Gaetano

Rosenblatt (sell-side) has hosted a bunch of calls with some companies I am very interested in over the past 36 hours. For this article we are going to talk about Applied Opto, Fabrinet, and Adtran. I am mostly going to focus on novel signals, or significant confirmations, that we received from these calls since the last official commentary from the companies. Here are my latest articles on each: AAOI Post Earnings Debrief: FN Post Earnings Debrief: FN Earnings Debrief. Big Dip. Opportunity or Not?

As I am writing this, Fabrinet (FN is currently down 20%). The entire semis trade is hit today hard. We’ve got war escalation, yield concerns. The whole kit and kaboodle. So is this FN reaction deserved? Or is it just caught up in the unwind today and can’t catch a bid? Let’s unpack the call and see what’s going on. I am going to write this as I read through the transcript and try to pull out any major signals.

Over the past few months we have been working our way through the different Physical AI investments layers from the ground up. I took a little break from writing about the layers and have been focusing on finding the best investments and building out the portfolio. But now it’s time to dive back in. So at this point our machine has been trained, it’s practiced, it can see and sense the world, it has enough local compute to understand what’s happening.

Optics has obviously been one of the top performing themes in the market this year. Many of these companies have re-rated significantly while also growing in basically every way possible. At this point it’s hard to find ‘undervalued’ optical companies. And if you have found one, it’s probably in some obscure market with minimal current revenue and a highly speculative story. But what if there was one that was hiding in plain sight? Exposed to some of the fastest growing segments in the optical trade.

Well after Lumentum finally crossing the $1B quarterly threshold yesterday, Coherent crossed the $2B quarterly threshold today. Such clean numbers, I love it. And they expect their first $3B+ quarter by the end of fiscal 2027. That is a massive projection. We’ll unpack this more later. The headline print was already strong. Rev at the top of guidance, gross margin crossed 40%, EPS beat, and the next-quarter guide showed another large sequential step up.

The entire AI trade is doing well today. We had many positive earnings reports across the board yesterday. Most relevant here is Lumentum of course. I did a full breakdown here: And today we have COHR reporting. After a really strong print from LITE, all eyes will be on COHR. Pressure is on for sure. Let’s quickly go over the main things I am interested in. Will keep this one brief and direct. Headline expected for Q4 Rev at $1.91-$2.05B, gross margins at 39%-40%, EPS $1.52-$172.

Well one of the strongest optical earnings prints of this cycle ended basically flat after hours. At least initially. Now it’s up 5% or so overnight. Which feels kind of insane. But the stock also went from around $600 to $940 in roughly two weeks. So expectations were already high. Then you had a $7.2B GAAP loss sitting in the headline which I think was responsible for the initial dip we saw. More on that later. Because the actual business print was very strong.

What a crazy few weeks for the Photonics trade. Since the bottom on July 30, many of these stock are up over 50%. Some are up over 100%. We had the Trump Chinese transceiver proposal ban. Trump’s Chinese Optical Proposal Is A Really Big Deal. We also had some very encouraging earnings results / calls from companies like AEHR, VIAV, AAOI and more. I already discussed the Chinese proposal in depth. So what I want to do today is unpack the signals from the AAOI call.

The two most important optical companies are reporting this week. LITE on Tuesday. COHR on Wednesday. The bar has been raised the past few weeks. Both of these stocks are up around 50% since the late July lows. So let’s dig into LITE and discuss all the different bits that we expect to see. Disclaimer: This report is provided solely for informational and educational purposes and should be treated neither as investment advice nor as a recommendation to buy, sell, or hold any security.

If you have been following along you know I have been building out my Physical AI portfolio over the last couple months. So far I have allocated 68% of the capital I intend to invest. Across 14 different companies. Many of them have reported earnings over the last few weeks. We saw some great post-earnings moves. AEVA, which is one of my larger holdings, went up ~30%. INDI went up ~16% BKSY went up ~12% And so on. So today my goal is to unpack the earnings for each company I invest in.