Lumentum Needham's top networking pick for 2025 on AI surge

Investing.com -- Lumentum Holdings Inc (NASDAQ: LITE) was named Needham's top pick for 2025 across networking and cloud communication sectors, as the brokerage notes surging investments in artificial intelligence infrastructure and a recovery in telecom demand as key growth drivers.

“We expect LITE to benefit from continued strong growth in its Datacom business driven by surging AI infrastructure investments as well as a sustained recovery in its telecom business,” analyst wrote.

Needham analysts added Lumentum to their conviction list, replacing Harmonic Inc (NASDAQ: HLIT), and raised price target on the stock to $110.

The brokerage expects Lumentum's datacom business to benefit from AI-driven demand for data center connectivity, while its telecom unit sees sustained growth tied to wide area network expansions.

Lumentum's ongoing expansion of electro-absorption modulated laser production capacity is expected to provide a significant boost, with additional capacity slated to drive upside in fiscal 2026 estimates, Needham said.

Higher U.S. tariffs on China could also position Lumentum to gain market share in datacom transceivers, Needham added, citing the company's deep vertical integration as a competitive advantage that enables strong operating leverage.

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