What happened

Shares of Finisar (NASDAQ:FNSR) have soared today, up by 10% as of 12:15 p.m. EDT, after the company reported fiscal fourth-quarter earnings and suggested that it may have scored a design win in Apple's (NASDAQ:AAPL) next iPhone.

Different colors of iPhone 7

Finisar might have landed a spot in the next iPhone. Image source: Apple.

So what

Revenue in the fiscal fourth quarter totaled $357.5 million, which translated into non-GAAP earnings per share of $0.50. That top-line result was shy of the $360 million in sales that analysts were expecting, while the bottom-line result was right on target. Sales were down sequentially, which CEO Jerry Rawls attributed to a spending slowdown from Chinese telecom customers. Non-GAAP gross margin was 36.2%.

Now what

Going forward, Finisar's outlook for the first quarter of fiscal 2018 calls for revenue in the range of $330 million to $350 million, with adjusted earnings per share of $0.37 to $0.43. That guidance also fell short of consensus estimates, which call for $366 million in sales and an adjusted profit of $0.51 per share.

Instead, investors appear to be focusing on the possibility that Finisar scored a design win in the next-generation iPhone with its vertical-cavity surface-emitting laser (VCSEL) that can be used in 3D sensing applications. Apple is expected to utilize 3D sensing in the next iPhone, potentially to enable augmented reality (AR) use cases.

Rawls said, "We have made really good progress with our high-powered VCSEL array program. We have received production purchase orders and expect to soon receive customer approval for -- to ship meaningful volumes in our second fiscal quarter." When asked about whether there were multiple customers interested in 3D sensing, Rawls added, "We're engaged with a number of customers, but short-term revenue is going to be predominantly from one."

Peers that had been rumored to be in the running to supply 3D sensing components are seeing pressure on their stocks following Rawls' remarks.

Evan Niu, CFA owns shares of Apple. The Motley Fool owns shares of and recommends Apple. The Motley Fool has a disclosure policy.