Coherent’s fourth quarter was marked by higher-than-expected growth in both revenue and adjusted profit, yet the market’s reaction was notably negative. Management attributed this to extraordinary demand from AI-driven data center and communications customers, as well as improvements in production efficiency and pricing optimization. CEO James Anderson emphasized that “the visibility of the business is the best it’s ever been,” highlighting robust bookings, with customer commitments stretching into 2027. However, despite these operational achievements, investor concerns about industry supply-demand balance and competitive dynamics likely weighed on sentiment.
Is now the time to buy COHR? Find out in our full research report (it’s free for active Edge members).
Coherent (COHR) Q4 CY2025 Highlights:
- Revenue: $1.69 billion vs analyst estimates of $1.64 billion (17.5% year-on-year growth, 2.9% beat)
- Adjusted EPS: $1.29 vs analyst estimates of $1.21 (7% beat)
- Adjusted EBITDA: $396.4 million vs analyst estimates of $395.1 million (23.5% margin, in line)
- Revenue Guidance for Q1 CY2026 is $1.77 billion at the midpoint, above analyst estimates of $1.71 billion
- Adjusted EPS guidance for Q1 CY2026 is $1.38 at the midpoint, above analyst estimates of $1.32
- Operating Margin: 10.9%, up from 9.5% in the same quarter last year
- Market Capitalization: $42.82 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Coherent’s Q4 Earnings Call
- Samik Chatterjee (JPMorgan Chase & Co.) asked about the duration of current demand visibility and the pace of six-inch indium phosphide capacity ramp. CEO James Anderson explained most 2026 bookings are filled and 2027 is filling quickly, with wafer starts already at 80% of the planned doubled capacity.
- Simon Leopold (Raymond James) probed milestones for 1.6 terabit product revenue and the scale-up opportunity in co-packaged optics (CPO). Anderson responded that 1.6 terabit is growing rapidly and CPO scale-up could happen sooner than expected, with customer engagement deepening.
- Ruben Roy (Stifel) questioned the gross margin implications of the 1.6 terabit ramp and mix between pluggable transceivers and CPO. Anderson indicated the 1.6 terabit ramp is expected to be margin accretive and that CPO adds incremental addressable market.
- Thomas O'Malley (Barclays) asked about backlog composition and industry supply-demand balance. Anderson clarified that backlog is driven primarily by 800 gig and 1.6 terabit bookings, while persistent strong demand means supply remains tight despite industry capacity additions.
- Ezra Weener (Jefferies) inquired about the impact of input costs and internal versus external indium phosphide sourcing. Anderson and CFO Sherri Luther explained that internal six-inch capacity offsets rising external costs and provides a cost advantage, supporting gross margin expansion.
Catalysts in Upcoming Quarters
In coming quarters, the StockStory team will closely monitor (1) the pace of six-inch indium phosphide production ramp and its impact on gross margins, (2) progress in scaling OCS and co-packaged optics solutions with key customer design wins, and (3) ongoing order momentum and backlog growth in AI-driven data center and communications segments. Additional focus will be on execution of portfolio optimization and the ability to maintain operational leverage as investments in capacity and R&D continue.
Coherent currently trades at $230.27, up from $211 just before the earnings. Is the company at an inflection point that warrants a buy or sell? Find out in our full research report (it’s free).
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