Can you quantify the OCS backlog and when it might reach $100 million in revenue?

Demand for OCS is very strong, and backlog grew sequentially. Revenue is expected to ramp throughout calendar year 2026 and into 2027. The company is focused on ramping production capacity as fast as possible to meet demand, but did not provide a specific timeline for reaching $100 million in revenue. “backlog is good. It grew in the December quarter versus the September quarter. We expect revenue to ramp to grow this quarter and really the revenue to ramp throughout this calendar year and into next year.”

What are the milestones for 1.6T transceivers, and when might they cross $100 million per quarter? How does the competitive landscape look?

Both 800 gig and 1.6T transceivers are expected to grow, with 1.6T growing much faster from a smaller base. The 1.6T ramp has accelerated due to strong customer demand, driven initially by EML and Silicon Photonics-based transceivers, with VCSEL-based 1.6T expected to ramp in the second half of calendar year 2026. Specific revenue milestones were not provided. “1.6T is growing much faster, but it's growing off a smaller base than 800 gig. I would say the 1.6T ramp has accelerated.”

How does CPO content compare to 800 gig and 1.6T, and how do you see these technologies coexisting, especially looking out to 2027?

Management views CPO as additive to pluggable transceivers, which will remain dominant for scale-across and scale-out networks through the decade. The significant growth for CPO is expected to be driven by scale-up applications, representing incremental total addressable market (TAM) as this network is currently 100% electrical. “we really view it as it's additive. The way we think about it is pluggable transceivers will remain the dominant form factor and certainly in scale across and in the scale-out networks through at least the rest of this decade.”

COHR

Coherent (COHR) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Dec 2025 (Q2 FY26)· Information Technology· Feb 4, 2026

Source: earnings call transcript

Executive summary

Coherent Corp. Q2 FY26 — Strong AI-Driven Growth and Capacity Expansion

Coherent Corp. delivered strong Q2 FY26 results, driven by exceptional demand from AI build-out in its Datacenter & Communications segment. The company is rapidly expanding its 6-inch indium phosphide production capacity and transceiver assembly to meet robust customer orders, which are extending further into future periods. Management anticipates sustained strong revenue growth and meaningful operating leverage in the coming quarters, with fiscal '27 growth expected to exceed fiscal '26.

Highlights

Revenue increased 9% sequentially and 22% year-over-year on a pro forma basis to $1.69 billion.
Non-GAAP gross margin expanded by 24 basis points sequentially and 77 basis points year-over-year to 39%.
Non-GAAP EPS grew 11% sequentially and 35% year-over-year to $1.29.
Datacenter & Communications segment revenue grew 11% sequentially and 34% year-over-year.
Data center bookings book-to-bill ratio exceeded 4x, indicating extraordinary demand and visibility.

Concerns

Non-GAAP operating expenses increased to $321 million from $304 million sequentially and $283 million year-over-year.
Capital expenditures increased to $154 million from $104 million sequentially and $106 million year-over-year, with further sequential increases expected.

Guidance & targets

Category	Target	Timeline	Confidence
Q3 FY26 Revenue	$1.7 billion - $1.84 billion high materiality	Q3 · FY26	High
Q3 FY26 Non-GAAP Gross Margin	38.5% - 40.5% high materiality	Q3 · FY26	High
Q3 FY26 Non-GAAP Total Operating Expenses	$320 million - $340 million medium materiality	Q3 · FY26	High
Q3 FY26 Non-GAAP Tax Rate	18% - 20% low materiality	Q3 · FY26	High
Q3 FY26 Non-GAAP EPS	$1.28 - $1.48 high materiality	Q3 · FY26	High
Fiscal Year 2027 Revenue Growth Rate	Exceed fiscal '26 growth rate high materiality	FY27	High
Data Center Sequential Revenue Growth	Double-digit sequential growth medium materiality	March and June quarters	High
Industrial Segment Sequential Revenue Growth	Roughly flat sequentially in current quarter, sequential growth in June quarter and remainder of calendar year medium materiality	Q3 · FY26	Medium
Internal Indium Phosphide Production Capacity	Double by the fourth quarter of this calendar year high materiality	Q4 CY26	High
CPO Solution Revenue	Initial revenue towards the end of this calendar year, more significant revenue contribution next calendar year and beyond medium materiality	CY26 and CY27+	High
OCS Revenue	Grow sequentially in the current quarter and the coming quarters medium materiality	Q3 · FY26	High
Communications Business Sequential Revenue Growth	Grow sequentially in the current quarter as well as our June quarter medium materiality	Q3 · FY26	High
3D Sensing Revenue (Apple Partnership)	Starts to kick in in the second half of this calendar year medium materiality	H2 CY26	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Datacenter & Communications Accounts for over 70% of total revenue. Driven by strong growth in both Datacenter and Communications markets. Data center growth was driven by 800 gig and 1.6T transceivers. Communications growth was driven by DCI and scale across products, as well as traditional telecom applications. Data center revenue growth: 14% QoQData center revenue growth: 36% YoYData center bookings book-to-bill: >4xCommunications revenue growth: 9% QoQCommunications revenue growth: 44% YoY	$1.18B	34%	11%	improved
Industrial Sequential growth in Q2 was driven by industrial lasers and engineered materials product lines. Expects sequential growth in June quarter and remainder of calendar year due to increased semi-cap orders. Orders from semi-cap customers: significant increase	$0.51B	flat (pro forma)	4%	—

Orderbook & backlog

Data Center Bookings Book-to-Bill Ratio >4x Q2 FY26

increased

Customers placing orders further out in time, providing strong visibility for coming quarters.

OCS Backlog grew sequentially Q2 FY26

sequential growth

Includes both 64x64 and 320x320 system sizes, with most weighted toward larger size. Over 10 customer engagements.

Bookings Duration into calendar '27 Q2 FY26

Most of calendar '26 is booked out, and calendar '27 is filling very quickly. Detailed long-term forecasts from big customers go out 2-3 years into calendar '28.

Product announcements

Product	Type	Timeline
CPO solution with new high-power CW Laser	launch	Initial revenue towards end of CY26, significant revenue contribution CY27 and beyond
Multi-rail technology platform	launch	Ramp to start in H2 CY26, revenue contribution starts H2 CY26
Uncooled 3-pin micro-pump solution	launch	—

Deals & partnerships

Munich product division (materials processing tools) divestiture

Completed the sale of the product division based in Munich, Germany. Over the past 4 quarters, this business contributed average quarterly revenue of $25 million with a gross margin well below Coherent's corporate gross margin. Reduced employee headcount by approximately 425 employees.

Market-leading AI data center customer customer contract exceptionally large purchase order

For a CPO solution that includes Coherent's new high-power CW Laser. A key factor in the customer's decision was the production of the CW Laser on Coherent's 6-inch indium phosphide line in Sherman, Texas.

Leading DCI OEM customer contract significant multiyear design win multiyear

Utilizes Coherent's industry-first uncooled 3-pin micro-pump solution for Data Center Interconnect (DCI).

Apple partnership significant new agreement multiyear

Partnership for 3D sensing, announced as part of Apple's American manufacturing program. Leverages 6-inch gallium arsenide VCSEL technology in Sherman, Texas.

Capital programs

Indium Phosphide Production Capacity Expansion underway

Period spend: $154 million (part of total capex)

Benefit:double internal indium phosphide production capacity

Driven by a ramp of 6-inch wafer production, which produces more than 4x as many chips at less than half the cost compared to 3-inch wafers. Ramping production in parallel at 2 sites: Sherman, Texas and Jarfalla, Sweden.

Transceiver Module Assembly Capacity Expansion underway

Benefit:expanding production capacity in Malaysia, Vietnam and other locations

Expanding to meet rapid growth in demand for transceiver products.

Risks & headwinds

Increased Capital Expenditures remainder of FY26

$154 million in Q2 FY26, expected to increase sequentially over the remainder of this fiscal year

Mitigation:Supporting the exceptional customer demand in Datacenter & Communications by rapidly expanding capacity.

Supply-Demand Imbalance for Indium Phosphide CY26, CY27, potentially longer

Industry supply-demand imbalance expected to continue

Mitigation:Rapidly expanding 6-inch indium phosphide production capacity, driving aggressive goals beyond current doubling target to meet demand.

Q&A highlights

How would you characterize demand visibility and the capacity ramp for indium phosphide, particularly the contribution of 6-inch wafers?

Management described demand visibility as 'extraordinary,' with bookings extending into calendar year 2027 and detailed forecasts into 2028. They are also securing long-term supply agreements. For indium phosphide, wafer starts are already at 80% of the target to double capacity by year-end, with 6-inch wafers producing 4x more chips at less than half the cost.

“bookings being booked out through the rest of this calendar year. And most of the bookings we're getting now are into calendar '27.”

asked by Samik Chatterjee · answered by James Anderson

2 min read 6 chapters

Detailed narrative

AI-Driven Demand and Visibility

Coherent is experiencing extraordinary demand and visibility due to the AI build-out, particularly in optical networking infrastructure. Data center bookings saw a book-to-bill ratio exceeding 4x in Q2 FY26, with orders extending into calendar year 2027 and detailed forecasts reaching calendar year 2028. The company is also securing long-term supply agreements with financial commitments from customers to guarantee demand, providing robust confidence in future growth.

Indium Phosphide Capacity Expansion

The company is rapidly expanding its 6-inch indium phosphide production capacity, with wafer starts already at 80% of the target to double capacity by Q4 CY26. This 6-inch technology produces over 4x as many chips at less than half the cost compared to 3-inch wafers, driving significant revenue growth and margin expansion.

Production is ramping at two sites, Sherman, Texas, and Jarfalla, Sweden, with 6-inch yields exceeding 3-inch lines, and committed substrate supply has been secured.

1.6T and CPO Product Ramps

Coherent expects significant growth from 1.6T transceivers, with initial ramps driven by EML and Silicon Photonics-based transceivers, followed by 200-gig VCSEL-based 1.6T transceivers in H2 CY26. The company secured an exceptionally large purchase order for a CPO solution, including its new high-power CW Laser, with initial revenue expected by end of CY26 and significant contribution in CY27.

This CPO solution leverages 6-inch indium phosphide production in Sherman, Texas, highlighting a competitive advantage.

Optical Circuit Switch (OCS) Momentum

OCS backlog grew sequentially in Q2 FY26, with over 10 customer engagements for both 64x64 and 320x320 systems. OCS revenue is expected to grow sequentially in the current and coming quarters, addressing an expected addressable market opportunity of over $2 billion over the coming years. Applications are broadening beyond traditional uses to include DCI and scale-up networks, indicating a larger market potential than previously assessed.

Industrial Segment Recovery and Portfolio Optimization

The Industrial segment saw a significant increase in orders from semi-cap customers in Q2 FY26, expected to drive sequential growth in the June quarter and H2 CY26. Coherent also completed the sale of its Munich-based materials processing product division, which is expected to be immediately accretive to gross margin and EPS.

This divestiture, along with other streamlining initiatives, has led to exiting 33 sites over the past six quarters, improving operational efficiency.

Operational Efficiency and Margin Expansion

Non-GAAP gross margin improved by 24 bps sequentially and 77 bps YoY to 39%, driven by reduced product input costs, manufacturing efficiency gains, yield improvements, and pricing optimization. SG&A as a percentage of revenue declined to 9.6%. The company is consolidating ERP platforms and implementing low-cost region initiatives to further drive efficiencies and achieve its long-term SG&A target of 8% of revenue, while investing in R&D for future growth.

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