0001633978false6/272026Q1P5DP5DP5YP5YP5DP5DP5DP5D0.01438080.00763190.01007110.0053257

Note 16. Subsequent Event

TBD.

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 27, 2025

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from

Commission File Number 001-36861

Lumentum Holdings Inc.

(Exact name of Registrant as specified in its charter)


Delaware						47-3108385
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification Number)

1001 Ridder Park Drive, San Jose, California 95131

(Address of principal executive offices including Zip code)

(408) 546-5483

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value of $0.001 per share	LITE	Nasdaq Global Select Market

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

As of October 28, 2025, the Registrant had 70.9 million shares of common stock outstanding.


TABLE OF CONTENTS
			Page
PART I - FINANCIAL INFORMATION
	Item 1.	Financial Statements (Unaudited)
		Condensed Consolidated Statements of Operations for the Three Months Ended September 2 7 , 2025 and September 2 8 , 2024	2
		Condensed Consolidated Statements of Comprehensive Income (Loss ) for the Three Months Ended September 27, 2025 and September 28, 2024	3
		Condensed Consolidated Balance Sheets as of September 27, 2025 and June 2 8 , 20 25	4
		Condensed Consolidated Statements of Cash Flows for the Three Months Ended September 27, 2025 and September 28, 2024	5
		Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended September 27, 2025 and September 28, 2024	7
		Notes to Condensed Consolidated Financial Statements	8
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	38
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	52
	Item 4.	Controls and Procedures	54

PART II - OTHER INFORMATION
	Item 1.	Legal Proceedings	55
	Item 1A.	Risk Factors	56
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	87
	Item 5.	Other Information	87
	Item 6.	Exhibits	88

SIGNATURES			89

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

LUMENTUM HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share data)

(Unaudited)


	Three Months Ended
	September 27, 2025		September 28, 2024
Net revenue	$	533.8	$	336.9
Cost of sales	332.8		236.5
Amortization of acquired developed intangibles	19.5		22.5
Gross profit	181.5		77.9
Operating expenses:
Research and development	81.4		74.3
Selling, general and administrative	85.1		76.3
Restructuring and related charges	8.3		9.7


Total operating expenses	174.8		160.3
Income (loss) from operations	6.7		(82.4)
Other income (expense), net:

Interest expense	(5.7)		(5.5)
Other income, net	4.2		8.7
Total other income (expense), net	(1.5)		3.2
Income (loss) before income taxes	5.2		(79.2)
Income tax provision	1.0		3.2
Net income (loss)	$	4.2	$	(82.4)

Net income (loss) per share:
Basic	$	0.06	$	(1.21)
Diluted	$	0.05	$	(1.21)

Shares used to compute net income (loss) per share:
Basic	70.3		68.3
Diluted	78.3		68.3

See accompanying Notes to Condensed Consolidated Financial Statements.

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LUMENTUM HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in millions)

(Unaudited)


	Three Months Ended
	September 27, 2025		September 28, 2024
Net income (loss)	$	4.2	$	(82.4)
Other comprehensive income, net of tax:
Foreign currency translation adjustments	(0.3)		—
Net change in unrealized gain on available-for-sale securities	0.4		2.3


Other comprehensive income, net of tax	0.1		2.3
Comprehensive income (loss), net of tax	$	4.3	$	(80.1)

See accompanying Notes to Condensed Consolidated Financial Statements.

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LUMENTUM HOLDINGS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions, except par value)

(Unaudited)


	September 27, 2025		June 28, 2025
ASSETS
Current assets:
Cash and cash equivalents	$	772.9	$	520.7
Short-term investments	348.9		356.4
Accounts receivable, net	307.0		250.0
Inventories	531.6		470.1
Prepayments and other current assets	125.2		120.1
Total current assets	2,085.6		1,717.3
Property, plant and equipment, net	794.8		726.4
Operating lease right-of-use assets, net	30.5		27.9
Goodwill	1,060.9		1,060.9
Other intangible assets, net	430.7		465.1
Deferred tax asset	204.6		210.3
Other non-current assets	6.0		10.8
Total assets	$	4,613.1	$	4,218.7
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	278.6	$	225.2
Accrued payroll and related expenses	69.3		57.9
Accrued expenses	45.5		34.6
Current portion of long-term debt	1,079.0		10.6
Operating lease liabilities, current	12.2		11.4
Other current liabilities	41.6		53.1
Total current liabilities	1,526.2		392.8
Long-term debt	2,164.5		2,562.6

Operating lease liabilities, non-current	24.5		23.6
Deferred tax liability	6.0		7.2
Other non-current liabilities	111.1		97.8
Total liabilities	3,832.3		3,084.0
Commitments and contingencies (Note 13)
Stockholders’ equity:
Common stock, $0.001 par value, 990 authorized shares, 70.9 and 69.8 shares issued and outstanding as of September 27, 2025 and June 28, 2025, respectively	0.1		0.1
Additional paid-in capital	1,628.6		1,986.8
Accumulated deficit	(857.0)		(861.2)
Accumulated other comprehensive income	9.1		9.0
Total stockholders’ equity	780.8		1,134.7
Total liabilities and stockholders’ equity	$	4,613.1	$	4,218.7

See accompanying Notes to Condensed Consolidated Financial Statements.

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LUMENTUM HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

(Unaudited)


	Three Months Ended
	September 27, 2025		September 28, 2024
OPERATING ACTIVITIES:
Net income (loss)	$	4.2	$	(82.4)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation expense	27.8		27.0
Stock-based compensation	42.4		35.6
Bad debt recovery	(0.1)		—
Change in valuation allowance on deferred tax assets	(0.3)		—


Amortization and write-off of acquired intangibles	34.4		43.6
Loss on sales and dispositions of property, plant and equipment	0.4		0.2
Amortization of debt discount and debt issuance costs	0.8		0.7
Inducement expense on partial repurchase of 2026 Notes	5.9		—
Write-off of right-of-use assets	—		5.3
Other non-cash items	(3.0)		(0.3)
Changes in operating assets and liabilities:
Accounts receivable	(56.9)		(3.8)
Inventories	(57.5)		(6.5)
Operating lease right-of-use assets, net	(2.6)		(0.2)
Prepayments and other current and non-currents assets	(2.4)		(16.6)
Income taxes, net	(1.9)		7.2
Accounts payable	28.8		32.6
Accrued payroll and related expenses	11.4		5.9
Operating lease liabilities	1.7		1.0
Accrued expenses and other current and non-current liabilities	24.8		(9.7)
Net cash provided by operating activities	57.9		39.6
INVESTING ACTIVITIES:
Payments for acquisition of property, plant and equipment	(76.2)		(74.1)


Purchases of short-term investments	(58.3)		(63.9)
Proceeds from maturities and sales of short-term investments	66.7		90.7

Proceeds from the sales of property, plant and equipment	—		0.2
Net cash used in investing activities	(67.8)		(47.1)
FINANCING ACTIVITIES:

Proceeds from the issuance of 2032 Notes, net of issuance costs	1,255.7		—
Proceeds from term loans	—		76.5

Proceeds from the exercise of stock options	1.5		0.9
Payment for partial repurchase of 2026 Notes	(843.1)		—
Payment for 2032 capped call options	(102.0)		—
Payment of withholding taxes related to net share settlement of restricted stock units	(47.4)		(16.0)


Principal payments on term loans	(2.6)		(0.4)
Payment of acquisition related holdback	—		(1.0)
Net cash provided by financing activities	262.1		60.0

Increase in cash and cash equivalents	252.2		52.5
Cash and cash equivalents at beginning of period	520.7		436.7
Cash and cash equivalents at end of period	$	772.9	$	489.2



Supplemental disclosure of cash flow information:
Cash paid (refund) for taxes, net	$	3.2	$	(4.2)
Cash paid for interest	0.1		0.1

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LUMENTUM HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

(Unaudited)


Supplemental disclosure of non-cash investing and financing activities:

Unpaid debt issuance costs related to the issuance of 2032 Notes	1.1	—


Right-of-use assets obtained in exchange for new operating lease liabilities	5.2	3.7

See accompanying Notes to Condensed Consolidated Financial Statements.

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LUMENTUM HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(in millions)

(Unaudited)




	Common Stock		Additional Paid-In Capital			Accumulated Deficit		Accumulated Other Comprehensive Income				Total Stockholders' Equity
		Shares			Amount




























Balance as of June 28, 2025		69.8	$	0.1		$	1,986.8	$	(861.2)	$	9.0		$	1,134.7
Net income		—	—			—		4.2		—			4.2
Other comprehensive income		—	—			—		—		0.1			0.1
Issuance of shares in connection with vesting of restricted stock units and performance stock units		1.3	—			—		—		—			—
Withholding taxes related to net share settlement of restricted stock units		(0.4)	—			(47.4)		—		—			(47.4)
Exercise of stock options		0.2	—			1.5		—		—			1.5
ESPP shares issued		—	—			—		—		—			—
Stock-based compensation		—	—			46.4		—		—			46.4
Fair value of incremental consideration on partial repurchase of 2026 Notes		—	—			(256.9)		—		—			(256.9)
Capped call options related to 2032 Notes, net of tax		—	—			(101.8)		—		—			(101.8)
Balance as of September 27, 2025		70.9	$	0.1		$	1,628.6	$	(857.0)	$	9.1		$	780.8




	Common Stock		Additional Paid-In Capital			Accumulated Deficit		Accumulated Other Comprehensive Income				Total Stockholders' Equity
		Shares			Amount
Balance as of June 29, 2024		67.9	$	0.1		$	1,835.0	$	(887.1)	$	9.3		$	957.3
Net loss		—	—			—		(82.4)		—			(82.4)
Other comprehensive income		—	—			—		—		2.3			2.3
Issuance of shares in connection with vesting of restricted stock units and performance stock units		0.9	—			—		—		—			—
Withholding taxes related to net share settlement of restricted stock units		(0.3)	—			(16.0)		—		—			(16.0)
Exercise of stock options		0.1	—			0.9		—		—			0.9

Stock-based compensation		—	—			33.8		—		—			33.8


Balance as of September 28, 2024		68.6	$	0.1		$	1,853.7	$	(969.5)	$	11.6		$	895.9

See accompanying Notes to Condensed Consolidated Financial Statements.

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LUMENTUM HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. Description of Business and Summary of Significant Accounting Policies

Description of Business

Lumentum Holdings Inc. (“we,” “us,” “our”, “Lumentum” or the “Company”) is a leading provider of optical and photonic products and is recognized as an industry leader based on revenue and market share. Our products are essential to a range of cloud, artificial intelligence and machine learning (“AI/ML”), telecommunications, consumer, and industrial end-market applications. The Company operates in one reportable segment.

We disaggregate revenue by type of product, which are Components and Systems, and by geography. A Components product is defined as one of the individual building blocks that goes into creating a larger solution. It is typically not a complete product on its own but rather a specialized element that enables system functionality. This includes semiconductor laser chips, laser sub-assemblies, line subsystems and wavelength management systems. These are supplied to customers who then integrate them into their own full system solutions. Components represent foundational parts that support or enable that system’s operation and include a comprehensive portfolio of optical and photonic chips, components, laser light sources that are integrated into smartphones, subsystems supplied to cloud data center operators, AI/ML infrastructure providers, and network equipment manufacturer customers who are building cloud data center and network infrastructures.

A Systems product is defined as a complete, stand-alone product that delivers full functionality to the end customer. It is typically self-contained and ready to operate within a customer’s network or application environment. This includes optical modules, optical circuit switches, and industrial lasers such as short-pulse solid-state lasers and kilowatt-class fiber lasers. These products integrate multiple technologies and subsystems into a finished solution that directly addresses a customer’s needs. A system represents the end-product that can be deployed and used independently.

Our products enable high-capacity optical links for cloud computing, AI/ML workloads, and data center interconnect (“DCI”) applications, as well as for communications service provider networks. Our offerings support access (local), metro (intracity), long-haul (intercity and global), and submarine (undersea) network infrastructure. Our products serve enterprise network infrastructure needs, including storage area networks (“SANs”), local area networks (“LANs”), and wide area networks (“WANs”). Demand for our products is fueled by the ongoing expansion of network capacity required to support cloud services, AI/ML processing, streaming video, video conferencing, wireless and mobile connectivity, and the internet of things (“IoT”). In addition, our industrial laser products are used for precision material processing across diverse industries, including semiconductor and microelectronics fabrication, electric vehicle and battery production, metal cutting and welding, and advanced manufacturing that emphasize greater manufacturing precision, flexibility, and sustainability.

Basis of Presentation

We have prepared the condensed consolidated financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”), which requires management to make estimates and assumptions that affect the amounts reported in our condensed consolidated financial statements and accompanying notes. Management bases its estimates on historical experience and various other assumptions believed to be reasonable. Although these estimates are based on management’s best knowledge of current events and actions that may impact the Company in the future, actual results may be different from the estimates. Our critical accounting policies are those that affect our financial statements materially and involve difficult, subjective or complex judgments by management. These policies are inventory valuation, revenue recognition, income taxes, goodwill and business combinations.

Prior to fiscal year 2026, we operated in two reportable segments consisting of Cloud & Networking and Industrial Tech. During the first quarter of fiscal year 2026, the Company implemented a re-organization, under which it will be managed as a single, integrated enterprise, with a unified management team overseeing operations across the entire company, rather than through discrete operating segments. The chief operating decision maker (“CODM”) is the Company’s Chief Executive Officer, who reviews financial information presented as a single enterprise for purposes of allocating resources and evaluating financial performance. Accordingly, we determined we operate in a single reporting segment. Comparative prior period segment information has been updated to reflect the new segment structure and measures. The changes in our operating segments had no impact on our previously reported consolidated results of operations, financial position or cash flows. Refer to “Note 14. Operating Segments and Geographic Information” for more details.

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LUMENTUM HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Our business and operating results depend significantly on general market and economic conditions. The current global macroeconomic environment is volatile and continues to be adversely impacted by many factors including inflation, a dynamic supply chain and demand environment, changes in trade policies, including heightened, scheduled, or threatened tariffs, trade restrictions including for certain rare earth minerals, and signs of a fluctuating macroeconomic environment.

The Company is actively monitoring and assessing the ongoing global trade environment, particularly with respect to recent changes in trade restrictions and tariff regulations. We have assessed the potential impacts of heightened restrictions and tariffs on our allowance for credit losses, the carrying value of our goodwill and other long-lived assets, inventory valuation, and revenue recognition. While we have determined there was not a material impact to our condensed consolidated financial statements as of September 27, 2025 and for the quarter ended September 27, 2025, import tariffs implemented by the U.S. and other countries, as currently in effect and/or proposed, could have a material impact on our results for the remainder of fiscal year 2026 and in the future. The impact of tariffs is dependent upon negotiations with customers and suppliers and other mitigation efforts and potential further changes in global trade policies, including higher tariffs in the U.S. or other countries.

Fiscal Years

We utilize a 52-53 week fiscal year ending on the Saturday closest to June 30th. Every fifth or sixth fiscal year will have a 53-week period. The additional week in a 53-week year is added to the third quarter, making such quarter consist of 14 weeks. Our fiscal 2026 is a 52-week year ending on June 27, 2026, with the quarter ended September 27, 2025 being a 13-week quarterly period. Our fiscal 2025 was a 52-week year that ended on June 28, 2025, with the quarter ended September 28, 2024 being a 13-week quarterly period.

Principles of Consolidation

The condensed consolidated financial statements are prepared in accordance with GAAP and includes the accounts of Lumentum Holdings Inc. and its wholly owned subsidiaries. All inter-company transactions and balances are eliminated in consolidation.

Accounting Policies

The condensed consolidated financial statements and accompanying notes should be read in conjunction with the audited consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the fiscal year ended June 28, 2025. There were no significant changes to our accounting policies during the three months ended September 27, 2025, except as noted below:

Income Taxes

In accordance with the authoritative guidance on accounting for income taxes, we recognize income taxes using an asset and liability approach. This approach requires the recognition of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in our consolidated financial statements or tax returns. The measurement of current and deferred taxes is based on provisions of the enacted tax law, and the effects of future changes in tax laws or rates are not anticipated.

The authoritative guidance provides for recognition of deferred tax assets if the realization of such deferred tax assets is more likely than not to occur based on an evaluation of both positive and negative evidence and the relative weight of the evidence. We consider future growth, forecasted earnings, future taxable income, the mix of earnings in the jurisdictions in which we operate, historical earnings, taxable income in prior years, if carry-back is permitted under the law, and prudent and feasible tax planning strategies in determining the need for a valuation allowance.

In the event we determine that we would not be able to realize all or part of our net deferred tax assets in the future, an adjustment to the deferred tax assets valuation allowance would be charged to earnings in the period in which we make such a determination, or goodwill would be adjusted at our final determination of the valuation allowance related to an acquisition within the measurement period. Conversely, if we later determine that it is more likely than not that all or a portion of the net deferred tax assets will be realized, we would reverse the applicable portion of the previously established valuation allowance. A release of valuation allowance decreases income tax expense in the period of release, increases net income, and reduces our effective tax rate. Such releases may be material to our financial statements depending on the size of the deferred tax assets involved.

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LUMENTUM HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

In the fourth quarter of fiscal 2025, we released $153.1 million of valuation allowances on our UK deferred tax assets after we considered all available positive and negative evidence related to our UK subsidiary. We analyzed the UK subsidiary’s historical operating results, projected future taxable income, tax planning strategies, and reversals of deferred tax liabilities, and determined that the weight of available objectively verifiable positive evidence supported the realizability of the UK deferred tax assets. In weighing the available evidence, more weight was placed upon our forecasts of future taxable income than on the history of pre-tax losses as such losses were generated under our prior UK business operating model which will no longer be in effect beginning with fiscal year 2026, and the guarantee of a positive operating margin as we effectuated an internal restructuring at the end of fiscal year 2025. Further, the most significant deferred tax asset in the UK is the net operating loss carryforward. Under UK tax law, net operating losses may be carried forward indefinitely, and we have considered the indefinite carryforward period to be positive evidence.

We are subject to income tax audits by the respective tax authorities of the jurisdictions in which we operate. The determination of our income tax liabilities in each of these jurisdictions requires the interpretation and application of complex, and sometimes uncertain, tax laws and regulations. The authoritative guidance on accounting for income taxes prescribes both recognition and measurement criteria that must be met for the benefit of a tax position to be recognized in the financial statements. If a tax position taken, or expected to be taken, in a tax return does not meet such recognition or measurement criteria, an unrecognized tax benefit liability is recorded. If we ultimately determine that an unrecognized tax benefit liability is no longer necessary, we reverse the liability and recognize a tax benefit in the period in which it is determined that the unrecognized tax benefit liability is no longer necessary.

Our income tax provision is highly dependent on the geographic distribution of our worldwide earnings or losses, tax laws and regulations in various jurisdictions, tax incentives, the availability of tax credits and loss carryforwards, and the effectiveness of our tax planning strategies. The application of tax laws and regulations is subject to legal and factual interpretation, judgment and uncertainty. Tax laws themselves are subject to change as a result of changes in fiscal policy, changes in legislation, and the evolution of regulations and court rulings and tax audits.

The recognition and measurement of current taxes payable or refundable and deferred tax assets and liabilities requires that we make certain estimates and judgments. Changes to these estimates, including changes in judgment regarding the realizability of deferred tax assets and the need for or release of valuation allowances, may have a material impact on our tax provision, net income, and effective tax rate in a future period.

Note 2. Recently Issued Accounting Pronouncements

Accounting Pronouncements Recently Adopted

In November 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2024-04, Debt with Conversion and Other Options (Subtopic 470-20): Induced Conversions of Convertible Debt Instruments, which clarifies the requirements related to accounting for the settlement of a debt as an induced conversion. ASU No. 2024-04 is intended to improve the relevance and consistency in application of the induced conversion guidance in Subtopic 470-20 for convertible debt instruments with cash conversion features and debt instruments that are not currently convertible, when the the face value of the debt is settled in cash. We have early adopted ASU No. 2024-04 in the first quarter of fiscal year 2026 and applied the accounting in the partial repurchase of our 2026 Notes in September 2026. Refer to “Note 8. Debt” for detailed discussion of this transaction.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income tax paid. We have adopted ASU No. 2023-09 beginning in fiscal year 2026; however, it has no material impact on our condensed consolidated financial statements and disclosures for the first quarter of fiscal year 2026.

In March 2024, the FASB issued ASU No. 2024-02: Codification Improvements - Amendments to Remove References to the Concepts Statements, which contains amendments to the Codification that remove references to various FASB Concepts Statements. We have adopted ASU No. 2024-02 in the first quarter of fiscal year 2026 and it did not have a material impact on our condensed consolidated financial statements and disclosures as a result of the adoption.

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LUMENTUM HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Accounting Pronouncements Not Yet Effective

In September 2025, the FASB issued ASU No. 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Sub-topic 350-40), Targeted Improvements to the Accounting for Internal-Use Software, which amends certain aspects of the accounting for and disclosure of software costs under ASC 350-40. The amendments also supersede the guidance on Web site development costs in ASC 350-50 and relocate that guidance, along with the recognition requirements for development costs specific to Web sites, to ASC 350-40. ASU No. 2025-06 is effective for fiscal years beginning after December 15, 2027, with early adoption permitted. We plan to adopt ASU No. 2025-06 in the first quarter of fiscal year 2029. We are currently evaluating the impact of this ASU on our financial statements and disclosures.

In July 2025, the FASB issued ASU No. 2025-05, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses for Accounts Receivable and Contract Assets, which amends ASC 326-20 to provide a practical expedient for all entities, related to the estimation of expected credit losses for current accounts receivable and current contract assets that arise from transactions accounted for under ASC 606. ASU No. 2025-05 is effective for fiscal years beginning after December 15, 2025, with early adoption permitted. We plan to adopt ASU No. 2025-05 in the first quarter of fiscal year 2027. We are currently evaluating the impact of this ASU on our financial statements and disclosures.

In May 2025, the FASB issued ASU No. 2025-04, Compensation - Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606), which is intended to reduce diversity in practice and improve existing guidance, primarily by revising the definition of a “performance condition” and eliminating forfeiture policy election for service conditions associated with share-based consideration payable to a customer. In addition, ASU No. 2025-04 clarifies that the guidance in ASC 606 on the variable consideration constraints does not apply to share-based consideration payable to a customer regardless of whether an award’s grant date has occurred (as determined under ASC 718). ASU No. 2025-04 is effective for fiscal years beginning after December 15, 2026, with early adoption permitted. We plan to adopt ASU No. 2025-04 in the first quarter of fiscal year 2028. We are currently evaluating the impact of this ASU on our financial statements and disclosures.

In May 2025, the FASB issued ASU No. 2025-03, Business Combinations (Topic 805) and Consolidation (Topic 810), which revises the guidance in ASC 805 to clarify that, in determining the accounting acquirer in a business combination that is effected primarily by exchanging equity interests in which a VIE is acquired, an entity would be required to consider the factors in ASC 805-10-55-12 through 55-15. Previously, the accounting acquirer in such transactions was always the primarily beneficiary. ASU No. 2025-03 is effective for fiscal years beginning after December 15, 2026, with early adoption permitted. We plan to adopt ASU No. 2025-04 in the first quarter of fiscal year 2028. We are currently evaluating the impact of this ASU on our financial statements and disclosures.

In November 2024, the FASB issued ASU No. 2024-03, Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40), which requires disaggregation of certain expense captions into specified categories in disclosures within the footnotes to the financial statements. In January 2025, the FASB issued ASU No. 2025-01, which revises the effective date of ASU No. 2024-03, to clarify that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted. We plan to adopt ASU No. 2024-04 in the first quarter of fiscal year 2028. We are currently evaluating the impact of this ASU on our financial statements and disclosures.

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LUMENTUM HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 3. Earnings Per Share

The following table sets forth the computation of basic and diluted net income (loss) per share (in millions, except per share data):


	Three Months Ended
	September 27, 2025		September 28, 2024
Numerator:
Net income (loss) - basic and diluted	$	4.2	$	(82.4)

Denominator:
Weighted average common shares outstanding - basic	70.3		68.3
Effect of dilutive securities from ESPP	0.1		—
Effect of dilutive securities from stock options	0.4
Effect of dilutive securities from RSUs and PSUs	1.9		—
Shares issuable assuming conversion of the convertible notes	5.6		—
Weighted average common shares outstanding - diluted	78.3		68.3

Net income (loss) per share:
Basic	$	0.06	$	(1.21)
Diluted	$	0.05	$	(1.21)

Potentially dilutive common shares result from the assumed exercise of outstanding stock options, assumed vesting of equity awards, and assumed issuance of stock under the ESPP, all using the treasury stock method.

Potentially dilutive common shares issuable upon conversion of our outstanding convertible notes are determined using the if-converted method.

There were no anti-dilutive shares excluded from the calculation of diluted net income per share during the three months ended September 27, 2025. Anti-dilutive shares excluded from the calculation of diluted net loss per share for the three months ended September 28, 2024 include 4.8 million shares issuable under restricted stock units (“RSUs”) and performance stock units (“PSUs”), 0.1 million shares issuable under the Employee Stock Purchase Plan (the “ESPP”), and 1.0 million shares outstanding related to stock options. Refer to “Note 12. Equity.

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LUMENTUM HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 4. Cash, Cash Equivalents and Short-term Investments

The following table summarizes our cash, cash equivalents and short-term investments by category for the periods presented (in millions):


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
September 27, 2025:
Cash	$	347.6	$	—	$	—	$	347.6
Cash equivalents:



Money market funds	125.6		—		—		125.6



U.S. Treasury securities	299.7		—		—		299.7

Total cash and cash equivalents	$	772.9	$	—	$	—	$	772.9
Short-term investments:

Commercial paper	2.7		—		—		2.7

Corporate debt securities	205.1		0.6		(0.1)		205.6



U.S. Agency securities	77.1		0.1		—		77.2
U.S. Treasury securities	63.2		0.2		—		63.4
Total short-term investments	$	348.1	$	0.9	$	(0.1)	$	348.9

June 28, 2025:
Cash	$	349.5	$	—	$	—	$	349.5
Cash equivalents:
Commercial paper	2.5		—		—		2.5

Money market funds	161.7		—		—		161.7
U.S. Treasury securities	7.0		—		—		7.0

Total cash and cash equivalents	$	520.7	$	—	$	—	$	520.7
Short-term investments:

Commercial paper	$	2.7	$	—	$	—	$	2.7

Corporate debt securities	210.9		0.3		(0.1)		211.1



U.S. Agency securities	67.6		0.1		—		67.7
U.S. Treasury securities	74.8		0.1		—		74.9
Total short-term investments	$	356.0	$	0.5	$	(0.1)	$	356.4

We review our investment portfolio to identify and evaluate investments that have indicators of possible impairment. Factors considered in determining whether a loss is other-than-temporary include, but are not limited to, the length of time and extent a security’s fair value has been below its cost, the financial condition and near-term prospects of the investee, the credit quality of the security’s issuer, likelihood of recovery and our intent and ability to hold the security for a period sufficient to allow for any anticipated recovery in value. For the debt instruments we own, we also evaluate whether we have the intent to sell the security or whether it is more likely than not that we will be required to sell the security before recovery of its cost basis. We have not recorded our unrealized losses on our short-term investments into income because we do not intend to sell nor is it more likely than not that we will be required to sell these investments prior to recovery of their amortized cost basis.

We use the specific-identification method to determine any realized gains or losses from the sale of our short-term investments classified as available-for-sale. During the three months ended September 27, 2025 and September 28, 2024, we did not realize significant gains or losses on a gross level from the sale of our short-term investments classified as available-for-sale.

During the three months ended September 27, 2025 and September 28, 2024, our other income, net was $4.2 million and $8.7 million, respectively, which includes interest and investment income on cash equivalents and short-term investments of $8.6 million and $9.4 million, respectively.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

As of September 27, 2025 and June 28, 2025, we recorded interest receivables of $4.9 million and $5.2 million, respectively, in prepayments and other current assets within the condensed consolidated balance sheets. We did not recognize an allowance for credit losses against interest receivables in any of the periods presented.

The following table summarizes unrealized losses on our cash equivalents and short-term investments by category that have been in a continuous unrealized loss position for more than 12 months and less than 12 months as of the periods presented, respectively (in millions):


	Continuous Loss Position for More Than 12 Months				Continuous Loss Position for Less Than 12 Months				Gross Unrealized Losses
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
September 27, 2025:
U.S. Agency securities	$	16.0	$	—	$	—	$	—	$	—

Commercial paper	2.7		—		—		—		—

Corporate debt securities	32.5		(0.1)		3.0		—		(0.1)



U.S. government bonds	20.0		—		—		—		—
Total	$	71.2	$	(0.1)	$	3.0	$	—	$	(0.1)

June 28, 2025:
U.S. Agency securities	$	—	$	—	$	24.5	$	—	$	—

Commercial paper	—		—		5.2		—		—
Corporate debt securities	—		—		73.8		(0.1)		(0.1)


U.S. government bonds	—		—		35.3		—		—
Total	$	—	$	—	$	138.8	$	(0.1)	$	(0.1)

The following table classifies our short-term investments by remaining maturities (in millions):


	September 27, 2025				June 28, 2025
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due within 1 year	$	123.7	$	123.9	$	139.9	$	140.0
Due in 1 year to 5 years	224.4		225.0		216.1		216.4


Total	$	348.1	$	348.9	$	356.0	$	356.4

All available-for-sale securities have been classified as current, based on management’s intent and ability to use the funds in current operations.

Note 5. Fair Value Measurements

We determine fair value based on the fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value assumes that the transaction to sell the asset or transfer the liability occurs in the principal or most advantageous market for the asset or liability and establishes that the fair value of an asset or liability shall be determined based on the assumptions that market participants would use in pricing the asset or liability. The classification of a financial asset or liability within the hierarchy is based upon the lowest level input that is significant to the fair value measurement. The fair value hierarchy prioritizes the inputs into three levels that may be used to measure fair value:


Level 1:			Inputs are unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2:			Inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument.
Level 3:			Inputs are unobservable inputs based on our assumptions.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The fair value of our Level 1 financial instruments, such as money market funds and U.S. Treasury securities, which are traded in active markets, is based on quoted market prices for identical instruments. The fair value of our Level 2 fixed income securities is obtained from an independent pricing service, which may use quoted market prices for identical or comparable instruments or model driven valuations using observable market data or inputs corroborated by observable market data. Our marketable securities are held by custodians who obtain investment prices from a third-party pricing provider that incorporates standard inputs in various asset price models. Our procedures include controls to ensure that appropriate fair values are recorded, including comparing the fair values obtained from our pricing service against fair values obtained from another independent source.

Financial assets measured at fair value on a recurring basis are summarized below (in millions):


	Level 1		Level 2		Level 3		Total
September 27, 2025: (1)
Assets:
Cash equivalents:



Money market funds	$	125.6	$	—	$	—	$	125.6


U.S. Treasury securities	299.7		—		—		299.7


Short-term investments:

Commercial paper	—		2.7		—		2.7

Corporate debt securities	—		205.6		—		205.6



U.S. Agency securities	—		77.2		—		77.2
U.S. Treasury securities	63.4		—		—		63.4
Total assets	$	488.7	$	285.5	$	—	$	774.2

(1) Excludes $347.6 million in cash held in our bank accounts as of September 27, 2025.


	Level 1		Level 2		Level 3		Total
June 28, 2025 (1)
Assets:
Cash equivalents:
Commercial paper	$	—	$	2.5	$	—	$	2.5

Money market funds	161.7		—		—		161.7

U.S. Treasury securities	7.0		—		—		7.0
Short-term investments:

Commercial paper	—		2.7		—		2.7

Corporate debt securities	—		211.1		—		211.1



U.S. Agency securities	—		67.7		—		67.7
U.S. Treasury securities	74.9		—		—		74.9
Total assets	$	243.6	$	284.0	$	—	$	527.6

(1) Excludes $349.5 million in cash held in our bank accounts as of June 28, 2025.

Financial Instruments Not Recorded at Fair Value on a Recurring Basis

We report our financial instruments at fair value with the exception of our convertible notes, refer to “Note 8. Debt”. The estimated fair value of the convertible notes was determined based on the trading price of the convertible notes as of the last day of trading for the period. We consider the fair value of the convertible notes to be a Level 2 measurement as they are not actively traded in markets.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The carrying amounts and estimated fair values of the convertible notes are as follows for the periods presented (in millions):


	September 27, 2025				June 28, 2025
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
2032 Notes	$	1,254.6	$	1,444.3	$	—	$	—
2029 Notes	600.4		1,442.8		600.2		925.5
2028 Notes	858.0		1,195.1		857.7		890.2
2026 Notes	468.3		782.3		1,048.3		1,233.3
	$	3,181.3	$	4,864.5	$	2,506.2	$	3,049.0

As of September 27, 2025, the carrying amount of our term loans is not significantly different from its fair value.

Assets Measured at Fair Value on a Non-Recurring Basis

We periodically review our intangible and other long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Determination of recoverability is based on the lowest level of identifiable estimated undiscounted cash flows resulting from use of the asset and its eventual disposition. If not recoverable, an impairment loss would be calculated based on the excess of the carrying amount over the fair value.

Management utilizes various valuation methods, including an income approach, a market approach and a cost approach, to estimate the fair value of intangibles and other long-lived assets. During the annual impairment testing performed in the fourth quarter of fiscal 2025, we concluded that there was no impairment of our intangible and other long-lived assets. We review our intangible and other long-lived assets for impairment at least annually in the fourth quarter of each fiscal year, absent any interim indicators of impairment. There were no indicators of impairment during the three months ended September 27, 2025.

Note 6. Balance Sheet Details

Allowance for Current Expected Credit Losses

We did not have any allowance for credit losses other than our allowance for uncollectible accounts receivable. As of September 27, 2025 and June 28, 2025, the allowance for credit losses on our trade receivables was $3.4 million and $3.5 million, respectively.

Inventories

The components of inventories were as follows (in millions):


	September 27, 2025		June 28, 2025
Raw materials and purchased parts	$	245.2	$	253.2
Work in process	230.5		159.1
Finished goods	55.9		57.8
Inventories	$	531.6	$	470.1

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LUMENTUM HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Property, Plant and Equipment, Net

The components of property, plant and equipment, net were as follows (in millions):


	September 27, 2025		June 28, 2025
Land	$	105.8	$	108.6
Buildings and improvements	293.4		270.4
Machinery and equipment	895.2		848.8
Computer equipment and software	40.7		39.1
Furniture and fixtures	13.9		14.7
Leasehold improvements	45.9		45.9

Construction in progress	174.3		152.3
	1,569.2		1,479.8
Less: Accumulated depreciation	(774.4)		(753.4)
Property, plant and equipment, net	$	794.8	$	726.4

Our construction in progress primarily includes building improvements and machinery and equipment that we expect to place in service in the next 12 months.

On December 17, 2024, we entered into an agreement to sell our net assets in an entity in Shenzhen, China. On March 5, 2025, we completed the sale and received net proceeds of $47.8 million, which was net of cash of $17.6 million and direct selling costs of $1.1 million. The net assets sold consist primarily of building, building improvements and land rights as of December 17, 2024 with a net carrying value of $12.9 million, and were used for manufacturing and research and development activities. As a result, we recognized a gain on sale of facility of $34.9 million, which was recorded in our condensed consolidated statements of operations for the year ended June 28, 2025. We paid $4.4 million of withholding taxes on this sale transaction, which is recorded as part of the income tax provision for the year ended June 28, 2025. We also incurred $0.7 million of indirect selling expenses related to this transaction, which was recorded as part of selling, general and administrative expenses in our condensed consolidated statements of operations for the year ended June 28, 2025.

In July 2024, we purchased the land and building of our wafer fabrication facility located in Sagamihara, Japan for a total transaction price of $42.2 million including $1.3 million of incremental direct costs for fees paid to third parties that were capitalized. We also recorded a $16.3 million increase in the carrying value of buildings purchased related to the termination of leases for the purchased building. The total carrying value of assets purchased was $58.5 million at the purchase date, of which $33.4 million was allocated to the land and $25.1 million to the building.

In addition, in connection with the sale of our Brazilian entities, we recorded a gain on sale of approximately $1.6 million recorded in selling, general and administrative expenses in our condensed consolidated statements of operations during the three months ended September 27, 2025.

During the three months ended September 27, 2025 and September 28, 2024, we recorded depreciation expense of $27.8 million and $27.0 million, respectively.

Operating Lease Right-of-Use Assets

Operating lease right-of-use assets, net were as follows (in millions):


	September 27, 2025		June 28, 2025
Operating lease right-of-use assets	$	57.8	$	54.4
Less: accumulated amortization	(27.3)		(26.5)
Operating lease right-of-use assets, net	$	30.5	$	27.9

In connection with the purchase of land and building in Sagamihara, Japan in July 2024, we terminated our leases for the related facilities and recorded a $16.3 million increase in the carrying value of building purchased, as a result of derecognizing $32.0 million of net operating lease right-of-use asset, $1.6 million of operating lease liabilities, current, and $14.1 million of operating lease liabilities, non-current.

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LUMENTUM HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Other Current Liabilities

The components of other current liabilities were as follows (in millions):


	September 27, 2025		June 28, 2025
Restructuring accrual and related charges (1)	$	5.9	$	2.5
Warranty reserve (2)	13.1		14.4
Deferred revenue and customer deposits	2.7		0.7

Income tax payable (3)	15.6		29.1
Other current liabilities	4.3		6.4
Other current liabilities	$	41.6	$	53.1

(1) Refer to “Note 10. Restructuring and Related Charges.”

(2) Refer to “Note 13. Commitments and Contingencies.”

(3) Refer to “Note 11. Income Taxes.”

Other Non-Current Liabilities

The components of other non-current liabilities were as follows (in millions):


	September 27, 2025		June 28, 2025
Asset retirement obligations	$	7.1	$	7.1
Pension and related accruals (1)	10.5		9.7

Unrecognized tax benefit (2)	57.0		55.6
Other non-current liabilities (2)	36.5		25.4
Other non-current liabilities	$	111.1	$	97.8

(1) We have defined benefit pension plans in Japan, Switzerland, and Thailand. Pension and related accrual of $10.5 million as of September 27, 2025 represents $11.4 million of non-current portion of benefit obligation, offset by $0.9 million of funding for the pension plan in Switzerland. Pension and related accrual of $9.7 million as of June 28, 2025 relates to $11.0 million of non-current portion of benefit obligation, offset by $1.3 million of funding for the pension plan in Switzerland. We typically re-evaluate the assumptions related to the fair value of our defined benefit obligations annually in the fiscal fourth quarter and make any updates as necessary. During the three months ended September 27, 2025 and September 28, 2024, our contribution expense to the 401(k) Plan in the United States was $0.7 million and $0.7 million, respectively. Our contribution expense to all defined contribution plans outside the United States was $2.7 million and $1.9 million during the three months ended September 27, 2025 and September 28, 2024, respectively.

(2) The Company has reclassified a $21.4 million unrecognized tax position to other non-current liabilities in the condensed consolidated balance sheets as of the year ended June 28, 2025 for an indemnification liability related to the sale of certain assets. This does not impact our results of operations for the year ended June 28, 2025.

Note 7. Goodwill and Other Intangible Assets

Impairment of Goodwill

We review goodwill for impairment during the fourth quarter of each fiscal year or more frequently if events or circumstances indicate that an impairment loss may have occurred. In the fourth quarter of fiscal 2025, we completed the annual impairment test of goodwill, which indicated there was no goodwill impairment. There were no indicators of goodwill impairment during the three months ended September 27, 2025.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Other Intangibles

Our intangible assets are amortized on a straight-line basis over the estimated useful lives, except for certain customer relationships, which are amortized using an accelerated method of amortization over the expected customer lives, more accurately reflecting the pattern of realization of economic benefits we expect to derive. Acquired developed technologies are amortized to cost of sales and research and development expenses. Acquired customer relationships are amortized to selling, general and administrative expenses in the consolidated statement of operations.

In-process research and development (“IPR&D”) is initially capitalized at fair value as an intangible asset with an indefinite life and assessed for impairment thereafter. When an IPR&D project is completed, the IPR&D is reclassified to an amortizable purchased intangible asset and amortized over the asset’s estimated useful life.

During the annual impairment testing performed in the fourth quarter of fiscal 2025, we concluded that our intangible and other long-lived assets were not impaired at the asset group level. We review our intangible and other long-lived assets for impairment at least annually in the fourth quarter of each fiscal year, absent any interim indicators of impairment. There were no indicators of impairment at the asset group level during the three months ended September 27, 2025.

The following tables present details of all of our intangible assets as of the periods presented (in millions, except for weighted average remaining amortization period):


September 27, 2025	Gross Carrying Amounts		Accumulated Amortization		Net Carrying Amounts		Weighted Average Remaining Amortization Period (Years)
Acquired developed technologies	$	826.4	$	(579.3)	$	247.1	3.9
Customer relationships	419.5		(240.4)		179.1		3.9
In-process research and development	4.5		—		4.5		n/a
Order backlog	14.0		(14.0)		—		—
Trade name and trademarks	3.0		(3.0)		—		—
Total intangible assets	$	1,267.4	$	(836.7)	$	430.7


June 28, 2025	Gross Carrying Amounts		Accumulated Amortization		Net Carrying Amounts		Weighted Average Remaining Amortization Period (Years)
Acquired developed technologies	$	822.4	$	(559.0)	$	263.4	4.1
Customer relationships	419.8		(226.6)		193.2		4.1
In-process research and development	8.5		—		8.5		n/a
Order backlog	14.0		(14.0)		—		—
Trade name and trademarks	3.0		(3.0)		—		—
Total intangible assets	$	1,267.7	$	(802.6)	$	465.1

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LUMENTUM HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The following table presents details of amortization for the periods presented (in millions):


	Three Months Ended
	September 27, 2025		September 28, 2024
Cost of sales	$	19.5	$	22.5
Research and development	0.4		0.4
Selling, general and administrative	14.5		18.8
Total amortization of intangibles	$	34.4	$	41.7

Based on the carrying amount of our acquired intangible assets except in-process research and development as of September 27, 2025, and assuming no future impairment of the underlying assets, the estimated future amortization is as follows (in millions):


Fiscal Years
Remainder of 2026	$	101.1
2027	123.1
2028	82.6
2029	52.3
2030	46.3
Thereafter	20.8
Total future amortization	$	426.2

Note 8. Debt

Our debt consists of the following:


	September 27, 2025						June 28, 2025
	Short-term		Long-term		Total		Short-term		Long-term		Total
Convertible notes	$	1,068.7	$	2,112.6	$	3,181.3	$	—	$	2,506.2	$	2,506.2
Term loans	10.3		51.9		62.2		10.6		56.4		67.0
Total	$	1,079.0	$	2,164.5	$	3,243.5	$	10.6	$	2,562.6	$	2,573.2

Convertible Notes

2032 Notes

On September 8, 2025, we issued $1,265.0 million in aggregate principal amount of 0.375% Convertible Senior Notes due in 2032 (“2032 Notes”) in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. The 2032 Notes are governed by an indenture between the Company and U.S. Bank Trust Company, National Association, as trustee (the “2032 Indenture”). The 2032 Notes are unsecured, rank equally with all of the Company’s existing senior unsecured indebtedness, including the Company’s outstanding 0.50% Convertible Senior Notes due 2026, 0.50% Convertible Senior Notes due 2028, and 1.50% Convertible Senior Notes due 2029, and do not contain any financial covenants, restrictions on dividends, incurrence of senior debt or other indebtedness, or the issuance or repurchase of securities by us.

The net proceeds from the sale of the 2032 Notes was approximately $1,255.7 million, after deducting $9.3 million of net issuance costs. In addition, we incurred $1.1 million of professional fees directly related to this transaction, which was recorded as part of accrued expenses in our condensed consolidated balance sheets as of September 27, 2025. Concurrent with the issuance of the 2032 Notes, we used $843.1 million of the net proceeds to repurchase $581.1 million aggregate principal amount of the 0.50% Convertible Senior Notes due in 2026 and $102.0 million of the net proceeds to pay the cost of the 2032 Capped Call Options. We intend to use the remaining net proceeds for general corporate purposes, which may include the repayment or repurchase of our indebtedness, including any of our existing convertible notes, capital expenditures, working capital and potential acquisitions.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The 2032 Notes bear interest at a rate of 0.375% per year, payable semi-annually in arrears on March 15 and September 15 of each year, beginning on March 15, 2026. The 2032 Notes will mature on March 15, 2032, unless earlier redeemed, repurchased by us, or converted pursuant to their terms.

The initial conversion rate is 5.3257 shares of common stock per $1,000 principal amount of the 2032 Notes (which is equivalent to an initial conversion price of approximately $187.77 per share). The conversion rate is subject to adjustment upon the occurrence of certain events specified in the 2032 Indenture but will not be adjusted for any accrued and unpaid interest. In addition, upon the occurrence of a make-whole fundamental change (as defined in the 2032 Indenture) or our issuance of a notice of redemption, we will, in certain circumstances, increase the conversion rate by a number of additional shares for a holder that elects to convert the 2032 Notes in connection with such make-whole fundamental change or notice of redemption.

Prior to the close of business on the business day immediately preceding December 15, 2031, holders of the 2032 Notes may convert their 2032 Notes only under the following circumstances:

•during any fiscal quarter commencing after December 27, 2025 (and only during such fiscal quarter), if the last reported sale price of the common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of the applicable conversion price of the 2032 Notes, or $244.10, on each applicable trading day;

•during the five consecutive business day period after any five consecutive trading day period (the “2032 measurement period”) in which the trading price per $1,000 principal amount of 2032 Notes for each trading day of the 2032 measurement period was less than 98% of the product of the last reported sale price of our common stock and the applicable conversion rate on each such trading day;

•if we call any or all of the 2032 Notes for redemption, at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date; or

•upon the occurrence of specified corporate events as specified in the 2032 Indenture.

On or after December 15, 2031 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their 2032 Notes at any time. Upon conversion, we are required to satisfy our conversion obligation with respect to such converted 2032 Notes by paying cash equal to the principal amount of such converted 2032 Notes and paying or delivering, as the case may be, cash, shares of common stock or a combination of cash and shares of common stock, at our election, with respect to any conversion value in excess thereof, if any.

We may redeem for cash all or any portion of the 2032 Notes, at our option (subject to the partial redemption limitation set forth in the 2032 Indenture), on or after March 20, 2029, if the last reported sale price of our common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading-day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which we provide notice of redemption at a redemption price equal to 100% of the principal amount of the 2032 Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. No sinking fund is provided for the 2032 Notes. If we elect to redeem fewer than all of the outstanding 2032 Notes, at least $100.0 million aggregate principal amount of the 2032 Notes must be outstanding and not subject to redemption as of the redemption notice date. Upon the occurrence of a fundamental change (as defined in the 2032 Indenture), holders may require us to repurchase all or a portion of their 2032 Notes for cash at a price equal to 100% of the principal amount of the 2032 Notes to be repurchased, plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

The entirety of the 2032 Notes are recorded as convertible notes, non-current in our consolidated balance sheets as of September 27, 2025, measured at amortized cost.

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(Unaudited)

2032 Capped Call Options

In September 2025, in connection with the issuances of the 2032 Notes, the Company entered into privately negotiated capped call transactions (the “2032 Capped Call Options”) with certain financial institutions (the “2032 Capped Call Counterparties”). The 2032 Capped Call Options cover, subject to anti-dilution adjustments substantially similar to those applicable to the 2032 Notes, the number of shares of our common stock that initially underlie the 2032 Notes and are generally expected to reduce potential dilution to the Company’s common stock upon any conversion of 2032 Notes and/or offset any cash payments the Company would be required to make in excess of the principal amount of converted 2032 Notes, as the case may be, with such reduction and/or offset subject to a cap. The cap price of the 2032 Capped Call Options was initially $268.24 per share, and is subject to certain adjustments under the terms of the 2032 Capped Call Options. If the market price per share of our common stock, as measured under the terms of the 2032 Capped Call Options, exceeds the cap price of the 2032 Capped Call Options, there would be dilution and/or there would not be an offset of any potential cash payments in excess of the principal amount of converted 2032 Notes, in each case, to the extent that such market price exceeds the cap price of the 2032 Capped Call Options.

Each of the 2032 Capped Call Options was executed pursuant to a separate agreement entered into by the Company and each of the 2032 Capped Call Counterparties. The 2032 Capped Call Options are not part of the terms of the 2032 Notes and will not affect any holder’s rights under the 2032 Notes. Holders of the 2032 Notes will not have any rights with respect to the 2032 Capped Call Options. The Company concluded that the 2032 Capped Call Options met the criteria for equity classification because they were indexed to the Company’s common stock and the Company has the discretion to settle the 2032 Capped Call Options in shares or cash. As a result, the $102.0 million amount paid was recorded as a reduction to additional paid-in capital within the Company’s condensed consolidated balance sheets as of September 27, 2025, along with the offsetting associated current tax impact of $0.2 million.

The Company made a tax election to integrate the 2032 Notes and the 2032 Capped Call Options for federal income tax purposes pursuant to applicable U.S. Treasury Regulations. Accordingly, the $102.0 million gross cost of the purchased 2032 Capped Call Options will be deductible for income tax purposes as original issue discount interest over the term of the 2032 Notes. As a result, the Company established a deferred income tax asset of $21.4 million at inception, with a corresponding valuation allowance as it is not more-likely-than-not that our U.S. deferred tax assets are realizable in the future. As of September 27, 2025, we have recognized a current tax impact of $0.2 million at issuance, which is recorded as an increase to additional paid-in capital within the Company’s condensed consolidated balance sheets.

2029 Notes

On June 16, 2023, we issued $603.7 million in aggregate principal amount of 1.50% Convertible Senior Notes due in 2029 (“2029 Notes”) in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. The 2029 Notes are governed by an indenture between the Company and U.S. Bank Trust Company, National Association, as trustee (the “2029 Indenture”). The 2029 Notes are unsecured and do not contain any financial covenants, restrictions on dividends, incurrence of senior debt or other indebtedness, or the issuance or repurchase of securities by us.

The 2029 Notes bear interest at a rate of 1.50% per year, payable semi-annually in arrears on June 15 and December 15 of each year. The 2029 Notes will mature on December 15, 2029, unless earlier redeemed, repurchased by us, or converted pursuant to their terms.

The initial conversion rate is 14.3808 shares of common stock per $1,000 principal amount of the 2029 Notes (which is equivalent to an initial conversion price of approximately $69.54 per share). The conversion rate is subject to adjustment upon the occurrence of certain events specified in the 2029 Indenture but will not be adjusted for accrued and unpaid interest. In addition, upon the occurrence of a make-whole fundamental change (as defined in the 2029 Indenture) or our issuance of a notice of redemption, we will, in certain circumstances, increase the conversion rate by a number of additional shares for a holder that elects to convert the 2029 Notes in connection with such make-whole fundamental change or notice of redemption.

Prior to the close of business on the business day immediately preceding September 15, 2029, holders of the 2029 Notes may convert their 2029 Notes only under the following circumstances:

•during any fiscal quarter (and only during such fiscal quarter), if the last reported sale price of the common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of the applicable conversion price of the 2029 Notes, or $90.40, on each applicable trading day;

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

•during the five consecutive business day period after any five consecutive trading day period (the “2029 measurement period”) in which the trading price per $1,000 principal amount of 2029 Notes for each trading day of the 2029 measurement period was less than 98% of the product of the last reported sale price of our common stock and the applicable conversion rate on each such trading day;

•if we call any or all of the 2029 Notes for redemption, at any time prior to the close of business on the second business day immediately preceding the redemption date; or

•upon the occurrence of specified corporate events as specified in the 2029 Indenture.

On or after September 15, 2029 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their 2029 Notes at any time. Following our irrevocable settlement method election made on September 25, 2024, upon conversion, we are required to satisfy our conversion obligation with respect to such converted 2029 Notes by delivering cash equal to the principal amount of such converted 2029 Notes and cash, shares of common stock or a combination of cash and shares of common stock, at our election, with respect to any conversion value in excess thereof.

We may redeem for cash all or any portion of the 2029 Notes, at our option (subject to the partial redemption limitation set forth in the 2029 Indenture), on or after June 22, 2026, if the last reported sale price of our common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading-day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which we provide notice of redemption at a redemption price equal to 100% of the principal amount of the 2029 Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. No sinking fund is provided for the 2029 Notes. If we elect to redeem fewer than all of the outstanding 2029 Notes, at least $100.0 million aggregate principal amount of the 2029 Notes must be outstanding and not subject to redemption as of the redemption notice date. Upon the occurrence of a fundamental change (as defined in the 2029 Indenture), holders may require us to repurchase all or a portion of their 2029 Notes for cash at a price equal to 100% of the principal amount of the 2029 Notes to be repurchased, plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

Since the closing price of our stock exceeded $90.40 (or 130% of the conversion price of $69.54) for 20 of the last 30 trading days of our first quarter of fiscal year 2026, our 2029 Notes became convertible at the option of the holders during the second quarter of fiscal year 2026, thus, the entire 2029 Notes are recorded as short-term debt, which is presented as current liabilities in our consolidated balance sheets as of September 27, 2025, measured at amortized cost, while the entire 2029 Notes are recorded as convertible notes, non-current in our consolidated balance sheets as of June 28, 2025, measured at amortized cost.

2028 Notes

In March 2022, we issued $861.0 million in aggregate principal amount of 0.50% Convertible Senior Notes due in 2028 (the “2028 Notes”) in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”). The 2028 Notes are governed by an indenture between the Company and U.S. Bank Trust Company, National Association, as trustee (the “2028 Indenture”). The 2028 Notes are unsecured and do not contain any financial covenants, restrictions on dividends, incurrence of senior debt or other indebtedness, or the issuance or repurchase of securities by us.

The 2028 Notes bear interest at a rate of 0.50% per year, payable semi-annually in arrears on June 15 and December 15 of each year. The 2028 Notes will mature on June 15, 2028, unless earlier redeemed, repurchased by us, or converted pursuant to their terms.

The initial conversion rate is 7.6319 shares of common stock per $1,000 principal amount of the 2028 Notes (which is equivalent to an initial conversion price of approximately $131.03 per share). The conversion rate is subject to adjustment upon the occurrence of certain specified events, but will not be adjusted for accrued and unpaid interest. In addition, upon the occurrence of a make-whole fundamental change (as defined in the 2028 Indenture) or our issuance of a notice of redemption, we will, in certain circumstances, increase the conversion rate by a number of additional shares for a holder that elects to convert the 2028 Notes in connection with such make-whole fundamental change or notice of redemption.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Prior to the close of business on the business day immediately preceding March 15, 2028, holders of the 2028 Notes may convert their 2028 Notes only under the following circumstances:

•during any fiscal quarter (and only during such fiscal quarter), if the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during the 30 consecutive trading days ending on the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of the applicable conversion price, or $170.34, on each applicable trading day;

•during the five consecutive business day period after any five consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of the 2028 Notes for each trading day of such measurement period was less than 98% of the product of the last reported sale price of the Company’s common stock and the applicable conversion rate on each such trading day;

•if the Company calls any or all of the 2028 Notes for redemption, at any time prior to the close of business on the second business day immediately preceding the redemption date; or

•upon the occurrence of specified corporate events, as specified in the 2028 Indenture.

On or after March 15, 2028 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their 2028 Notes at any time. Following our irrevocable settlement method election made on September 25, 2024, upon conversion, we are required to satisfy our conversion obligation with respect to such converted 2028 Notes by paying cash equal to the principal amount of such converted 2028 Notes and paying or delivering, as the case may be, cash, shares of common stock or a combination of cash and shares of common stock, at our election, with respect to any conversion value in excess thereof,if any.

We may redeem for cash all or any portion of the 2028 Notes, at our option (subject to the partial redemption limitation set forth in the 2028 Indenture), on or after June 20, 2025, if the last reported sale price of its common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading-day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption at a redemption price equal to 100% of the principal amount of the 2028 Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. No sinking fund is provided for the 2028 Notes. If we elect to redeem fewer than all of the outstanding 2028 Notes, at least $100.0 million aggregate principal amount of the 2028 Notes must be outstanding and not subject to redemption as of the redemption notice date. Upon the occurrence of a fundamental change (as defined in the 2028 Indenture), holders may require the Company to repurchase all or a portion of their 2028 Notes for cash at a price equal to 100% of the principal amount of the 2028 Notes to be repurchased, plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

We initially bifurcated the principal amount of the 2028 Notes into liability and equity components. The liability component of the 2028 Notes was initially valued at $629.8 million based on the contractual cash flow discounted at an appropriate comparable market on non-convertible debt borrowing rate at the date of issuance, which was 5.7%, with the equity component representing the residual amount of the proceeds of $231.2 million, which was recorded as a debt discount. Upon adoption of ASU 2020-06 in the first quarter of fiscal 2023, our 2028 Notes were accounted for as a single liability measured at amortized cost. The entire 2028 Notes are recorded as convertible notes, non-current in our consolidated balance sheets as of September 27, 2025 and June 28, 2025, measured at amortized cost.

2026 Notes

In December 2019, we issued $1,050.0 million in aggregate principal amount of 0.50% Convertible Senior Notes due in 2026 (the “2026 Notes”) in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act. The 2026 Notes are governed by an indenture between the Company and U.S. Bank Trust Company, National Association (as successor in interest to U.S. Bank National Association), as trustee (as supplemented by the First Supplemental Indenture, dated as of September 25, 2024, the “2026 Indenture”). The 2026 Notes are unsecured and do not contain any financial covenants, restrictions on dividends, incurrence of senior debt or other indebtedness, or the issuance or repurchase of securities by us.

The 2026 Notes bear interest at a rate of 0.50% per year, payable semi-annually in arrears on June 15 and December 15 of each year. The 2026 Notes will mature on December 15, 2026, unless earlier redeemed, repurchased by us, or converted pursuant to their terms.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The initial conversion rate is 10.0711 shares of common stock per $1,000 principal amount of the 2026 Notes (which is equivalent to an initial conversion price of approximately $99.29 per share). The conversion rate is subject to adjustment upon the occurrence of certain events specified in the 2026 Indenture but will not be adjusted for accrued and unpaid interest. In addition, upon the occurrence of a make-whole fundamental change (as defined in the 2026 Indenture) or our issuance of a notice of redemption, we will, in certain circumstances, increase the conversion rate by a number of additional shares set forth in the 2026 Indenture or a holder that elects to convert the 2026 Notes in connection with such make-whole fundamental change or notice of redemption.

Prior to the close of business on the business day immediately preceding September 15, 2026, holders of the 2026 Notes may convert their 2026 Notes only under the following circumstances:

•during any fiscal quarter (and only during such fiscal quarter), if the last reported sale price of the common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of the conversion price of the 2026 Notes, or $129.08 on each applicable trading day;

•during the five consecutive business day period after any five consecutive trading day period (the “2026 measurement period”) in which the trading price per $1,000 principal amount of the 2026 Notes for each trading day of the 2026 measurement period was less than 98% of the product of the last reported sale price of our common stock and the applicable conversion rate for the 2026 Notes on each such trading day;

•if we call any or all of the 2026 Notes for redemption, at any time prior to the close of business on the second business day immediately preceding the relevant redemption date; or

•upon the occurrence of specified corporate events.

On or after September 15, 2026 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their 2026 Notes at any time. Following our entry into the First Supplemental Indenture, dated as of September 25, 2024, to the 2026 Indenture, upon conversion, we are required to satisfy our conversion obligation with respect to such converted 2026 Notes by paying cash equal to the principal amount of such converted 2026 Notes and paying or delivering, as the case may be, cash, shares of common stock or a combination of cash and shares of common stock, at our election, with respect to any conversion value in excess thereof, if any.

We may redeem for cash, all or any portion of the 2026 Notes, at our option, on or after December 20, 2023, if the last reported sale price of its common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading-day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which we provide a notice of redemption at a redemption price equal to 100% of the principal amount of the 2026 Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. No sinking fund is provided for the 2026 Notes. Upon the occurrence of a fundamental change (as defined in the 2026 Indenture), holders may require us to repurchase all or a portion of the 2026 Notes for cash at a price equal to 100% of the principal amount of the 2026 Notes to be repurchased, plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

We initially bifurcated the principal amount of the 2026 Notes into liability and equity components. The liability component of the 2026 Notes was initially valued at $734.8 million based on the contractual cash flows discounted at an appropriate comparable market non-convertible debt borrowing rate at the date of issuance of 5.8% with the equity component representing the residual amount of the proceeds of $315.2 million, which was recorded as a debt discount. Upon adoption of ASU 2020-06 in the first quarter of fiscal 2023, our 2026 Notes were accounted for as a single liability measured at amortized cost.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Concurrent with the issuance of the 2032 Notes, we used approximately $843.1 million of the net proceeds to repurchase $581.1 million aggregate principal amount of the 2026 Notes. We also paid $0.7 million of the related accrued interest. We have adopted and applied ASU 2024-04, Debt with Conversion and Other Options: Induced Conversions of Convertible Debt Instruments. We determined that this transaction met the requirements for the settlement of debt as an induced conversion. Accordingly, we recorded $256.9 million, which represents the fair value increase in the fair value of the debt, as a reduction to additional paid-in capital within the Company’s consolidated Balance Sheets as of September 27, 2025, and recognized an inducement expense of $5.9 million in our consolidated statements of operations during the three months ended September 27, 2025, which represents the excess of fair value of the total consideration over the fair value of securities issuable pursuant to the original conversion terms.

Since the closing price of our stock exceeded $129.08 (or 130% of the conversion price of $99.29) for 20 of the last 30 trading days of our first quarter of fiscal year, our 2026 Notes became convertible at the option of the holders during the second quarter of fiscal year 2026, thus, the remaining 2026 Notes outstanding are recorded as short-term debt, which is presented as current liabilities in our consolidated balance sheets as of September 27, 2025, measured at amortized cost. The entire 2026 Notes are recorded as convertible notes, non-current in our consolidated balance sheets as of June 28, 2025, measured at amortized cost.

Our convertible notes consisted of the following components as of the periods presented (in millions):



September 27, 2025	2026 Notes (1)		2028 Notes (2)		2029 Notes (3)		2032 Notes (4)		Total
Principal	$	468.9	$	861.0	$	603.7	$	1,265.0	$	3,198.6

Unamortized debt discount and debt issuance costs	(0.6)		(3.0)		(3.3)		(10.4)		(17.3)
Net carrying amount of the liability component	$	468.3	$	858.0	$	600.4	$	1,254.6	$	3,181.3


June 28, 2025	2026 Notes (1)		2028 Notes (2)		2029 Notes (3)		Total
Principal	$	1,050.0	$	861.0	$	603.7	$	2,514.7
Unamortized debt discount and debt issuance costs	(1.7)		(3.3)		(3.5)		(8.5)
Net carrying amount of the liability component	$	1,048.3	$	857.7	$	600.2	$	2,506.2

(1) If the closing price of our stock exceeds $129.08 (or 130% of the conversion price of $99.29) for 20 of the last 30 trading days of any future fiscal quarter, our 2026 Notes would become convertible at the option of the holders during the subsequent fiscal quarter, which was the case as of the end of the first quarter of fiscal year 2026, and therefore, the debt was reclassified to current liabilities in our condensed consolidated balance sheets.

(2) If the closing price of our stock exceeds $170.34 (or 130% of the conversion price of $131.03) for 20 of the last 30 trading days of any future fiscal quarter, our 2028 Notes would become convertible at the option of the holders during the subsequent fiscal quarter and the debt would be reclassified to current liabilities in our condensed consolidated balance sheets.

(3) If the closing price of our stock exceeds $90.40 (or 130% of the conversion price of $69.54) for 20 of the last 30 trading days of any future quarter, our 2029 Notes would become convertible at the option of the holders during the subsequent fiscal quarter, which was the case as of the end of the first quarter of fiscal year 2026, and therefore, the debt was reclassified to current liabilities in our consolidated balance sheets.

(4) If the closing price of our stock exceeds $244.10 (or 130% of the conversion price of $187.77) for 20 of the last 30 trading days of any future quarter, our 2032 Notes would become convertible at the option of the holders during the subsequent fiscal quarter and the debt would be reclassified to current liabilities in our consolidated balance sheets.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The following table sets forth interest expense information related to the convertible notes for the periods presented (in millions):


	Three Months Ended
	September 27, 2025		September 28, 2024
Contractual interest expense	$	4.7	$	4.7
Amortization of the debt discount and debt issuance costs	0.8		0.7
Total interest expense	$	5.5	$	5.4

The future interest and principal payments related to our convertible notes are as follows as of September 27, 2025 (in millions):


Fiscal Years	2026 Notes		2028 Notes		2029 Notes		2032 Notes		Total
2026	$	3.0	$	4.3	$	9.1	$	2.4	$	18.8
2027	470.1		4.3		9.1		4.7		488.2
2028	—		865.3		9.1		4.7		879.1
2029	—		—		9.1		4.7		13.8
2030	—		—		608.1		4.7		612.8
Thereafter	—		—		—		1,274.7		1,274.7
Total payments	$	473.1	$	873.9	$	644.5	$	1,295.9	$	3,287.4

The principal balances of our convertible notes are reflected in the payment periods in the table above based on their respective contractual maturities.

Term Loans

SMBC Term Loan

On August 9, 2024, the Company entered into a term loan agreement (the “SMBC Term Loan”) with Sumitomo Mitsui Banking Corporation (“SMBC”). The SMBC Term Loan provides an aggregate principal amount of 6.4 billion Japanese yen (“JPY”). The loan requires monthly principal payments of approximately 53.3 million JPY, from August 31, 2024 to June 30, 2029 and interest based on a fixed annual interest rate of 0.88%, with the remaining principal of approximately 3.3 billion JPY due on the loan maturity date of July 31, 2029. Under the loan agreement, the Company cannot prepay the outstanding loan without SMBC’s approval. In the event the Company prepays the outstanding loan with SMBC’s approval, the Company shall pay SMBC a settlement amount calculated pursuant to the terms of the loan agreement. The SMBC Term Loan is secured by the real estate owned in Sagamihara, Japan.

As of September 27, 2025, the Company had $38.2 million in principal amount outstanding, of which the short-term portion of $4.3 million is recorded as current liabilities while the long-term portion of $33.9 million is recorded as long-term debt in the Company’s condensed consolidated balance sheets.

Mizuho Term Loan

On September 20, 2024, the Company entered into a term loan agreement (the “Mizuho Term Loan”) with Mizuho Bank, Ltd. (“Mizuho”), in order to finance our planned manufacturing expansions. The Mizuho Term Loan provides for borrowings of 4.5 billion JPY with a 5-year term from the funding date September 20, 2024. The loan requires quarterly principal payments of approximately 225.0 million JPY commencing on December 20, 2024 with the final payment on September 20, 2029. The Mizuho Term Loan bears interest at a fixed annual rate of 0.90%. The Mizuho Term Loan is secured by the real estate assets owned by NeoPhotonics Semiconductor GK. The Mizuho Term Loan agreement requires that the Company and certain domestic subsidiaries comply with covenants relating to customary matters, including obtaining approval from Mizuho prior to transferring, creating a security interest, or disposing of the collateral assets; obtaining approval from Mizuho prior to a business transfer, business acquisition, corporate reorganization or changes such as mergers, company splits, share exchanges or share transfers or capital structure changes; obtaining approval from Mizuho prior to changing the Company’s indirect ownership in Lumentum Japan, Inc; and obtaining approval from Mizuho prior to a distribution of dividends by Lumentum Japan, Inc. to its shareholders.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

As of September 27, 2025, the Company had $24.0 million in principal amount outstanding, of which the short-term portion of $6.0 million is recorded as current liabilities while the long-term portion of $18.0 million is recorded as long-term debt in the Company’s condensed consolidated balance sheets.

The SMBC Term Loan and the Mizuho Term Loan are collectively referred to as Japan Term Loans.

Note 9. Accumulated Other Comprehensive Income (Loss)

Our accumulated other comprehensive income (loss), net of tax, consists of the accumulated net unrealized gains or losses on foreign currency translation adjustments, defined benefit obligations and available-for-sale securities.

The changes in accumulated other comprehensive income (loss), net of tax, were as follows for the periods as presented (in millions):


	Foreign Currency Translation Adjustments, Net of Tax (1)		Defined Benefit Obligations, Net of Tax (2)		Unrealized Gain (Loss) on Available-for-Sale Securities, Net of Tax (3)		Total
Beginning balance as of June 28, 2025	$	9.9	$	(1.6)	$	0.7	$	9.0
Other comprehensive gain, net	(0.3)		—		0.4		0.1
Ending balance as of September 27, 2025	$	9.6	$	(1.6)	$	1.1	$	9.1





	Foreign Currency Translation Adjustments, Net of Tax (1)		Defined Benefit Obligations, Net of Tax (2)		Unrealized Gain (Loss) on Available-for-Sale Securities, Net of Tax (3)		Total
Beginning balance as of June 29, 2024	$	9.8	$	0.7	$	(1.2)	$	9.3
Other comprehensive gain, net	—		—		2.3		2.3
Ending balance as of September 28, 2024	$	9.8	$	0.7	$	1.1	$	11.6

(1) In fiscal 2019, we established the functional currency for our worldwide operations as the U.S. dollar. Translation adjustments reported prior to December 2018 remain as a component of accumulated other comprehensive income (loss) in our condensed consolidated balance sheets, until all or a part of the investment in the subsidiaries is sold or liquidated.

(2) We re-evaluate the assumptions related to the fair value of our defined benefit obligations annually in the fiscal fourth quarter and make any updates as necessary.

(3) For the three months ended September 27, 2025 and September 28, 2024, our unrealized loss on available-for-sale securities is presented net of tax of nil for both periods.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 10. Restructuring and Related Charges

We have initiated various strategic restructuring actions primarily to reduce costs, consolidate our operations, rationalize the manufacturing of our products and align our business in response to market conditions and as a result of our acquisitions.

The following table summarizes activities of restructuring and related charges for the periods as presented (in millions):


	Three Months Ended
	September 27, 2025		September 28, 2024
Balance as of beginning of period	$	2.5	$	11.1
Charges	8.3		9.7
Payments and other adjustments	(4.9)		(14.5)
Balance as of end of period	$	5.9	$	6.3

During the three months ended September 27, 2025, we recorded restructuring and related charges of $8.3 million related to a reduction in force during the period in order to enhance operational efficiency and realign our investments toward the most critical initiatives.

During the three months ended September 28, 2024, we recorded restructuring and related charges of $9.7 million, which includes $6.0 million of asset write-offs primarily due to integration efforts to consolidate our sites, $3.0 million of charges related to the discontinuation of our in-house development of coherent DSPs and RFICs and the remaining restructuring charges due to company-wide cost reduction initiatives.

Any changes in the estimates of executing our restructuring activities will be reflected in our future results of operations.

Note 11. Income Taxes

Our tax provision for interim periods has generally been determined using an estimate of our annual effective tax rate, adjusted for discrete items, if any, that arise during the period. Each quarter, we update our estimate of the annual effective tax rate, and if the estimated annual effective tax rate changes, we make a cumulative adjustment in such period. Our quarterly tax provision and estimate of our annual effective tax rate are subject to variation due to several factors, including variability in pre-tax income (or loss), the mix of jurisdictions to which such income relates, changes in how we do business, and tax law developments.

We recorded a tax provision of $1.0 million for the three months ended September 27, 2025. Our tax provision for the three months ended September 27, 2025 includes a discrete tax benefit of 0.6 million primarily related to the tax benefit from a windfall in connection with stock-based compensation vested during the quarter and foreign return to provision differences, partially offset by the tax expense from currency re-measurement of certain tax related accounts.

We recorded a tax provision of $3.2 million for the three months ended September 28, 2024. Our tax provision for the three months ended September 28, 2024 is primarily related to the tax expense associated with interest on uncertain tax positions, partially offset by the tax benefit from currency re-measurements.

Our estimated effective tax rate for the three months ended September 27, 2025 differs from the 21% U.S. statutory rate primarily due to the income tax expense from foreign income inclusions in the U.S., current year valuation allowance change, and non-deductible stock-based compensation, partially offset by the income tax benefit from foreign rate differential,and various income tax credits.

We regularly assess our ability to realize our deferred tax assets on a quarterly basis and will establish a valuation allowance if it is more-likely-than-not that some portion of the deferred tax assets will not be realized. As of September 27, 2025, we maintain a full valuation allowance on U.S. federal and state and certain foreign deferred tax assets. We will continue to assess the need for a valuation allowance against our remaining deferred tax assets and may increase or decrease our valuation allowance materially in the future.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

As of September 27, 2025, we had $59.5 million of unrecognized tax benefits, which, if recognized, would affect the effective tax rate. We are subject to examination of income tax returns by various domestic and foreign tax authorities. The timing of resolution and closure of these tax examinations is highly unpredictable. Although it is possible that certain ongoing tax examinations may be concluded within the next 12 months, we cannot reasonably estimate the impact to tax expense and net income from tax examinations that could be resolved or closed within the next 12 months. Subject to audit timing and uncertainty, we expect the amount of unrecognized tax benefit that would become recognized due to expiration of the statute of limitations and affect the effective tax rate to decrease by $3.3 million over the next 12 months.

Note 12. Equity

Description of Lumentum Stock-Based Compensation Plans

Equity Incentive Plan

On November 17, 2023, our stockholders approved amendments to the Amended and Restated Equity Incentive Plan (the “2015 Plan”) to increase the number of shares of common stock reserved for issuance by an additional 3.0 million shares. On November 20, 2024, our stockholders approved an amendment to the 2015 Plan to extend the expiration date of the 2015 Plan by one year until June 23, 2026.

In February 2025, our board of directors approved the 2025 Inducement Equity Incentive Plan (the “Inducement Plan”) in accordance with Listing Rule 5635(c)(4) of the corporate governance rules of the Nasdaq Stock Market, which became effective in February 2025. The Inducement Plan has substantially the same terms and conditions as the 2015 Plan, however, the Inducement Plan may only be used for grants to new employees and not for existing employees, executives, directors or consultants.

As of September 27, 2025, we had 4.2 million shares subject to stock options, restricted stock units, restricted stock awards, and performance stock units issued and outstanding under the 2015 Plan. Restricted stock units and performance stock units are performance-based, market-based and time-based or any combination thereof and are expected to vest within four years. As of September 27, 2025, 1.6 million shares of common stock under the 2015 Plan were available for grant.

Stock Options

The Company granted certain employees with stock options, the vesting of which is based on the requisite service requirement and expected to vest within three years. The Company calculates the fair value of stock options using the Black-Scholes option-pricing model, which requires the Company to make estimates of assumptions such as expected volatility, expected term, risk-free interest rate, expected dividend yield, and forfeiture rates. We issue new shares of common stock upon exercise of stock options.

Restricted Stock Units

Restricted stock units (“RSUs”) under the 2015 Plan and the Inducement Plan are grants of shares of our common stock, the vesting of which is based on the requisite service requirement. The fair value of these grants is based on the closing market price of our common stock on the date of grant. Generally, our RSUs are subject to forfeiture and are expected to vest within four years. For annual grants to existing employees, RSUs generally vest ratably on an annual basis, or combination of annual and quarterly basis, over three years.

During the three months ended September 27, 2025, our board of directors approved grants of 1.0 million RSUs, which primarily vest over three years. The fair value of these grants is based on the closing market price of our common stock on the grant date.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Performance Stock Units

Performance stock units (“PSUs”) under the 2015 Plan and the Inducement Plan are grants of shares of our common stock that vest upon the achievement of certain performance and service conditions. For PSUs with performance-based conditions, the fair value of these grants is based on the closing market price of our common stock on the date of grant, and we begin recognizing compensation expense when we conclude that it is probable that the performance conditions will be achieved. We reassess the probability of vesting at each reporting period and adjust our compensation cost based on this probability assessment. For PSUs with market-based conditions, the fair value of these grants is estimated using a Monte-Carlo simulation model, and the compensation expense is recognized ratably over the requisite service period regardless of whether or not the market condition is satisfied, provided the requisite service is rendered. Our PSUs are subject to risk of forfeiture until performance and service conditions are satisfied and generally vest within three years.

During the three months ended September 27, 2025, our board of directors granted 0.1 million PSUs with an aggregate grant date fair value of $13.7 million to certain executive officers and senior management. These PSUs will vest subject to the achievement of earnings per share targets, as well as service conditions, over three years. The number of shares may be increased or decreased based on the results of these measurement targets ranging between 0% and 200% in accordance with the terms established at the date of grant. In addition, the board of directors also approved a grant of 0.1 million PSUs with an aggregate grant date fair value of $33.0 million to certain executive officers and senior management. These PSUs will vest subject to the achievement of the Company’s total shareholder return (or “TSR”) relative to specified peer group, as well as service conditions, over three years. The number of shares may be increased or decreased based on the results of these measurement targets ranging between 0% and 200% in accordance with the terms established at the date of grant. The Company estimated the grant date fair value of these PSU awards using a Monte-Carlo simulation model, which was calculated at $282.85 per share. Accordingly, stock-based compensation expense related to PSUs are categorized as AIP PSUs, TSR PSUs and Other PSUs. AIP PSUs relates to the shares granted to executive and non-executive employees as part of our Annual Incentive Plan (“AIP PSUs”) during fiscal year 2025, which were subject to performance targets and service conditions and vested in August 2025. TSR PSUs relate to shares granted to certain executive officers and senior management, which will vest subject to the achievement of the Company’s TSR relative to specified peer group while Other PSUs relate to shares granted to certain executive officers and senior management, which are subject to financial performance targets (such as Revenue and EPS) and service conditions. Refer to the table below for a presentation of stock-based compensation expense by equity awards for more details.

Employee Stock Purchase Plan

Our ESPP provides eligible employees with the opportunity to acquire an ownership interest in the Company through periodic payroll deductions and provides a 15% purchase price discount as well as a 6-month look-back period. The ESPP is structured as a qualified employee stock purchase plan under Section 423 of the Internal Revenue Code of 1986, as amended. The ESPP will terminate upon the date on which all shares available for issuance have been sold. We estimate the fair value of the ESPP shares on the date of grant using the Black-Scholes option-pricing model. Of the 3.0 million shares authorized under the ESPP, 0.4 million shares remained available for issuance as of September 27, 2025.

Stock-Based Compensation

The impact on our results of operations of recording stock-based compensation by function for the periods presented was as follows (in millions):


	Three Months Ended
	September 27, 2025		September 28, 2024
Cost of sales	$	8.5	$	9.7
Research and development	10.3		9.3
Selling, general and administrative	23.6		16.6
Total stock-based compensation	$	42.4	$	35.6

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Our stock-based compensation by equity awards for the periods presented were as follows (in millions):


	Three Months Ended
	September 27, 2025		September 28, 2024
RSUs	$	25.6	$	24.0
AIP PSUs	4.8		4.1
TSR PSUs	2.9		0.2
Other PSUs	9.9		3.0
Total PSUs	17.6		7.3
Options	1.6		1.3
ESPP	1.6		1.2
Sub-total	46.4		33.8
Change in stock-based compensation capitalized to inventory	(4.0)		1.8
Total stock-based compensation	$	42.4	$	35.6

During the three months ended September 27, 2025 and September 28, 2024, we recorded $17.6 million and $7.3 million of stock-based compensation related to PSUs, respectively. The amount of stock-based compensation expense recognized in any one period related to PSUs with performance-based conditions can vary based on the achievement or anticipated achievement of the performance conditions. If the performance conditions are not met or not expected to be met, no compensation expense would be recognized on the underlying PSUs, and any previously recognized compensation expense related to those PSUs would be reversed.

Total income tax benefit associated with stock-based compensation recognized in our condensed consolidated statements of operations during the periods presented was as follows (in millions):


	Three Months Ended
	September 27, 2025		September 28, 2024
Income tax benefit associated with stock-based compensation	$	8.0	$	1.4

Approximately $18.6 million and $14.6 million of stock-based compensation was capitalized to inventory as of September 27, 2025 and June 28, 2025, respectively.

The table below summarizes the unrecognized stock-based compensation cost related to unvested shares and the weighted-average period over which it is expected to be recognized as of September 27, 2025:


	Unrecognized stock-based compensation (in millions)		Weighted-average period (in years)
RSUs	$	197.7	2.1
PSUs	102.7		2.6
Stock options	4.8		1.1
ESPP	0.9		0.1

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Stock Award Activity

The following table summarizes our award activities for the three months ended September 27, 2025 (in millions):



	Stock Options			Restricted Stock Units			Performance Stock Units
	Number of Shares	Weighted-Average Exercise Price per Share		Number of Shares	Weighted-Average Grant Date Fair Value per Share		Number of Shares	Weighted-Average Grant Date Fair Value per Share





Balance as of June 28, 2025	0.6	$	8.1	2.6	$	59.9	1.6	$	61.0


Granted	—	—		1.0	118.6		0.2	118.0
Vested/Exercised	(0.2)	7.9		(0.7)	60.9		(0.7)	57.8
Canceled	—	—		(0.1)	61.2		(0.1)	87.1
Balance as of September 27, 2025	0.4	$	8.1	2.8	$	79.4	1.0	$	75.3

A summary of awards available for grant is as follows (in millions):


			Awards Available for Grant
Balance as of June 28, 2025			2.6



Granted			(1.2)
Canceled			0.2
Balance as of September 27, 2025			1.6

Employee Stock Purchase Plan Activity

The ESPP expense for the three months ended September 27, 2025 and September 28, 2024 was $1.6 million and $1.2 million, respectively. The expense related to the ESPP is recorded on a straight-line basis over the relevant subscription period.

During the three months ended September 27, 2025 and September 28, 2024, there were no shares issued to employees through the ESPP.

Note 13. Commitments and Contingencies

Purchase Obligations

Our purchase obligations of $875.3 million as of September 27, 2025 represent legally binding commitments to purchase inventory and other commitments made in the normal course of business to meet operational requirements. Although open purchase orders are considered enforceable and legally binding, the terms generally allow the option to cancel, reschedule and adjust the requirements based on our business needs prior to the delivery of goods or performance of services. Obligations to purchase inventory and other commitments are generally expected to be fulfilled within one year.

We depend on a limited number of contract manufacturers, subcontractors and suppliers for raw materials, packages and standard components. We generally purchase these single or limited source products through standard purchase orders or one-year supply agreements and have no significant long-term guaranteed supply agreements with these vendors. While we seek to maintain a sufficient safety stock of such products and maintain on-going communications with our suppliers to guard against interruptions or cessation of supply, our business and results of operations could be adversely affected by a stoppage or delay of supply, substitution of more expensive or less reliable products, receipt of defective parts or contaminated materials, increases in the price of such supplies, or our inability to obtain reduced pricing from our suppliers in response to competitive pressures. In addition, the imposition of tariffs on certain imported goods and materials may increase our costs and place upward pressure on the cost of sales.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Product Warranties

We provide reserves for the estimated costs of product warranties at the time revenue is recognized. We typically offer a twelve-month warranty for most of our products. However, in some instances depending upon the product, product components or application of our products by the end customer, our warranties can vary and generally range from six months to five years. We estimate the costs of our warranty obligations on an annualized basis based on our historical experience of known product failure rates, use of materials to repair or replace defective products, and service delivery costs incurred in correcting product failures. In addition, from time-to-time, specific warranty accruals may be made if unforeseen technical problems arise with specific products. We assess the adequacy of our recorded warranty liabilities and adjust the amounts as necessary.

The following table presents the changes in our warranty reserve for the periods presented (in millions):


	Three Months Ended
	September 27, 2025		September 28, 2024
Balance as of beginning of period	$	14.4	$	13.2

Measurement period adjustment	—		0.8
Provision for warranty	2.8		2.4
Utilization of reserve, net	(4.1)		(3.2)
Balance as of end of period	$	13.1	$	13.2

Environmental Liabilities

Our research and development, manufacturing and distribution operations involve the use of hazardous substances and are regulated under international, federal, state and local laws governing health and safety and the environment. We apply strict standards for protection of the environment and occupational health and safety to sites inside and outside the United States, even if not subject to regulations imposed by foreign governments. We believe that our properties and operations at our facilities comply in all material respects with applicable environmental laws and occupational health and safety laws. However, the risk of environmental liabilities cannot be completely eliminated and there can be no assurance that the application of environmental and health and safety laws will not require us to incur significant expenditures. We are also regulated under a number of international, federal, state and local laws regarding recycling, product packaging and product content requirements. The environmental and product content/disposal and recycling laws are gradually becoming more stringent and may cause us to incur significant expenditures in the future.

Legal Proceedings

We are subject to a variety of claims and suits that arise from time-to-time in the ordinary course of our business. While management currently believes that resolving claims against us, individually or in the aggregate, will not have a material adverse impact on our financial position, results of operations or statements of cash flows, these matters are subject to inherent uncertainties and management’s view of these matters may change in the future. We accrue for loss contingencies when it is both probable that we will incur the loss and when we can reasonably estimate the amount of the loss or range of loss. As of September 27, 2025, the accrual for expected settlement of litigation matters was not material.

Regulatory Matters

In August 2024, the Company received inquiries from the Bureau of Industry and Security of the U.S. Department of Commerce (“BIS”) and Department of Justice (“DOJ”) following the Company’s voluntary disclosure to BIS in December 2023, and supplemented in April 2024. The Company continues to cooperate with both agencies on this matter. The Company is unable to predict the likely outcome of these matters.

Indemnifications

In the normal course of business, we enter into agreements that contain a variety of representations and warranties and provide for general indemnification. Exposure under these agreements is unknown, because claims may be made against us in the future, and we may record charges in the future as a result of these indemnification obligations.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

On March 5, 2025, we completed a sale of net assets located in an entity in Shenzhen, China. The Company has reclassified a $21.4 million unrecognized tax position to other non-current liabilities in the condensed consolidated balance sheets as of June 28, 2025 for an indemnification liability related to the sale of certain assets. This does not impact our results of operations for the year ended June 28, 2025. We did not have any other material indemnification claims that were probable or reasonably possible.

On November 7, 2023, we completed the acquisition of Cloud Light. In accordance with the Merger Agreement, cash consideration included $75.8 million of cash held in an escrow fund to support Cloud Light’s indemnification obligations and customary adjustment for working capital. Since the measurement period expired, any future adjustments will be included in our earnings. No amount of escrow funds have been released as the parties have not mutually agreed on the indemnification obligation and working capital adjustment.

Audit Proceedings

We are under audit by various domestic and foreign tax authorities with regards to income tax and indirect tax matters. In some, although not all cases, we have reserved for potential adjustments to our provision for income taxes and accrual of indirect taxes that may result from examinations by these tax authorities or final outcomes in judicial proceedings, and we believe that the final outcome of these examinations, agreements or judicial proceedings will not have a material effect on our results of operations. If events occur which indicate payment of these amounts is unnecessary, the reversal of the liabilities would result in the recognition of benefits in the period when we determine the liabilities are no longer necessary. If our estimates of the federal, state, and foreign income tax liabilities and indirect tax liabilities are less than the ultimate assessment, it could result in a further charge to expense.

Note 14. Operating Segments and Geographic Information

The CODM assesses the performance of the single segment and allocates resources based on consolidated net income (loss) included in the Company’s condensed consolidated statements of operations. The CODM uses consolidated net income to set budgets, evaluate performance, review actual results and in deciding whether to reinvest profits into our business, pursue acquisitions, or make any other capital management decisions. The significant segment expenses are reflected in the Company’s condensed consolidated statements of operations and the condensed consolidated statements of cash flows. The measure of the single segment assets is the consolidated assets included in the condensed consolidated balance sheets. Accordingly, we determined we operate in a single reporting segment. Comparative prior period segment information has been updated to reflect the new segment structure and measures. The changes in our operating segments had no impact on our previously reported consolidated results of operations, financial position or cash flows.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Refer to “Note 15. Revenue Recognition” for a presentation of disaggregated revenue by type of product.

Concentrations

We operate in three geographic regions: Americas, Asia-Pacific, and EMEA (Europe, Middle East, and Africa). Net revenue is assigned to the geographic region and country where our product is initially shipped. For example, certain customers may request shipment of our product to a contract manufacturer in one country, which may differ from the location of their end customers.

The following table presents net revenue by the three geographic regions we operate in and net revenue from countries that generally represented 10% or more of our total net revenue (in millions, except percentage data):


	Three Months Ended
	September 27, 2025				September 28, 2024
	Amount		% of Total		Amount		% of Total
Net revenue:
Americas:
United States	$	93.7	17.6	%	$	65.4	19.4	%
Mexico	73.6		13.8		33.9		10.0
Other Americas	8.6		1.6		2.9		0.9
Total Americas	$	175.9	33.0	%	$	102.2	30.3	%

Asia-Pacific:
Hong Kong	$	92.9	17.4	%	$	88.7	26.4	%
Thailand	109.1		20.4		52.5		15.6
China	49.3		9.2		14.6		4.3
Japan	21.0		3.9		16.9		5.0

Other Asia-Pacific	49.4		9.3		31.4		9.3
Total Asia-Pacific	$	321.7	60.2	%	$	204.1	60.6	%

EMEA	$	36.2	6.8	%	$	30.6	9.1	%

Total net revenue	$	533.8	100.0	%	$	336.9	100.0	%

During the three months ended September 27, 2025, two customers individually accounted for 22%, and 21% of our total revenue, respectively. During the three months ended September 28, 2024, two customers individually accounted for 15% and 12% of our total revenue, respectively.

As of September 27, 2025, three customers individually accounted for 16%, 14% and 10% of gross accounts receivable, respectively. As of June 28, 2025, two customers individually accounted for 13% and 11% of gross accounts receivable, respectively. We had no other customers that represented 10% or greater of our gross accounts receivable.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The measure of segment assets is reported on the condensed consolidated balance sheets as total assets. We do not present assets at a level other than that presented in the accompanying condensed consolidated balance sheets. Long-lived assets, namely property, plant and equipment, net, were identified based on the physical location of the assets in the corresponding geographic areas as of the periods indicated (in millions):


	September 27, 2025		June 28, 2025
Property, plant and equipment, net
United States	$	124.8	$	123.0
Thailand	240.4		218.6
Japan	164.5		144.3
United Kingdom	119.1		109.4
China	90.9		76.8
Other countries	55.1		54.3
Total property, plant and equipment, net	$	794.8	$	726.4

We purchase a portion of our inventory from contract manufacturers that are located primarily in Thailand, Taiwan, and Malaysia. During the three months ended September 27, 2025, our net inventory purchases from a single contract manufacturer that represented 10% or greater of our total net inventory purchases were concentrated with one contract manufacturer, who accounted for 20% of the total net inventory purchases. During the three months ended September 28, 2024, our net inventory purchases from a single contract manufacturer that represented 10% or greater of our total net inventory purchases were concentrated with one contract manufacturer, who accounted for 27% of the total net inventory purchases.

Note 15. Revenue Recognition

Disaggregation of Revenue

We disaggregate revenue by type of products and by geography. We do not present other levels of disaggregation, such as by customer, markets, contracts, duration of contracts, timing of transfer of control and sales channels, as this information is not used by our CODM to manage the business.

The table below discloses our total net revenue by type of product (in millions, except percentage data):


	Three Months Ended
	September 27, 2025				September 28, 2024
	Amount		% of Total		Amount		% of Total










Components	379.2		71.0	%	231.4		68.7	%
Systems	154.6		29.0	%	105.5		31.3	%
Net revenue	$	533.8	100.0	%	$	336.9	100.0	%

Refer to “Note 14. Operating Segments and Geographic Information” for a presentation of disaggregated revenue by geography.

Contract Balances

We record accounts receivable when we have an unconditional right to consideration. Contract liabilities are recorded when cash payments are received or due in advance of performance. Contract liabilities consist of advance payments and deferred revenue, where we have unsatisfied performance obligations. Contract liabilities are classified as deferred revenue and customer deposits and are included in other current liabilities within our condensed consolidated balance sheets. Payment terms vary by customer. The time between invoicing and when payment is due is not significant.

The following table reflects the changes in contract balances for the periods presented (in millions, except percentages):


Contract balances	Balance sheet location	September 27, 2025		June 28, 2025		Change		Percentage Change
Accounts receivable, net	Accounts receivable, net	$	307.0	$	250.0	$	57.0	22.8	%
Deferred revenue and customer deposits	Other current liabilities	$	2.7	$	0.7	$	2.0	285.7	%

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion in conjunction with the unaudited condensed consolidated financial statements and the corresponding notes included elsewhere in this Quarterly Report on Form 10-Q (this “Quarterly Report”). This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements. The matters discussed in these forward-looking statements are subject to risk, uncertainties and other factors that could cause actual results to differ materially from those made, projected or implied in the forward-looking statements. Please see “Risk Factors” and “Forward-Looking Statements” for a discussion of the uncertainties, risks and assumptions associated with these statements.

Forward-Looking Statements

This Quarterly Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements relate to, among other things, our markets and industry, products and strategy, the impact of export regulation changes, the expected benefits of our acquisitions, macroeconomic conditions, including supply chain conditions and inventory management by our customers, instability and uncertainty in the banking and financial services markets, and tightening credit markets on our business and results of operations, sales, gross margins, operating expenses, capital expenditures and requirements, liquidity, product development and research and development efforts, manufacturing plans, litigation, effective tax rates and tax reserves, our corporate and financial reporting structure, our plans for growth and innovation, our expectations regarding U.S.-China relations, market and regulatory conditions, trends and uncertainties in our business and financial results, and are often identified by the use of words such as, but not limited to, “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “project,” “seek,” “should,” “target,” “will,” “would,” “contemplate,” “predict,” “potential” and similar expressions or variations intended to identify forward-looking statements. These statements are based on the beliefs and assumptions of our management, which are in turn based on information currently available to management. Such forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section entitled “Risk Factors” included under Part II, Item 1A of this Quarterly Report. Furthermore, such forward-looking statements speak only as of the date of this report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.

Overview

We are an industry-leading provider of optical and photonic products defined by revenue and market share, essential to range of cloud, artificial intelligence and machine learning (“AI/ML”), telecommunications, consumer, and industrial end-market applications.

We believe the global markets in which Lumentum participates have fundamentally robust, long-term trends that will increase the need for our photonics products and technologies. We believe the world is becoming more reliant on ever-increasing amounts of data flowing through optical networks and data centers. Lumentum’s products and technology enable the scaling of these optical networks and data centers to higher capacities. AI/ML has caused a dramatic surge in the growing demands on data networking in cloud data centers and accelerated the usage of optical components and modules. We expect that the accelerating shift to digital and virtual approaches to many aspects of work and life will continue into the future. Virtual meetings, video calls, and hybrid in-person and virtual environments for work and other aspects of life will continue to drive strong needs for bandwidth growth and present dynamic new challenges that our technologies address. As manufacturers demand higher levels of precision, new materials, and factory and energy efficiency, suppliers of manufacturing tools globally are turning to laser-based approaches, including the types of lasers Lumentum supplies. Laser-based 3D sensing and LiDAR for security, industrial and automotive applications are rapidly developing markets. The technology enables computer vision applications that enhance security, safety, and new functionality in the electronic devices that people rely on every day. The use of LiDAR and in-cabin 3D sensing in automobile and delivery vehicles over time significantly adds to our long-term market opportunity. Additionally, we expect 3D-enabled machine vision solutions to expand significantly in industrial applications in the coming years.

To maintain and grow our market and technology leadership positions, we are continually investing in new and differentiated products and technologies and customer programs that address both nearer-term and longer-term growth opportunities, both organically and through acquisitions, as well as continually improving and optimizing our operations. Over many years, we have developed close relationships with market leading customers. We seek to use our core optical and photonic technology and our volume manufacturing capability to expand into attractive emerging markets that benefit from advantages that optical or photonics-based solutions provide.

Operating Segment Information

Industry Conditions

Our supply chain is complex, and we need to manage supply of certain components required to build our products while confronted with fluctuating demand from our customers. From time to time, we experience logistics and supply chain issues and shortages of the types of components we and our customers require in our products, and we have had to incur incremental supply and procurement costs in order to increase our ability to fulfill demands from our customers.

Through fiscal year 2024, we experienced significant fluctuations in demand as customers delayed projected shipments or built up inventory in response to supply shortages and then brought down inventories as supply chain constraints eased. Our revenue fluctuated in response to these changes in demand and our margins were adversely impacted as we were not been able to fully recover costs, such as underutilized manufacturing capacity. However, beginning in the first quarter of fiscal year 2025, network equipment manufacturers normalized inventory levels and we have seen increasing demand from AI and cloud customers as they continue to expand their data centers.

Due to worldwide operations, we and our customers are also subject to risks relating to the global trade environment. The Company is actively monitoring and assessing the global trade environment, particularly with respect to recent changes and proposed changes in tariff regulations and trade restrictions. The ongoing uncertainty surrounding trading policies, including the potential for additional tariffs, restrictions related to our customers and retaliatory measures by non-U.S. governments, continues to create a volatile environment that could disrupt our operations. The imposition of tariffs on certain imported goods and materials and export controls on critical components may increase our costs and place upward pressure on the cost of goods sold, which, in turn, may reduce our gross margins if we are unable to pass these costs onto customers through price increases.

If these tariff-related and restriction-related cost increases persist or escalate, our financial results could be adversely affected, including lower profitability. Additionally, changes in the global trade landscape could result in reduced market competitiveness and a slowdown in consumer demand as well as disruptions to our supply chain, including longer lead times, higher shipping costs, or limited availability of key inputs. This may constrain our ability to meet customer demand in a timely manner, potentially affecting our revenue growth and operational efficiency. The impact of tariffs on our business is hard to predict, as it is dependent on negotiations with customers and suppliers and other mitigation efforts and potential further changes in global trade policies, including higher tariffs or trade restrictions in the U.S. or other countries.

For more information on risks associated with supply chain constraints and customer inventory management, see the section titled “Risk Factors” in Item 1A of Part II of this report.

Critical Accounting Policies and Estimates

Our condensed consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) as set forth in the Financial Accounting Standards Board’s Accounting Standards Codification (“ASC”). We also consider the various staff accounting bulletins and other applicable guidance issued by the United States Securities and Exchange Commission (“SEC”). GAAP, as set forth within the ASC, requires us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented. To the extent there are differences between these estimates, judgments or assumptions and actual results, our financial statements will be affected. The accounting policies that reflect our more significant estimates, judgments and assumptions and which we believe are the most critical to aid in fully understanding and evaluating our reported financial results include the following:

•Inventory Valuation

•Revenue Recognition

•Income Taxes

•Business Combinations

•Goodwill and Intangible Assets - Impairment Assessment

Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in Part II, Item 7 of our Annual Report on Form 10-K for our fiscal year ended June 28, 2025 provides a complete discussion of our critical accounting policies and estimates. There have been no changes to these policies during the three months ended September 27, 2025, except as noted below:

Income Taxes

Recently Issued Accounting Pronouncements

Refer to “Note 2. Recently Issued Accounting Pronouncements” in the notes to condensed consolidated financial statements.

Results of Operations

The results of operations for the periods presented are not necessarily indicative of results to be expected for future periods. The following table summarizes selected unaudited condensed consolidated statements of operations items as a percentage of net revenue:


	Three Months Ended
	September 27, 2025		September 28, 2024
Net revenue by type of products:
Components	71.0	%	69.0	%
Systems	29.0		31.0
Net revenue	100.0		100.0
Cost of sales	62.3		70.2
Amortization of acquired developed intangibles	3.7		6.7
Gross profit	34.0		23.1
Operating expenses:
Research and development	15.2		22.1
Selling, general and administrative	15.9		22.6
Restructuring and related charges	1.6		2.9


Total operating expenses	32.7		47.6
Income (loss) from operations	1.3		(24.5)

Interest expense	(1.1)		(1.6)
Other income, net	0.8		2.6
Income (loss) before income taxes	1.0		(23.5)
Income tax provision	0.2		0.9
Net income (loss)	0.8	%	(24.5)	%

Financial data for the three months ended September 27, 2025

The following table summarizes selected unaudited condensed consolidated statements of operations items for the periods presented (in millions, except for percentages):


	Three Months Ended
	September 27, 2025			September 28, 2024			Change		Percentage Change
Net revenue by type of products:
Components	379.2			231.4			$	147.8	63.9	%
System	154.6			105.5			49.1		46.5	%
Net revenue	$	533.8		$	336.9		$	196.9	58.4	%

Gross profit	$	181.5		$	77.9		$	103.6	133.0	%
Gross margin	34.0		%	23.1		%

Research and development	$	81.4		$	74.3		$	7.1	9.6	%
Percentage of net revenue	15.2		%	22.1		%

Selling, general and administrative	$	85.1		$	76.3		$	8.8	11.5	%
Percentage of net revenue	15.9		%	22.6		%

Restructuring and related charges	$	8.3		$	9.7		$	(1.4)	(14.4)	%
Percentage of net revenue	1.6		%	2.9		%

Net Revenue

Net revenue increased by $196.9 million, or 58.4%, during the three months ended September 27, 2025 compared to the three months ended September 28, 2024, driven by a $147.8 million increase in Components products and a $49.1 million increase in Systems products. Approximately three-quarters of the increase in Components products relates to our ramp of laser chip and laser assembly product shipments to support strong, broad-based demand across intra-data center, data center interconnect and long-haul applications. The average selling prices of these laser chip and laser assembly products remained relatively flat compared to prior period. The remaining approximately one-quarter of Components revenue growth was due to an increase in shipment volume of data transport products, encompassing line subsystems solutions for long-haul terrestrial networks and charge pump products used in sub-sea network installations.

Nearly all of the increase in our System products was driven by our cloud transceiver product lines due to an increase in shipment volume, which was partially offset by lower pricing across multiple transceiver lines. We also began an initial phase of optical circuit switch shipments and we remain on track for manufacturing expansion over the coming quarters to support future growth.

Revenue by Region


	Three Months Ended
	September 27, 2025				September 28, 2024
	Amount		% of Total		Amount		% of Total
Net revenue:
Americas:
United States	$	93.7	17.6	%	$	65.4	19.4	%
Mexico	73.6		13.8		33.9		10.0
Other Americas	8.6		1.6		2.9		0.9
Total Americas	$	175.9	33.0	%	$	102.2	30.3	%

Asia-Pacific:
Hong Kong	$	92.9	17.4	%	$	88.7	26.4	%
Thailand	109.1		20.4		52.5		15.6
China	49.3		9.2		14.6		4.3
Japan	21.0		3.9		16.9		5.0

Other Asia-Pacific	49.4		9.3		31.4		9.3
Total Asia-Pacific	$	321.7	60.2	%	$	204.1	60.6	%

EMEA	$	36.2	6.8	%	$	30.6	9.1	%

Total net revenue	$	533.8	100.0	%	$	336.9	100.0	%

For the three months ended September 27, 2025 and September 28, 2024, net revenue from customers outside the United States, based on customer shipping location, represented 82.4% and 80.6% of net revenue, respectively.

Our net revenue is primarily denominated in U.S. dollars, including our net revenue from customers outside the United States as presented above. We expect revenue from customers outside of the United States to continue to be an important part of our overall net revenue and an increasing focus for net revenue growth opportunities. However, regulatory and enforcement actions by the United States and other governmental agencies, as well as changes in tax and trade policies and tariffs, have impacted and may continue to negatively impact net revenue from customers outside the United States.

Gross Margin

Gross margin for the three months ended September 27, 2025 increased to 34.0% from 23.1% for the three months ended September 28, 2024, primarily driven by the positive impact of higher revenue from our laser chip, laser assembly and data transport products. Approximately two-thirds of the gross margin increase was driven by lower manufacturing costs as a percentage of revenue, primarily due to higher internal factory utilization. The remaining approximately one-third of the gross margin increase was driven by improved product mix of our higher-margin laser chip and laser assembly products.

The markets in which we sell products are undergoing product, architectural and business model transitions driven in part by the deployment of AI, have high customer concentrations, are highly competitive, are price sensitive and/or are affected by customer seasonal and variants in buying patterns. We expect these factors to result in variability of our gross margin and our gross margin may be subject to increasing downward pressure due to these factors.

Research and Development (“R&D”)

R&D expense increased by $7.1 million, or 9.6% for the three months ended September 27, 2025 compared to the three months ended September 28, 2024, primarily due to a $5.3 million increase in our cash incentive compensation due to higher revenue and profit levels.

We believe that continuing our investments in R&D is critical to attaining our strategic objectives. We plan to continue to invest in R&D and new products that we believe will further differentiate us in the marketplace.

Selling, General and Administrative (“SG&A”)

SG&A expense increased by $8.8 million, or 11.5%, during the three months ended September 27, 2025 compared to the three months ended September 28, 2024, primarily due to a $5.7 million increase in our cash incentive compensation due to higher revenue and profit levels, as well as a $7.0 million increase in stock-based compensation and a $3.7 million increase in legal fees. This was offset by a $4.3 million decrease in amortization of acquired intangibles as certain assets were fully amortized as well as a $1.6 million gain from sale of our Brazilian entities.

From time-to-time, we incur expenses that are not part of our ordinary operations, such as mergers and acquisition-related and litigation expenses, which generally increase our SG&A expenses and potentially impact our profitability expectations in any particular period.

Restructuring and Related Charges

We have initiated various strategic restructuring events primarily intended to reduce costs, consolidate our operations, rationalize the manufacturing of our products, and align our business in response to market conditions and as a result of recent acquisitions.

Interest Expense

For the three months ended September 27, 2025 and September 28, 2024, we recorded interest expense of $5.7 million and $5.5 million, respectively. The slight increase in interest expense for the three months ended September 27, 2025 is mainly due to the issuance of the 2032 Notes in September 2025.

Other Income, Net

The components of other income, net are as follows (in millions):


	Three Months Ended
	September 27, 2025		September 28, 2024
Foreign exchange and other gains (losses), net	$	1.5	$	(0.7)
Interest and investment income, net	8.6		9.4
Inducement expense	(5.9)		—
Total other income, net	$	4.2	$	8.7

Other income, net for the three months ended September 27, 2025 decreased by $4.5 million compared to the three months ended September 28, 2024 primarily due to a $5.9 million inducement expense related to the partial repurchase of 2026 Notes offset by an increase in net foreign exchange gains of $2.2 million as the U.S. dollar strengthened against the Japanese Yen, which is the underlying currency for our term loans. Interest and investment income, net slightly decreased by $0.8 million compared to the three months ended September 28, 2024 due to slightly lower short term investment balances.

Provision (Benefit) for Income Taxes

The following table summarizes provision (benefit) for income taxes for the periods presented (in millions):


	Three Months Ended
	September 27, 2025		September 28, 2024
Income tax provision	$	1.0	$	3.2

We recorded a tax provision of $1.0 million and $3.2 for the three months ended September 27, 2025 and September 28, 2024, respectively. Our tax provision for the three months ended September 27, 2025 includes a discrete tax benefit of 0.6 million primarily related to the tax benefit from a windfall in connection with stock-based compensation vested during the quarter and foreign return to provision differences, partially offset by the tax expense from currency re-measurement of certain tax related accounts. Our tax provision for the three months ended September 28, 2024 is primarily related to the tax expense associated with interest on uncertain tax positions, partially offset by the tax benefit from currency re-measurements.

Our provision for incomes taxes may be impacted by changes in the geographic mix of earnings, acquisitions, changes in the realizability of deferred tax assets, changes in our uncertain tax positions, the results of income tax audits, settlements with tax authorities, the expiration of statutes of limitations, the implementation of tax planning strategies, tax rulings, court decisions, and changes in tax laws and regulations. It is also possible that significant negative or positive evidence may become available that causes us to change our conclusion regarding whether a valuation allowance is needed on certain of our deferred tax assets, which would affect our income tax provision in the period of such change.

We also evaluate changes to regulations and requirements in the international jurisdictions where we conduct our business. For additional information, refer to Part II Item 1A “Risk Factors”.

Financial Condition

Liquidity and Capital Resources

As of September 27, 2025 and June 28, 2025, our cash and cash equivalents were $772.9 million and $520.7 million, respectively. As of September 27, 2025 and June 28, 2025, our short-term investments of $348.9 million and $356.4 million, respectively, were all held in the United States. Cash equivalents and short-term investments are primarily comprised of money market funds, treasuries, agencies, high quality investment grade fixed income securities, certificates of deposit and commercial paper. Our investment policy and strategy provide for diversification of investments and is focused on the preservation of capital and supporting our liquidity requirements.

The total amount of cash held by the non-United States entities as of September 27, 2025 and June 28, 2025 was $343.8 million and $398.3 million, respectively, which was primarily held by entities incorporated in the United Kingdom, Japan, Hong Kong, China, Switzerland, China and Thailand. Although cash currently held in the United States, as well as cash generated in the United States from future operations, is expected to cover our normal operating requirements, a substantial amount of additional cash could be required for other purposes, such as capital expenditures to support our business and growth, including costs associated with increasing internal manufacturing capabilities, strategic transactions and partnerships, and future acquisitions.

Our intent is to indefinitely reinvest funds held outside the United States. Except for the funds held in the Cayman Islands, the British Virgin Islands, Hong Kong and Japan, our current plans do not demonstrate a need to repatriate them to fund our domestic operations. However, if in the future, we encounter a significant need for liquidity domestically or at a particular location that we cannot fulfill through borrowings, equity offerings, or other internal or external sources, or the cost to bring back the money is not significant from a tax perspective, we may determine that cash repatriations are necessary or desirable. Repatriation could result in additional material taxes. These factors may cause us to have an overall tax rate higher than other companies or higher than our tax rates in the past. Additionally, if conditions warrant, we may seek to obtain additional financing through debt or equity sources. To the extent we issue additional shares, it may create dilution to our existing stockholders. However, any such financing may not be available on terms favorable to us or may not be available at all.

Beginning in fiscal year 2023, the Tax Cuts and Jobs Act of 2017 requires taxpayers to capitalize research and development expenditures and amortize domestic expenditures over five years and foreign expenditures over fifteen years. The One Big Beautiful Bill Act (“OBBBA”) enacted in July 2025 eliminates capitalization of domestic research and development expenditures for taxable years beginning on or after January 1, 2025, but retains the requirement to amortize foreign research and development expenditures over 15 years. In addition, the OBBBA permits all taxpayers who paid or incurred domestic research and development expenses in tax years beginning on or after January 1, 2022 and before January 1, 2025 to elect to deduct any remaining unamortized amount over a one-year period or ratably over a two-year period (at the taxpayer’s election), accelerating the benefit of such expenses. We have evaluated these changes in the first quarter of fiscal year 2026, and the impact to our tax provision for this period is not material.

Liquidity and Capital Resources Requirements

We believe that our cash and cash equivalents as of September 27, 2025 and cash flows from our operating activities will be sufficient to meet our liquidity and capital spending requirements for at least the next 12 months.

There are a number of factors that could positively or negatively impact our liquidity position, including:

•global economic conditions which affect demand for our products and services and impact the financial stability of our suppliers and customers, including the impact of uncertainty in the banking and financial services industries;

•fluctuations in demand for our products as a result of changes in regulations, tariffs or other trade barriers, and trade relations in general;

•changes in accounts receivable, inventory or other operating assets and liabilities, which affect our working capital;

•increase in capital expenditures to support our business and growth, including increases in manufacturing capacity;

•the tendency of customers to delay payments or to negotiate favorable payment terms to manage their own liquidity positions;

•timing of payments to our suppliers;

•volatility in fixed income and credit, which impact the liquidity and valuation of our investment portfolios;

•cost and availability of credit, which may impact available financing for us, our customers or others with whom we do business;

•volatility in foreign exchange markets, which impacts our financial results;

•possible investments or acquisitions of complementary businesses, products or technologies, or other strategic transactions or partnerships;

•issuance of debt or equity securities, or other financing transactions, including bank debt;

•potential funding of pension liabilities either voluntarily or as required by law or regulation;

•acquisitions or strategic transactions; and

•the settlement of any conversion or redemption of our convertible notes in cash.

Contractual Obligations

The following table summarizes our contractual obligations as of September 27, 2025, and the effect such obligations are expected to have on our liquidity and cash flow (in millions):


	Payments Due
	Total		Less Than 1 Year		More Than 1 Year
Contractual Obligations
Asset retirement obligations	$	7.1	$	—	$	7.1

Operating lease liabilities, including imputed interest (1)	39.4		13.6		25.8
Pension plan contributions (2)	2.0		2.0		—
Purchase obligations (3)	875.3		834.5		40.8
Term loans - principal (5)	62.2		10.3		51.9
Term loans - interest (5)	1.5		0.5		1.0

Convertible notes - principal (4)	3,198.6		—		3,198.6
Convertible notes - interest (4)	88.8		21.2		67.6
Total	$	4,274.9	$	882.1	$	3,392.8

(1) The amounts of operating lease liabilities do not include any sublease income amounts nor do they include payments for short-term leases or variable lease payments. As of September 27, 2025, we expect to receive sublease income of approximately $2.1 million over the sublease periods.

(2) The amount of pension plan contributions represents planned contributions to our defined benefit plans. Although additional future contributions will be required, the amount and timing of these contributions will be affected by actuarial assumptions, the actual rate of returns on plan assets, the level of market interest rates, legislative changes, and the amount of voluntary contributions to the plan. Any contributions for the following fiscal year and later will depend on the value of the plan assets in the future and thus are uncertain. As such, we have not included any amounts beyond one year in the table above.

(3) Purchase obligations represent legally binding commitments to purchase inventory and other commitments made in the normal course of business to meet operational requirements. Refer to “Note 13. Commitments and Contingencies” in the notes to condensed consolidated financial statements.

(4) The amounts related to convertible notes include principal and interest on our 0.50% Convertible Senior Notes due 2026 (the “2026 Notes”), principal and interest on our 0.50% Convertible Senior Notes due 2028 (the “2028 Notes”), principal and interest on our 1.50% Convertible Senior Notes due 2029 (the “2029 Notes”), and principal and interest on our 0.375% Convertible Senior Notes due 2032 (the “2032 Notes”). The 2026 Notes have a maturity date of December 15, 2026, the 2028 Notes have a maturity date of June 15, 2028, the 2029 Notes have a maturity date of December 15, 2029, and the 2032 Notes have a maturity date of March 15, 2032. The principal balances of our convertible notes are reflected in the payment periods in the table above based on their respective contractual maturities, which may be accelerated if the holders elect to convert the notes prior to maturity. As the principal amounts of all of our outstanding convertible notes must be settled in cash, the actual cash settlement may be higher if we decide to settle the conversion value in excess of the principal amounts in cash, rather than issuing shares of common stock.

(5) The amounts related to term loans include principal and interest on our Sumitomo Mitsui Banking Corporation (“SMBC”) term loan with a fixed annual interest rate of 0.88% and Mizuho Bank, Ltd. (“Mizuho”) term loan with a fixed annual interest rate of 0.90%. The SMBC term loan requires monthly principal payments with the remaining principal due on the loan maturity date of July 31, 2029 while the Mizuho term loan requires quarterly principal payments with the final payment due on September 20, 2029.

We do not have any off-balance sheet arrangements, as such term is defined in rules promulgated by the SEC, which have or are reasonably likely to have a current or future effect on our liquidity or capital resources that are material to investors.

Indebtedness

As of September 27, 2025, the net carrying amount of our 2032 Notes of $1,254.6 million (principal balance of $1,265.0 million maturing in 2032) is presented in non-current liabilities in our condensed consolidated balance sheets. If the closing price of our stock exceeds $244.10 (or 130% of the conversion price of $187.77) for 20 of the last 30 trading days of any future quarter, our 2032 Notes would become convertible at the option of the holders during the subsequent fiscal quarter and the debt would be reclassified to current liabilities in our consolidated balance sheets.

As of September 27, 2025, the net carrying amount of our 2029 Notes of $600.4 million (principal balance of $603.7 million maturing in 2029) is presented in current liabilities in our condensed consolidated balance sheets. If the closing price of our stock exceeds $90.40 (or 130% of the conversion price of $69.54) for 20 of the last 30 trading days of any future quarter, our 2029 Notes would become convertible at the option of the holders during the subsequent fiscal quarter, which was the case as of the end of the first quarter of fiscal year 2026, and therefore, the debt was reclassified to current liabilities in our consolidated balance sheets.

As of September 27, 2025, the net carrying amount of our 2028 Notes of $858.0 million (which have an aggregate principal amount of $861.0 million outstanding that matures in 2028) is presented in non-current liabilities in our condensed consolidated balance sheets. If the closing price of our stock exceeds $170.34 (or 130% of the conversion price of $131.03) for 20 of the last 30 trading days of any future fiscal quarter, our 2028 Notes would become convertible at the option of the holders during the subsequent fiscal quarter and the debt would be reclassified to current liabilities in our condensed consolidated balance sheets.

As of September 27, 2025, the net carrying amount of our 2026 Notes of $468.3 million (which have an aggregate principal amount of $468.9 million outstanding that matures in 2026) is presented in non-current liabilities in our condensed consolidated balance sheets. If the closing price of our stock exceeds $129.08 (or 130% of the conversion price of $99.29) for 20 of the last 30 trading days of any future fiscal quarter, our 2026 Notes would become convertible at the option of the holders during the subsequent fiscal quarter, which was the case as of the end of the first quarter of fiscal year 2026, and therefore, the debt was reclassified to current liabilities in our condensed consolidated balance sheets.

As of September 27, 2025, the Company had $38.2 million in principal amount outstanding on our SMBC term loan, of which the short-term portion of $4.3 million is recorded as current liabilities while the long-term portion of $33.9 million is recorded as long-term debt in the Company’s condensed consolidated balance sheets.

As of September 27, 2025, the Company had $24.0 million in principal amount outstanding on our Mizuho term loan, of which the short-term portion of $6.0 million is recorded as current liabilities while the long-term portion of $18.0 million is recorded as long-term debt in the Company’s condensed consolidated balance sheets.

Unrecognized Tax Benefits

As of September 27, 2025 and June 28, 2025, our other non-current liabilities include unrecognized tax benefit for uncertain tax positions of $57.0 million and $55.6 million, respectively. We are unable to reliably estimate the timing of future payments related to uncertain tax positions.

Cash Flows

Our balance of cash and cash equivalents increased by $252.2 million from $520.7 million as of June 28, 2025 to $772.9 million as of September 27, 2025. The increase in cash and cash equivalents during the three months ended September 27, 2025 was due to cash from operating activities of $57.9 million and cash from financing activities of $262.1 million, offset by cash used in investing activities of $67.8 million.

Operating Cash Flow

Cash from operating activities was $57.9 million during the three months ended September 27, 2025, which reflects a net income of $4.2 million and non-cash items of $108.3 million, offset by changes in operating assets and liabilities of $54.6 million. Changes in operating assets and liabilities were primarily driven by an increase in accounts payable of $28.8 million primarily due to higher inventory purchases and capital expenditures, an increase of $11.4 million in accrued payroll and related expenses mainly driven by our accrual on employee cash bonuses, outstanding payroll taxes related to stock-based compensation and ESPP contribution, and an increase of $24.8 million in accrued expenses and other current and non-current liabilities driven by contractual liabilities, accrued interest on convertible notes and provision for non-cancellable commitments, offset by an increase in accounts receivable of $56.9 million mainly driven by higher revenue, and an increase of $57.5 m

Lumentum Holdings Inc. 10-Q