Coherent 2025-26: Datacomm +51%, Q1 FY26 Revenue $1.46-$1.6B

FY25 (Jun year-end) revenue $5.81B (+23%); op income $549M (+346%); NI $49M (vs -$156M FY24 loss); FCF $193M. Data Center + Communications +51% FY (Q4 +16% YoY); driven by AI datacenter ramp + 800-gig + 1.6T transceivers + Optical Circuit Switch. Industrial -2% FY (Q4 -8%); industrial laser products growing; silicon carbide demand stabilizing. Aerospace + Defense sold for $400M; ~$50M average quarterly revenue divested. Apple VCSEL partnership expanded; revenue starts H2 FY26 from Sherman, TX. 6-inch indium phosphide line inaugurated in Sherman, TX (first of its kind). Q1 FY26 guide: revenue $1.46-$1.6B; non-GAAP gross margin 37.5-39.5%; non-GAAP EPS $0.93-$1.13.

Key takeaways

• Data Center + Communications +51% FY — AI datacenter ramp dominates the thesis. The Data Center + Communications segment grew +51% YoY in FY25 (June year-end). Q4 FY25 Data Center + Communications revenue +16% YoY, driven by AI datacenter ramp + the production transition from 800-gig to 1.6T transceivers + early Optical Circuit Switch (OCS) revenue. This is the central FY25 + multi-year thesis: Coherent's photonics + transceiver + indium phosphide + ROADM platform is core infrastructure for hyperscaler AI buildouts. The +51% growth confirms market share + supply position + product roadmap execution.

• Apple VCSEL partnership expanded; revenue starts H2 FY26 from Sherman, TX. Coherent expanded its VCSEL (Vertical Cavity Surface Emitting Laser) partnership with Apple. VCSELs are key components for iPhone Face ID + LiDAR + AR/VR sensors. Revenue from Sherman, TX facility expected to start in H2 FY26. This represents a multi-year design-win + production ramp — a structural revenue + margin contributor with multi-billion-dollar TAM optionality.

• 6-inch indium phosphide line in Sherman, TX — first of its kind. Coherent inaugurated a 6-inch indium phosphide (InP) line in Sherman, TX. InP is the foundational semiconductor for high-speed laser + photodetector + transceiver applications. Moving from 4-inch to 6-inch wafers provides material cost + volume advantages (~2.25x area per wafer = better unit economics). First-of-its-kind 6-inch InP line gives Coherent a structural cost advantage in the photonics value chain.

• Aerospace + Defense divested for $400M — strategic refocus on photonics. Coherent sold its Aerospace + Defense business for $400M (~$50M avg quarterly revenue / ~$200M annual divested). Proceeds being used to pay down debt — accretive to EPS. This is a deliberate refocus toward higher-growth + higher-margin photonics + datacenter + communications platforms. The divestiture also reduces gross margin headwind from the lower-margin A+D business.

• Q1 FY26 guide: revenue $1.46-$1.6B; non-GAAP gross margin 37.5-39.5%; non-GAAP EPS $0.93-$1.13. Q1 FY26 revenue midpoint $1.53B vs Q1 FY25 ~$1.35B = +13% YoY. Non-GAAP gross margin range 37.5-39.5% reflects continued mix shift toward higher-margin datacenter products + cost productivity from the InP line ramp. Non-GAAP EPS midpoint ~$1.03 vs Q1 FY25 ~$0.50 = +106% YoY. This sets up FY26 as a major earnings recovery year — consensus estimates increasingly point toward sustained AI-datacenter-led compounding.

Business

Coherent Corp. is a global photonics + materials + lasers technology company, with three segments:

• Data Center + Communications (~50% of revenue, fastest growing): Optical transceivers (800-gig, 1.6T), Optical Circuit Switch (OCS), ROADMs, indium phosphide laser components. Multi-year AI datacenter buildout primary driver. FY25 +51% growth.
• Industrial-Related (~35% of revenue): Industrial laser systems for cutting, welding, marking. Silicon carbide for power electronics + EV. Industrial laser products + recurring services growing; silicon carbide stabilizing. FY25 -2% growth.
• Aerospace + Defense (divested FY25): Sold for $400M (~$200M annual revenue divested).

Strategic moves FY25:

• Data Center + Communications +51% YoY (AI datacenter ramp)
• 800-gig + 1.6T transceiver production ramp
• Optical Circuit Switch (OCS) early revenue contribution
• Apple VCSEL partnership expanded; H2 FY26 revenue start from Sherman, TX
• 6-inch InP line inauguration (first of kind)
• Aerospace + Defense divested for $400M
• Industrial laser products growth + silicon carbide stabilization
• Recurring services revenue growing faster than products
• Apple Sherman, TX facility ramp ahead
• Q4 FY25 record revenue + non-GAAP EPS doubled YoY to $1

FY25 financial performance

*EPS $-0.52 reflects preferred dividend impact + share count dynamics; underlying NI positive at $49M after FY23-24 losses. Non-GAAP EPS Q4 FY25 $1.00 (+~100% YoY).

The earnings progression: FY23 was the post-merger integration (II-VI / Coherent merger completed mid-FY22) trough year with significant GAAP losses. FY24 continued losses but op margin stabilizing. FY25 is the inflection year: revenue +23% to $5.81B, op income +346% to $549M (margin 9.4% from 2.6% FY24), GAAP NI returning to positive. Multi-year recovery + AI tailwind aligning.

Total debt $3.89B (-9% YoY) — debt paydown supported by the A+D divestiture proceeds. FCF $193M FY25; capex $441M FY25 reflects InP line + datacenter capacity investments.

Capital allocation

• Capex: $-441M FY25 (+27% YoY) — InP line + datacenter capacity.
• Dividends: $-11M FY25 (resumed minimal dividend; preferred shares).
• Buybacks: $-54M FY25 (+142% YoY).
• A+D divestiture: $400M proceeds.
• Total debt: $3.89B (-9% YoY) — debt paydown.
• FCF: $193M.

Q1 FY26 outlook (per Q4 FY25 call, 2025-08-13)

Management noted continued AI datacenter ramp, 1.6T transceiver scaling, OCS production ramp, Apple VCSEL revenue starting H2 FY26 from Sherman, TX, 6-inch InP cost / volume advantages, and silicon carbide demand stabilization in industrial-related.

Key risks

AI datacenter spending cycle. Data Center + Communications +51% FY25 is heavily dependent on hyperscaler AI capex. Any deceleration in AI capex spending (Google, Microsoft, Meta, Amazon, AWS) creates immediate near-term revenue impact.

Customer concentration. A handful of large hyperscaler + networking equipment customers drive a material portion of Data Center + Communications revenue. Customer concentration risk creates ongoing visibility challenges + pricing dynamics.

Transceiver speed transition execution. 800-gig → 1.6T → 3.2T+ transceiver speed transitions require continuous engineering investment + manufacturing yield improvements. Any setback in speed transition vs competitors (Marvell, Broadcom, Cisco, etc.) impacts share + margins.

Silicon carbide demand normalization. SiC demand from EV + power electronics has been volatile. Q4 FY25 stabilization is positive, but multi-quarter visibility remains limited.

Apple partnership execution. Apple VCSEL expansion + Sherman, TX ramp need flawless execution to meet H2 FY26 revenue start. Any delays affect investor expectations + financials.

6-inch InP line ramp. First-of-its-kind 6-inch InP production line carries technology + yield + ramp risk. Delays or quality issues impact the cost advantage + product roadmap.

Industrial cycle dynamics. Industrial-related growth depends on capital spending cycles in cutting / welding / marking + EV + power electronics. Macro slowdown can pressure industrial demand.

Competitive landscape. Lumentum, Marvell, Broadcom, Cisco (Acacia), Wolfspeed (SiC competitor), II-VI history (now part of Coherent), Innolume, others all compete in subsets of Coherent's portfolio.

Debt + leverage. Total debt $3.89B (down from $4.30B FY24) — A+D proceeds helped paydown. Continued deleveraging needed; refinancing risk if rate environment doesn't ease.

Margin expansion execution. Multi-year non-GAAP gross margin expansion (37.5-39.5% Q1 FY26 guide) depends on mix shift + InP cost advantages + capacity utilization. Any setback delays earnings recovery.

Regulatory / export controls. Photonics + InP + GaAs technologies often subject to export controls (US-China). Trade restrictions can impact addressable market.

Manufacturing + supply chain. Multi-region manufacturing (US, China, Vietnam, Europe) requires ongoing supply chain reliability + cost optimization.

Currency / FX. Multi-region revenue + manufacturing exposes Coherent to FX volatility.

Bottom line

Coherent FY25 (June year-end) is the inflection year: revenue $5.81B (+23%); op income $549M (+346%); GAAP NI $49M (recovering from -$156M FY24); op margin 9.4% (vs 2.6% FY24). Q4 FY25 record revenue + non-GAAP EPS doubled YoY to $1. Data Center + Communications +51% FY (Q4 +16%) — AI datacenter dominates thesis. Industrial -2% FY (silicon carbide stabilizing). A+D divested for $400M. Apple VCSEL partnership expanded; H2 FY26 revenue start from Sherman, TX. 6-inch InP line inaugurated.

Q1 FY26 guide: revenue $1.46-$1.6B; non-GAAP gross margin 37.5-39.5%; non-GAAP EPS $0.93-$1.13 (+106% YoY at midpoint).

The risks are real — AI datacenter spending cycle dependence, hyperscaler customer concentration, transceiver speed transition execution, silicon carbide demand normalization, Apple partnership execution, 6-inch InP ramp, industrial cycle dynamics, competitive landscape (Lumentum, Marvell, Broadcom, Cisco), debt + leverage, margin expansion execution, regulatory / export controls, manufacturing + supply chain, FX.

But the structural thesis (global photonics + materials + lasers leader + AI datacenter primary beneficiary + 800-gig + 1.6T transceivers + Optical Circuit Switch + Apple VCSEL partnership + Sherman TX 6-inch InP line + industrial laser franchise + silicon carbide for EV / power electronics + post-A+D divestiture more focused portfolio + multi-year debt paydown + non-GAAP earnings inflection) is intact and FY25 confirms.

Quality global photonics + AI infrastructure compounder mid-cycle, with AI datacenter ramp + transceiver speed leadership + InP cost advantages + Apple optionality. The Q4 FY25 record revenue + non-GAAP EPS doubling + Q1 FY26 +106% midpoint guide + Data Center + Communications +51% + 1.6T transceiver ramp + Apple VCSEL H2 FY26 start + 6-inch InP first-of-kind creates one of the cleaner photonics + AI compounding setups for investors seeking exposure to AI datacenter buildout + photonics innovation + Apple device partnership. The conservative guide framework + AI datacenter tailwind + InP cost advantage + Apple revenue ramp + multi-year deleveraging provides multiple paths to outperformance over a multi-year horizon. AI capex cycle dynamics + customer concentration + competitive landscape remain ongoing risks, but the technology leadership + cost advantages + product roadmap + scale support continued compounding through cycles.

Citations

• Coherent Corp. FY25 (Jun year-end) Form 10-K (filed August 2025, SEC EDGAR).
• COHR Q4 FY25 earnings call, 2025-08-13 — FY25 revenue $5.81B (+23%); non-GAAP EPS up ~3x; Q4 record revenue + non-GAAP EPS doubled YoY to $1; Data Center + Communications +51% FY / Q4 +16%; 800-gig + 1.6T transceivers + OCS ramping; Industrial-Related -2% FY / -8% Q4 (silicon carbide stabilizing); A+D sold for $400M; Apple VCSEL partnership expanded; H2 FY26 revenue start from Sherman, TX; 6-inch InP line inaugurated; Q1 FY26 revenue $1.46-$1.6B; non-GAAP gross margin 37.5-39.5%; non-GAAP EPS $0.93-$1.13.
• COHR Q3 / Q2 / Q1 FY25 earnings calls — supporting AI datacenter ramp + transceiver transition + silicon carbide trajectory.
• Internal financial_statements view (consolidated annual + cash flow + capital structure).