Evercore ISI Initiates Coverage on $LITE with Outperform Rating, PT $1,100 Analyst comments: "As AI accelerator deployments continue to inflect higher (20%+ CAGR), their utilization is severely limited by connectivity. Optical interconnections are increasingly critical bottlenecks, and the laser content required is concentrated in indium phosphide (InP), a material that is specialized, capital-intensive, and in short supply. We think LITE’s diversity of growth means not all things need to go right for the stock to work. Key thesis points: 1. Sizable TAM Ahead: Management has framed the optical AI TAM growing from ~$18B today to >$90B by 2030, a ~40% CAGR, spanning transceivers, OCS, CPO, and coherent components, with LITE participating across the board. 2. Upside to FY28 EPS: We model $35 of FY28 EPS (~60% CAGR) but see a path toward $45-$50 EPS in FY28. Over the medium term, we see potential for $60-$70 EPS as revenue scales, margins expand, and mix shifts toward higher-value products. 3. Scale Up/Out/Across: Optical content per unit of compute is rising across scale-up (within the rack), scale-out (across clusters), and scale-across (between data centers), giving LITE multiple avenues to grow that are not tied to any single product cycle or customer. In addition, OCS sets up a fixed, point-to-point optical path using MEMS mirrors, where LITE has a 20-year history with this technology. We see demand continuing, with LITE outlining >150% unit CAGR from CY25-CY28 at OFC. 4. Demand Outpacing Supply: InP optical lane demand is set to grow ~85% on a compound basis through 2030, yet LITE is undershipping by more than 30% even after lifting EML output 8x since FY23, which shifts pricing power and margin upstream to scaled, vertically integrated suppliers. 5. Margin Expansion: LITE is a unique asset where we see gross margins expanding substantially over the next few years. Our model pegs gross margins going from 46% in FY26 to 54% by FY28. Notably, deployments like CPO and NPO will contribute 60% gross margins to the model." Analyst: Amit Daryanani