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    COHR
    Earnings call· Jun 2026(Q4 FY26)

    COHERENT Q4 FY26 earnings call COHR

    Aug 12, 2026 Source

    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

    5

    • 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

    2

    • 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

    14
    CategoryTargetConfidence
    Q1 FY27 Revenue
    $2.2 billion to $2.4 billion
    high materiality
    High
    Q1 FY27 Non-GAAP Gross Margin
    39.5% and 41.5%
    medium materiality
    High
    Q1 FY27 Non-GAAP Operating Expenses
    $400 million and $420 million
    medium materiality
    High
    Q1 FY27 Non-GAAP Tax Rate
    18% and 20%
    low materiality
    High
    Q1 FY27 Non-GAAP EPS
    $1.85 and $2.05
    high materiality
    High
    Quarterly Revenue
    over $3 billion
    high materiality
    High
    Internal Indium Phosphide Output Capacity
    double year-over-year
    medium materiality
    High
    Internal Indium Phosphide Capacity
    more than double again
    medium materiality
    High
    CPO Revenue Contribution
    begin contributing to revenue growth
    medium materiality
    High
    OCS Revenue Growth
    grow significantly
    medium materiality
    High
    Multi-rail Initial Revenue
    ramp in the first half of calendar '27
    medium materiality
    High
    Thermadite Cooling Solutions Revenue
    begin ramping
    low materiality
    Medium
    Gross Margin
    continue to improve
    medium materiality
    High
    Capital Expenditures
    increase sequentially again
    medium materiality
    High

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    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%
    		$1.619B59%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.
    		—flatflat—

    Operational metrics

    24
    Non-GAAP gross margin
    40.2%up 66 bps QoQ, up 215 bps YoY
    Q4 FY26

    Improved due to lower product input costs, improved manufacturing yields and efficiencies (including 6-inch indium phosphide), and pricing optimization.

    Non-GAAP gross margin
    39.4%up 152 bps YoY
    FY26

    Full year non-GAAP gross margin.

    Non-GAAP operating expense
    $377 millionvs $348 million QoQ, vs $307 million YoY
    Q4 FY26

    Increased primarily due to investments in product portfolio.

    Non-GAAP operating expense as % of revenue
    18.4%down from 19.3% QoQ, down from 20.1% YoY
    Q4 FY26

    Reflects focus on driving better leverage and operating efficiencies.

    Non-GAAP operating expense
    $1.35 billionup from $1.17 billion FY25
    FY26

    Full year non-GAAP operating expense, primarily driven by increased investments in product portfolio.

    Non-GAAP operating expense as % of revenue
    19%down from 20.1% FY25
    FY26

    Full year non-GAAP operating expense as a percentage of revenue.

    R&D expense as % of revenue
    10.2%up from 9.9% QoQ, up from 9.8% YoY
    Q4 FY26

    Driven by investments within the data center and communications segment product portfolio.

    R&D expense as % of revenue
    9.7%up from 9.5% FY25
    FY26

    Full year R&D expense as a percentage of revenue.

    SG&A expense as % of revenue
    8.2%declined from 9.4% QoQ, declined from 10.3% YoY
    Q4 FY26

    Reflecting continued progress in driving efficiencies and generating greater operating leverage.

    SG&A expense as % of revenue
    9.2%decreased from 10.5% FY25
    FY26

    Full year SG&A expense as a percentage of revenue.

    Non-GAAP operating margin
    21.8%up from 20.3% QoQ, up from 18% YoY
    Q4 FY26

    Driven by strong revenue growth, continued gross margin expansion, and improved operating leverage.

    Non-GAAP operating margin
    20.5%up from 17.8% FY25
    FY26

    Full year non-GAAP operating margin.

    Non-GAAP EPS
    $1.74up 23% QoQ, up 74% YoY
    Q4 FY26

    Earnings growth continued to outpace revenue growth.

    Non-GAAP EPS
    $5.61up 59% YoY
    FY26

    Full year non-GAAP EPS.

    Cash and investments balance
    $2.59 billionvs $3.05 billion QoQ, vs $1.63 billion FY25 end
    FY26 end

    Year-end cash balance.

    Debt payments
    $513 million
    FY26

    Debt payments made during fiscal 2026.

    Debt leverage ratio
    0.7xvs 2x FY25 end
    FY26 end

    Significantly reduced debt leverage.

    Capital expenditures
    $556 millionup from $290 million QoQ, up from $131 million YoY
    Q4 FY26

    Acceleration directly supports future growth across data center and communications business. Investments in data center business have roughly an 18-month payback period.

    Indium phosphide laser production growth
    80%YoY
    Q4 FY26

    Growth in lasers produced in Q4 FY26 compared to prior year, used for 800-gig and 1.6T transceivers.

    6-inch indium phosphide yields
    better than 3-inch production
    Q4 FY26

    Applies across EMLs, CW lasers, and photodiodes.

    OCS addressable market opportunity
    more than $4 billion
    by 2030

    Across data center interconnect, scale-out, and scale-up networks.

    CPO/NPO incremental addressable market opportunity
    more than $15 billion
    over the coming years

    Enables transition from copper to optical connectivity.

    Multi-rail addressable market
    more than $2 billion
    by calendar 2030

    Addressing scale-across AI networking.

    Thermadite cooling solutions market opportunity
    meaningful expansion
    long-term

    For data center XPU cooling, enabling higher XPU performance and greater AI token generation.

    Industry KPIs

    8
    MetricValueDetails
    Orders book to billrecord bookings
    Long term agreementsextend through the end of the decade
    Segment revenue growth59%%
    Design wins product cycle ramps800-gig and 1.6T transceivers
    Order visibility backlog policyexceptional
    Supply demand imbalance lead times—
    Capacity expansion internal sourcingdoubling
    Operating margin incremental leverage21.8%%

    Orderbook & backlog

    3
    BookingsrecordQ4 FY26

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

    Order coverageexceptionalQ4 FY26

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

    Customer LTAsextend through the end of the decadeQ4 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

    1
    ProductTypeDetails
    PhotonLinklaunch

    Deals & partnerships

    1
    NVIDIACollaboration 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

    1
    6-inch Indium Phosphide Capacity Expansionunderway

    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

    2
    Supply constraints for indium phosphidenear-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 marketsQ4 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

    5

    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.

    Q&A highlights

    6

    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 read7 chapters

    Detailed Narrative

    01

    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.

    02

    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.

    03

    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.

    04

    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.

    05

    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.

    06

    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.

    07

    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%.

    AI-generated summary of the company’s earnings call. Not investment advice.