Coherent Corp.

What they do

Coherent develops, manufactures, and markets lasers, transceivers, and other optical and optoelectronic devices, modules, and systems, as well as engineered materials such as indium phosphide and silicon carbide. It sells into datacenter & communications and industrial end markets including precision manufacturing, energy, semiconductor & display capital equipment, and instrumentation. Effective July 1, 2025, it realigned from three segments (Networking, Materials, Lasers) into two reportable segments: Datacenter & Communications and Industrial. The company is vertically integrated, growing its own specialty materials and fabricating semiconductor and high-power lasers, passive optics such as isolators, transceivers, and transport equipment.

Revenue drivers

• Datacenter & Communications — Sells datacenter transceivers and telecom transport products, including new ZR/ZR+ transceivers, into hyperscale and cloud AI infrastructure; management attributes strong demand and shipment growth to this segment, supported by expanding indium phosphide capacity in Sherman, Texas.
• Industrial — Supplies lasers and engineered materials for precision manufacturing, semiconductor and display capital equipment, energy, and instrumentation; management cites strong demand in semiconductor capital equipment.
• NVIDIA agreement — A March 2, 2026 multi-year non-exclusive strategic agreement with NVIDIA includes a multi-billion-dollar purchase commitment and future access and capacity rights for advanced laser and optical networking products, alongside a separate $2 billion NVIDIA equity investment.

Recent performance

Fourth quarter fiscal 2026 revenue was $2.05 billion, up 33.8% year over year, with GAAP gross margin of 38.5% (up 277 bps) and GAAP diluted EPS of $1.19. Full year fiscal 2026 revenue was $7.12 billion, up 22.5%, GAAP gross margin 37.5%, and diluted EPS $4.12 versus a $0.52 loss in fiscal 2025. Full year net earnings attributable to Coherent were $805 million, compared with $49 million in fiscal 2025. Fiscal 2026 operating cash flow was $79.5 million, down from $633.6 million in fiscal 2025. At June 30, 2026, total assets were $18.30 billion, total liabilities $7.06 billion, and shareholder equity $10.90 billion.

Strategy

Coherent is investing in manufacturing capacity for datacenter and communications markets, including expanding indium phosphide capacity in Sherman, Texas, to address customer demand and an industry-wide shortage. The company states it is prioritizing capital allocation toward capacity expansion to fulfill accelerating customer demand. Its March 2026 agreement with NVIDIA covers joint development of advanced optics technologies, manufacturing capacity, and R&D for next-generation AI infrastructure; NVIDIA separately invested $2 billion via a Common Stock private placement to support R&D and capacity build-out. Restructuring continued under the 2023 and 2025 plans, with fiscal 2026 net charges of $1 million and $62 million respectively, primarily for site moves, property and equipment write-offs, employee termination, and site closure costs. Management frames the copper-to-optics transition in AI datacenters as a multi-year opportunity for its photonic portfolio.

Risks

• Product development and competition — Coherent's competitive position depends on developing new products and processes, and competitors introducing better or lower-cost offerings could render its products obsolete or unmarketable.
• Heavy R&D spending requirement — The company intends to continue significant research, development, and engineering investment with no assurance that new products will achieve customer acceptance or market success.
• Restructuring execution — Ongoing 2023 and 2025 restructuring plans involve site consolidations, closures, and workforce reductions, with fiscal 2026 net charges of $62 million under the 2025 Plan.
• Customer concentration in AI datacenter demand — Growth is tied to increasing investments by hyperscale and other cloud providers, including a multi-billion-dollar NVIDIA purchase commitment, making results sensitive to those customers' capital spending.

Outlook

CEO Jim Anderson said fiscal 2027 begins with exceptional customer demand, expanding production capacity, and multiple new growth platforms beginning to ramp. Management expects AI datacenter architectures to continue transitioning from copper to optical connectivity and believes Coherent's photonic portfolio and manufacturing scale position it for accelerating growth. CFO Sherri Luther said the company remains disciplined in capital allocation, prioritizing investments to expand manufacturing capacity to fulfill accelerating customer demand.