Investing.com -- Lumentum Holdings Inc (NASDAQ: LITE) reported third quarter results that exceeded analyst expectations, yet shares fell 5.6% in after-hours trading Tuesday as investors focused on the company’s debt position and sustainability of margin gains.

The optical components maker posted adjusted earnings per share of $2.37 for the fiscal third quarter ended March 28, beating the analyst consensus of $2.26. Revenue reached $808.4 million, surpassing the $802.94 million estimate and representing a 90% increase YoY from $425.2 million in the prior-year period.

However, the company’s balance sheet showed current portion of long-term debt surged to $3.24 billion from $10.6 million in the prior quarter, primarily due to proceeds from convertible preferred stock issuance in March 2026. The stock decline suggests investor concern about the debt classification and whether recent margin improvements driven by product mix can be sustained.

For the fourth quarter of fiscal 2026, Lumentum issued guidance of $2.85 to $3.05 per share on revenue of $960 million to $1.01 billion. The midpoint of $2.95 per share significantly exceeds the analyst consensus of $2.69, while the revenue midpoint of $985 million tops the $917.3 million estimate.

"Lumentum delivered an exceptional third quarter, with revenue growing 90% year over year to a record $808 million," said President and CEO Michael Hurlston. "While our top line growth continues to garner headlines, the more impressive part of our recent performance has been our margin expansion."

The company’s adjusted gross margin improved to 47.9% from 42.5% in the prior quarter, while adjusted operating margin expanded to 32.2% from 25.2%. Hurlston attributed the margin gains to operational rigor, pricing discipline, and product mix, including strength in laser chips, pump lasers, and narrow linewidth laser assemblies.