Some companies spend decades on the Nasdaq without ever cracking the inner circle. Then one Friday afternoon, an announcement changes everything.
That very scenario just happened to Lumentum Holdings (LITE).
Nasdaq announced it would replace CoStar Group (CSGP) with Lumentum in the Nasdaq-100 Index before the opening bell on May 18, 2026. By Monday’s close, LITE shares were up 16% to $1,053.09, according to Yahoo Finance.
CEO Michael Hurlston had already set the tone days earlier, after the company reported record quarterly revenue. “While our top line growth continues to garner headlines,” he said in a company statement, “the more impressive part of our recent performance has been our margin expansion.”
Wall Street apparently agreed, and the index committee was paying attention too.
Why landing in the Nasdaq-100 sent Lumentum stock flying
The Nasdaq-100 tracks the 100 largest non-financial companies listed on Nasdaq. Getting in isn’t just a badge of honor; it triggers real, mechanical buying.
Index-tracking and passive investment funds are required to mirror the composition of the index. That means every fund benchmarked to the Nasdaq-100 must now purchase LITE shares to stay in line. It’s a forced demand, and the market prices fast.
The numbers behind LITE’s run put the index inclusion in context:
- Year-to-date return: up 185.71% vs. the S&P 500‘s 8.29%
- 1-year return: up 1,523.39% vs. the S&P 500’s 30.97%
- 3-year return: up 2,332.08% vs. the S&P 500’s 79.46%
- 5-Year Return: up 1182.07% vs. the S&P 500’s 78.53%
Source: Lumentum Stock Performance, Yahoo Finance
This is not a stock that quietly crept into the index. It earned its way in.
Lumentum’s record quarter showed a company hitting its stride
The index news landed just days after Lumentum reported fiscal third-quarter results on May 5, 2026, that were hard to ignore.
Revenue came in at $808.4 million, up 90% year-over-year (YoY) and a new company record, according to a company statement. But Hurlston’s point about margins is worth sitting with.
Gross margin improved 540 basis points quarter-over-quarter (QoQ). Operating margin expanded 700 basis points QoQ. For a company growing revenue at 90%, that kind of margin expansion doesn’t happen by accident.
I crunched the numbers on the earnings trajectory, too:
- Q3 FY2026 non-GAAP EPS: $2.37 vs. $0.57 in Q3 FY2025
- Q3 FY2026 GAAP net income: $144.2 million vs. a $44.1 million loss in Q3 FY2025
- Q2 to Q3 revenue jump: from $665.5 million to $808.4 million
Source: Lumentum Third Quarter of Fiscal Year 2026 Financial Results
The company also ended the quarter with $3.17 billion in cash, cash equivalents, and short-term investments, up $2.02 billion from the prior quarter, largely due to a Series A Convertible Preferred Stock issuance in March 2026.
What Lumentum actually makes, and why AI infrastructure needs it
Lumentum isn’t a household name, but it sits inside some of the most critical infrastructure being built right now. The company manufactures optical and photonic products – components that move data through fiber networks at the speed of light.
Its two core business segments are Cloud & Networking and Industrial Tech. The first is where AI growth is showing up most directly. Lumentum makes optical circuit switches — a component embedded in the AI hardware stack — along with chips, modules, and subsystems used in telecommunications and data center networking.
Related: Lumentum stock price target surges 55% on Nvidia ties
The second segment covers commercial lasers for industrial, scientific, and oversight applications.
Hurlston specifically called out “co-packaged optics” and “optical circuit switches” as growth drivers still in early innings. “As our key growth drivers of co-packaged optics and optical circuit switches begin to kick in,” he said in the company statement, “we would expect further increases in earnings power.”
That’s a management team signaling the story isn’t over.
Lumentum’s Q4 outlook points to another record quarter
Lumentum guided Q4 fiscal 2026 revenue between $960 million and $1.01 billion, according to the company’s statement. At the midpoint, that’s roughly 18% sequential growth from Q3’s already-record $808 million.
The company also guided non-GAAP operating margin of 35% to 36% and non-GAAP diluted EPS of $2.85 to $3.05 for the quarter, a meaningful step up from Q3’s $2.37.
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My review of the trajectory suggests Lumentum is not just growing. It’s accelerating. Revenue, margins, and earnings are all moving in the same direction at the same time. That combination, paired with forced buying from index funds ahead of the May 18 inclusion date, gave Monday’s, May 12, move a fundamental backbone that pure momentum rallies rarely have.
The Nasdaq-100 doesn’t hand out invitations lightly. Lumentum, it seems, had already done the work to deserve one.
