Lumentum Holdings Inc. [NASDAQ: LITE] surged 16% to $1,053.09 on Monday after Nasdaq announced it would replace CoStar Group [NASDAQ: CSGP] with Lumentum in the Nasdaq-100 index ahead of the opening bell on May 18, 2026, setting off a wave of forced buying from passive investment funds.

The Nasdaq-100 tracks the 100 largest non-financial companies listed on the Nasdaq exchange, and inclusion in the index is not merely symbolic — every fund benchmarked to the index, including the widely-held Invesco QQQ Trust [NASDAQ: QQQ], is required to purchase shares of any newly added constituent to remain aligned with the index composition.

The announcement arrived just days after Lumentum reported fiscal third-quarter results on May 5 that set a new company revenue record, with sales of $808.4 million representing 90% year-over-year growth.

CEO Michael Hurlston, while acknowledging the headline top-line figures, placed greater emphasis on the margin trajectory, saying the more impressive part of the company’s recent performance had been its margin expansion, with gross margin improving 540 basis points quarter-over-quarter and operating margin expanding 700 basis points in the same period.

Non-GAAP earnings per share of $2.37 in the fiscal third quarter compared to just $0.57 in the prior-year period, while GAAP net income of $144.2 million swung from a $44.1 million net loss in the same quarter of fiscal 2025.

The company closed 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 completed in March 2026.

Lumentum manufactures optical and photonic products, components that transmit data through fibre networks at the speed of light, with its Cloud & Networking segment serving as the primary beneficiary of AI infrastructure buildout across data centres and telecommunications networks.

Hurlston specifically identified co-packaged optics and optical circuit switches as growth drivers still in the early stages of commercial adoption, stating that as these technologies kick in, the company would expect further increases in earnings power, suggesting the current run rate is not the ceiling.

Fourth-quarter revenue guidance of $960 million to $1.01 billion represents approximately 18% sequential growth from Q3’s already-record $808 million, with non-GAAP operating margin guided to 35% to 36% and non-GAAP EPS of $2.85 to $3.05.

Lumentum’s year-to-date return of 185.71% already dwarfed the S&P 500’s 8.29% gain, and its one-year return of 1,523% underscores why the Nasdaq-100 committee had little justification to keep it waiting any longer.