Clarification on the CPO revenue starting in the December quarter, the opportunity near and long-term, and addressing concerns about delays or NPO forward pull.

Management has seen no pushout of CPO demand; instead, demand has increased and pulled in. Engagement with customers on both CPO and NPO has significantly ramped up. Coherent offers a wide portfolio for integrated optics, and views NPO and CPO as different form factors with comparable content opportunities. The new PhotonLink platform will offer a complete integrated solution. “First of all, we've seen absolutely no pushout of CPO demand. In fact, it's been the opposite. We've seen demand increase and demand request from customers demand getting pulled in.”

Impact of potential import restrictions for optical transceivers on Coherent, and the feasibility of moving transceiver manufacturing to the U.S. to leverage the Jobs Act.

While speculative, such restrictions would benefit Coherent as the largest U.S. supplier. Coherent has an extensive U.S. manufacturing footprint with over 20 production facilities, including critical component production in Sherman, Texas. The company is open to increasing U.S. manufacturing if needed, building on its 50-year history as a U.S. manufacturer. “we have an outstanding footprint in the U.S. We have over 20 production facilities in the U.S. And that, I think, is really a strategic advantage for us.”

Update on gross margin trajectory given the target for Q4 FY27 revenue exceeding $3 billion and the previous 42.5% target.

Sherri Luther expressed confidence in reaching the greater than 42% gross margin target, noting 660 basis points of improvement over the last eight quarters. Key drivers include the bulk of the 6-inch indium phosphide ramp, new product ramps (1.6T, OCS, CPO, multi-rail, thermal management), and continued cost reductions and pricing optimization. Once 42% is achieved, the target will be raised. “The bulk of the 6-inch indium phosphide product ramp is still ahead of us. That's still to come. New product ramps for 1.6T OCS system, CPO, multi-rail systems, thermal management solutions, all of those new products, those ramps are all still to come.”

COHR

Coherent (COHR) Q4 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q4 FY26)· Information Technology· Aug 12, 2026

Source: earnings call transcript

Executive summary

Coherent Corp. Q4 FY26 — Record Revenue and Strong AI-Driven Growth

Coherent delivered a record-breaking Q4 and full fiscal year 2026, driven by exceptional demand in the AI data center and communications segments. The company is leveraging its broad photonic technology platform and expanding manufacturing capacity, particularly in 6-inch indium phosphide, to capitalize on the rapid growth of AI infrastructure. Management anticipates accelerated growth in fiscal 2027, with new revenue streams from OCS, CPO, and multi-rail systems expected to ramp up, alongside continued margin expansion and operating leverage.

Highlights

Q4 FY26 pro forma revenue increased 42% year-over-year to a record $2.05 billion.
Full-year FY26 pro forma revenue increased 28% to a record $7 billion.
Non-GAAP EPS grew 74% year-over-year in Q4 FY26 to $1.74, and 59% for the full year to $5.61.
Non-GAAP gross margin expanded by 215 basis points year-over-year in Q4 to 40.2%, and 152 basis points for the full year to 39.4%.
Debt leverage reduced to 0.7x at year-end FY26 from 2x at the end of FY25.

Concerns

Industrial segment revenue was roughly flat on a pro forma basis in both fiscal '26 and Q4.
Continued weakness across broader industrial markets offset growth in semiconductor and display capital equipment.

Guidance & targets

Category	Target	Timeline	Confidence
Q1 FY27 Revenue	$2.2 billion to $2.4 billion high materiality	Q1 · FY27	High
Q1 FY27 Non-GAAP Gross Margin	39.5% and 41.5% medium materiality	Q1 · FY27	High
Q1 FY27 Non-GAAP Operating Expenses	$400 million and $420 million medium materiality	Q1 · FY27	High
Q1 FY27 Non-GAAP Tax Rate	18% and 20% low materiality	Q1 · FY27	High
Q1 FY27 Non-GAAP EPS	$1.85 and $2.05 high materiality	Q1 · FY27	High
Quarterly Revenue	over $3 billion high materiality	by end of FY27	High
Internal Indium Phosphide Output Capacity	double year-over-year medium materiality	Q1 · FY27	High
Internal Indium Phosphide Capacity	more than double again medium materiality	by end of calendar '27	High
CPO Revenue Contribution	begin contributing to revenue growth medium materiality	Q2 · FY27	High
OCS Revenue Growth	grow significantly medium materiality	through fiscal '27 · FY27	High
Multi-rail Initial Revenue	ramp in the first half of calendar '27 medium materiality	H1 CY27	High
Thermadite Cooling Solutions Revenue	begin ramping low materiality	second half of calendar '27	Medium
Gross Margin	continue to improve medium materiality	over the coming quarters	High
Capital Expenditures	increase sequentially again medium materiality	Q1 · FY27	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Datacenter & Communications Primary driver of company growth, with demand strengthening and record bookings. Growth driven by 800-gig and 1.6T transceivers, OCS, and CPO. Customer orders extend into calendar '28, and LTAs through the end of the decade. Percentage of total company revenue: 79%Full year FY26 revenue growth: 40%	$1.619B	59%	19%	—
Industrial Revenue was roughly flat on a pro forma basis in both fiscal '26 and Q4. Semiconductor capital equipment and display capital equipment grew sequentially and year-over-year, but were offset by continued weakness across broader industrial markets. Expects growth to resume, led by semiconductor capital equipment.	—	flat	flat	—

Orderbook & backlog

Bookings record Q4 FY26

Another quarter of record bookings, extending visibility further into the future.

Order coverage exceptional Q4 FY26

Through calendar '27. Fiscal '27 is basically completely booked out. Customers now looking into calendar '28 for purchase orders.

Customer LTAs extend through the end of the decade Q4 FY26

Long-term agreements for supply over a multiyear period, with increasing supply each year, pricing commitments, and minimum demand guarantees (take-or-pay).

Product announcements

Product	Type	Timeline	Details
PhotonLink	launch	September 21

Deals & partnerships

NVIDIA Collaboration on CPO solutions

Coherent's Texas facility has begun ramping ultra-high-power CW laser for CPO solutions, including those covered by the NVIDIA partnership.

Capital programs

6-inch Indium Phosphide Capacity Expansion underway

Benefit:doubling internal indium phosphide output capacity year-over-year

Ahead of original plan. Further expansion to more than double capacity again by end of calendar '27. Texas and Sweden facilities are ramping, Zurich to begin 6-inch production in H1 CY27.

Risks & headwinds

Supply constraints for indium phosphide near-term

Indium phosphide capacity continues to be the primary constraint for transceiver production.

Mitigation:Focused on ramping 6-inch production, which is ahead of schedule. Assembly and test capacity is available.

Weakness in broader industrial markets Q4 FY26

Offset growth in semiconductor capital equipment and display capital equipment in Q4 FY26.

Mitigation:Expects growth to resume over coming quarters, led by semiconductor capital equipment where bookings continue to strengthen.

What to watch in Q1 FY27

Q1 FY27 Revenue

next quarter

Current $2.05 billion (Q4 FY26)

Target $2.2 billion to $2.4 billion

Why it matters

Verifies the company's ability to sustain its accelerated growth trajectory driven by AI demand.

We expect revenue to be between $2.2 billion and $2.4 billion.

Find out whether COHR delivers this. Inve re-checks your case every morning.

Q&A highlights

Update on the 6-inch indium phosphide ramp, its translation into revenue and gross margins, and specific laser production growth.

Management is pleased with the 6-inch indium phosphide ramp, which is ahead of schedule to double output capacity by end of Q1 FY27 and more than double again by end of CY27. Laser production grew 80% YoY in Q4 FY26, directly impacting transceiver shipments and data center revenue growth. 6-inch yields are better than 3-inch, and new ultra-high-power CW laser production for CPO has started.

“if I look at our June quarter, and I look at, well, how many lasers -- indium phosphide lasers did we produce in our June quarter on a year-over-year basis. We produced about 80% more indium phosphide lasers in our June quarter than we did the prior year.”

asked by Joseph Cardoso · answered by James Anderson

3 min read 7 chapters

Detailed narrative

Fiscal 2026 Performance Highlights

Coherent achieved a record fiscal year 2026, with pro forma revenue growing 28% to $7 billion. This growth, combined with 152 basis points of gross margin expansion and nearly 300 basis points of operating margin improvement, led to a 59% increase in non-GAAP EPS.

The company also significantly strengthened its balance sheet, reducing debt leverage from 2x to 0.7x, while continuing strategic investments in capacity and product development.

Datacenter & Communications Segment Driving Growth

The Datacenter & Communications segment was the primary growth engine, accounting for 79% of total company revenue in Q4 FY26. Segment revenue increased 59% year-over-year and 19% sequentially in Q4, and 40% for the full year. This strong performance was fueled by exceptional demand in AI data center and communications, with record bookings extending visibility into calendar 2028 and customer LTAs through the end of the decade.

Indium Phosphide Capacity Expansion Ahead of Schedule

Coherent is on track to double its internal indium phosphide output capacity year-over-year by the end of Q1 FY27, one quarter ahead of its original plan. The company also expects to more than double this capacity again by the end of calendar 2027.

This expansion, driven by the transition to 6-inch production in Texas and Sweden, is critical for revenue growth and margin expansion, with 6-inch yields exceeding those of 3-inch lines.

Emerging Opportunities in OCS, CPO, and NPO

The company is seeing strong demand for Optical Circuit Switching (OCS), with revenue increasing sequentially in Q4 and expected to grow significantly through FY27. Coherent estimates OCS represents over $4 billion in addressable market opportunity. Co-packaged optics (CPO) and near-packaged optics (NPO) are expected to begin contributing revenue in fiscal Q2, representing a combined incremental addressable market of over $15 billion.

The new PhotonLink platform will offer integrated optical solutions for these next-generation data center architectures.

Communications Business and Multi-rail Systems

The communications business saw 56% year-over-year growth in Q4, driven by strength in data center interconnects, ZR/ZR+ transceivers, and pump lasers. Multi-rail systems, addressing scale-across AI networking, represent a new growth opportunity with an estimated addressable market of over $2 billion by calendar 2030. Initial revenue from multi-rail is expected to ramp in the first half of calendar 2027, with samples already delivered to customers.

Industrial Segment and New Applications

While the Industrial segment was flat in FY26 and Q4, growth is expected to resume, led by semiconductor capital equipment. New long-term opportunities include data center XPU cooling with proprietary Thermadite material, fusion energy, quantum technologies, and micro LED display capital equipment. Thermadite revenue is anticipated to ramp in the second half of calendar 2027, expanding the long-term market opportunity.

Gross Margin Expansion and Operating Leverage

Coherent has consistently improved non-GAAP gross margin for eight of the past nine quarters, achieving 40.2% in Q4 FY26. This improvement is attributed to lower product input costs, improved manufacturing yields (especially from 6-inch indium phosphide), and pricing optimization. The company also demonstrated strong operating leverage, with non-GAAP operating expenses as a percentage of revenue decreasing to 18.4% in Q4, below its target model of 18%.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.