Coherent Corp. Earnings Call Highlights Robust Growth

Coherent Corp. ((COHR)) has held its Q1 earnings call. Read on for the main highlights of the call.

The recent earnings call for Coherent Corp. painted a picture of strong financial performance, with notable growth in revenue and profitability. The company has seen robust demand in its Datacenter and Communications segment, which has been a significant driver of its success. While there are challenges, such as supply constraints and a cautious demand outlook in the Industrial segment, the overall sentiment was positive, highlighting achievements in debt reduction and production capacity expansion.

Record-Breaking Revenue and Growth

Coherent Corp. reported a record-breaking first quarter revenue of $1.58 billion, marking a 3% sequential increase and a 17% rise year-over-year. This impressive growth was fueled by the burgeoning demand in AI data center and communications, leading to a 16% sequential and 73% year-over-year increase in non-GAAP EPS.

Data Center and Communications Segment Surge

The Datacenter and Communications segment experienced a remarkable 7% sequential and 26% year-over-year revenue growth. This surge is attributed to strong demand for advanced transceivers, specifically the 800 gig and 1.6T models, which are pivotal in driving the segment’s expansion.

Debt Reduction and Financial Flexibility

Coherent made significant strides in enhancing its financial flexibility by paying down $400 million in debt, reducing its debt leverage ratio from 2.4x to 1.7x. The company also completed a successful debt refinancing, which lowered its cost of capital and doubled its revolving credit facility to $700 million.

Expansion of 6-Inch Indium Phosphide Production

The company is ramping up its 6-inch indium phosphide production at two sites, aiming to double its internal production capacity over the next year. Initial yields from this expansion are already surpassing those of the previous 3-inch production, indicating a promising outlook for increased capacity.

Optical Circuit Switch (OCS) Platform

Coherent’s Optical Circuit Switch platform is gaining traction, with systems shipped to seven customers and both revenue and backlog growing sequentially. The company anticipates a meaningful revenue contribution from this platform by calendar year 2026.

Indium Phosphide Capacity Constraints

Despite the growth in the data center segment, Coherent faced constraints due to limited supply of indium phosphide lasers, which impacted its growth potential. Addressing these supply issues will be crucial for sustaining future growth.

Macro Economic and Regulatory Uncertainty in Industrial Segment

The Industrial segment faces a cautious outlook due to macroeconomic factors and ongoing tariff and regulatory uncertainties. This has led to a tempered near-term demand forecast, highlighting the need for strategic navigation of these challenges.

Forward-Looking Guidance

Looking ahead, Coherent Corp. provided guidance for the second quarter of fiscal 2026, projecting revenue between $1.56 billion and $1.7 billion. The company anticipates a non-GAAP gross margin of 38% to 40%, with operating expenses forecasted between $300 million and $320 million. The expected non-GAAP tax rate is between 18% and 20%, and EPS is projected to be between $1.10 and $1.30. This guidance underscores strong demand in the Datacenter and Communications segment, driven by growth in data center transceivers. Coherent is also focused on expanding production capacity for indium phosphide lasers and transceiver modules to meet this demand, reflecting a commitment to strategic investments for long-term growth.

In conclusion, Coherent Corp.’s earnings call highlighted a positive trajectory, with record revenue and significant growth in key segments. While challenges such as supply constraints and macroeconomic uncertainties persist, the company’s strategic initiatives in debt reduction and capacity expansion position it well for future success. Investors and stakeholders will be keenly watching how Coherent navigates these dynamics in the coming quarters.