Key Takeaways
- Coherent fell 13% to $170 on Thursday despite beating fiscal first-quarter estimates with $2.37 billion of revenue and $2.09 of adjusted EPS.
- Datacenter revenue rose 85%, and a new PhotonLink agreement with a major AI company is worth about $20 billion over five years.
- Heavy capacity spending, expected negative free cash flow and $1.56 billion of net debt left little cushion as the Nasdaq slid into a correction.
- The February 3 report will show whether Coherent stays on pace for its first $3 billion quarter by the end of fiscal 2027.
Coherent (COHR) delivered a beat, a raise, and a $20 billion contract. Thursday’s market took 13% off the stock anyway.
Shares closed at $170 after the fiscal first-quarter report, reversing a gain of about 5% in after-hours trading. The timing was brutal: the Dow dropped 1,800 points and the Nasdaq fell into a correction as AI and chip stocks sold off. Coherent is now down 18% in two sessions and 61% below its 52-week high of $440.
The optics map moved this week too. On November 2, Marvell Technology (MRVL) agreed to buy Lumentum (LITE) in a $115 billion all-stock deal, so Coherent’s closest laser rival will soon sit inside a chip designer.
That leaves Coherent as the big independent supplier for customers who want lasers without a Marvell attachment. Its newest contract suggests some of them do.
Datacenter did almost all of it
The quarter in three lines:
- Revenue of $2.37 billion beat the $2.30 billion consensus.
- Adjusted EPS of $2.09 topped the $1.97 estimate and rose 80%.
- Datacenter revenue jumped 85%, its fourth straight quarter of double-digit sequential growth.
Datacenter and Communications brought in roughly $2.0 billion, or 82% of sales. Within it, scale-across interconnect revenue roughly quadrupled to a run rate near $1 billion a year.
Margins moved the right way as well. Adjusted gross margin reached 40.6%, and adjusted operating margin hit 23.2%.
One segment is now carrying the whole company…
Industrial has become a small slice of a business that rises and falls with AI datacenter budgets.
PhotonLink stretches the runway
The bigger news sat beside the numbers. PhotonLink, the integrated optics platform Coherent launched in September, signed a long-term agreement with a major AI company worth about $20 billion over five years.
That works out to roughly $4 billion a year. Coherent currently runs at about $9.5 billion annualized, so one contract could add more than 40% to today’s revenue base once it ramps in early calendar 2028.
Before then, Coherent expects PhotonLink revenue above $100 million in the March quarter and $250 million a quarter before the end of calendar 2027.
Guidance kept pace. Second-quarter revenue is guided to $2.55 billion to $2.75 billion, with the midpoint 4.4% above consensus, and adjusted EPS to $2.28 to $2.48. Management expects fiscal 2027 pro forma growth above 60%, a first $3 billion quarter by year-end, and a $4 billion quarter in fiscal 2028.
How far out does the new deal push estimates?
Fiscal 2028 is where estimates have the most room to rise, since that is when the AI contract starts contributing.
TIKR tracks 24 analysts on Coherent. How many say “Buy”?
See the full breakdown of Buy, Hold, and Sell ratings on Coherent, along with Wall Street’s revenue and earnings estimates, all in one place. More than 500,000 investors use TIKR to research stocks like this one. See Coherent’s Analyst Ratings
The margin gap is the catch
Coherent’s profitability still trails its rival. Lumentum guided its December quarter to a 45% to 46% adjusted operating margin, roughly double Coherent’s 23.2%. And Coherent’s own gross margin guide of 40% to 42% points to little change next quarter.
Growth also costs cash. Coherent is expanding indium phosphide laser capacity after Nvidia’s $2 billion investment, and it carries $1.56 billion of net debt while analysts expect negative free cash flow over the next year. On a day when investors dumped anything tied to AI, that profile left little cushion.
The selloff has pushed the multiple down…
At about 18.5x forward earnings, Coherent now trades below Lumentum’s roughly 20.9x, even though both are guiding to big growth.
My take: This was the report Coherent needed, and the stock fell anyway. The beat was clean, the guide was higher, and a $20 billion contract shows customers want an independent laser supplier. I’d still size positions carefully, because margins are about half of Lumentum’s and the big deal doesn’t ramp for another year. At roughly 18.5x forward earnings, though, Thursday’s drop priced in bad news this quarter didn’t contain.
The February 3 report is the next checkpoint. It should show the first PhotonLink revenue and whether the path to a $3 billion quarter is still intact.
So what is Coherent stock actually worth?
TIKR lets you forecast the future price of any stock in less than a minute. Just enter a few assumptions into TIKR’s valuation model and see what Coherent could be worth. Start from Wall Street consensus estimates, or adjust the inputs to reflect your own view of the business. It’s free to use.
Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
