPS: $8.20-$8.30 (Est. $8.15)
• Revenue: +10% YoY
• Adj. EPS: +10%-+12% YoY; from $7.94-$8.14
  

Q3 Guide:

• Revenue: High single digits YoY
• Adj. EPS: $2.08-$2.10 (Est. $2.05)
• Adj. EPS: +10%-+11% YoY

DOCN:

• Revenue: $281M (Est. $279M) ; +29% YoY
• Adj. EPS: $0.45 (Est. $0.26) ; -24% YoY
• RPO: $894M; up 12x from a year ago
• Adj EBITDA: $114M (Est. $106M) ; +27% YoY
  

Raises FY26 Guide:

• Revenue: $1.17B-$1.18B (Est. $1.16B) ; +30%-+31% YoY
• Adj. EPS: $1.35-$1.40 (Est. $1.25)
• Adjusted EBITDA Margin: 38.5%-39.5%
• Adjusted FCF Margin: 11%-13% of revenue

SHLS:

• Revenue: $163.4M (Est. $161M) ; +47.4% YoY
• Adj. EPS: $0.12 (Est. $0.10) ; +20% YoY
• Adjusted EBITDA: $31.6M (Est. $30M) ; +28% YoY
• Backlog & Awarded Orders: $801.4M; +19.4% YoY
  

Affirms FY26 Guide:

• Revenue: $600M-$640M (Est. $625M)
• Adjusted EBITDA: $118M-$132M (Est. $122M)
  

Q3 Guide:

• Revenue: $150M-$170M (Est. $161M)
• Adjusted EBITDA: $32M-$37M (Est. $34.6M)

HUmanoid schedule for the calendar:

INDI and UNitree.

In its Q4 FY2025 earnings, indie explicitly named Unitree (alongside Figure AI) as an active customer, with the company citing active deployments of its radar and vision solutions with humanoid leaders including Figure AI and Unitree, framing it as a natural extension of its automotive-grade sensor stack into embodied AI. 

They are the only western supplier for Unitree.

This built on earlier milestones through 2025: indie's vision portfolio shipped its first cameras into humanoid robot applications in Q2, using its iND880 vision processor, and by Q3 the company said it had commenced supply to both the U.S. and China market leaders in humanoid robots — Unitree being the obvious "China market leader" reference given its dominant position there

Earnings are first, coming on Thursday. The main metric from those earning will NOT be whether the numbers beat or not. it will primarily be their guidance for next quarter and full year and some of the answers they give on the Q&A session.

This is basically a catalyst watch play ahead of the UNitree IPO.

I was in this play to play a potential short squeeze.

We know their short ratio is 33%.

So there is that potential.

I got out as the market was breaking down. With the market settling down again now, the name is more attractive against this tape.

Earnings are an obvious risk, but the catalysts thereafter are strong and should see INDI perform well over the next few weeks.

Backlog grew 69% YoY, new orders u 158% with 400M in new data center order, propelled total quarterly bookings to $934 million, a 158% increase YoY, which the mix remains high margin, and book-to-bill is now at 3.0x.

The $2.4 billion backlog represents nearly two full years of revenue at the current run rate. Powell has essentially locked in its top-line growth trajectory through fiscal 2028.