Key Takeaways:
- AI Photonics Leader: Coherent’s data center revenue grew 37% year-over-year, with backlog hitting a record high and orders now extending into calendar 2028.
- Price Projection: Based on current execution, COHR stock could reach $586 by June 2028.
- Potential Gains: That target points to a 52% total return from the current price of $385.03.
- Annual Return: Investors could see roughly 23% growth each year over the next 2.0 years.
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Coherent (COHR) posted a record Q3 quarter in 2026. Revenue hit $1.8 billion, up 21% year-over-year, driven by surging demand for AI data center optical components. Non-GAAP EPS grew 55% year-over-year to $1.41.
The Datacenter & Communications segment grew over 40% year-over-year and made up 75% of total revenue.
Non-GAAP gross margin expanded to 39.6%, up 105 basis points from a year ago.
NVIDIA made a $2 billion equity investment and signed a multiyear CPO supply agreement through the end of the decade.
The company expects to double internal indium phosphide capacity by next quarter, one quarter ahead of schedule.
Q4 revenue guidance of $1.91 to $2.05 billion implies another step up in sequential growth.
Coherent trades at $385.03. Investors who believe AI networking infrastructure spending has years to run may still find meaningful upside here.
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What the Model Says for Coherent Stock
We looked at Coherent as the AI buildout shifts from computing chips toward the optical networking infrastructure that connects them.
Coherent makes the lasers, transceivers, and optical components that move data inside and between AI data centers. As AI clusters grow larger and more distributed, more of that data has to travel faster and more efficiently. Optical technology is the only way to do that at scale.
The company’s edge is vertical integration. Most of the key components inside its transceivers are made in-house, including the indium phosphide lasers that sit at the heart of every product. This gives Coherent better cost control and insulation from supply chain swings that hurt competitors.
New growth vectors are stacking atop the core business. Co-packaged optics (CPO) revenue begins in the second half of calendar 2026.
Multi-rail systems, which connect AI data centers across greater distances, start generating revenue in early 2027. Thermal management products for data centers are scheduled for the second half of 2027.
Using 30.5% annual revenue growth and 23.3% operating margins, our model projects the stock reaching $586 within 2 years.
This assumes a 37.6x price-to-earnings multiple, down from the current forward P/E of 51.7x. The compression reflects normalization as the business scales.
Our Valuation Assumptions
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Our Valuation Assumptions
TIKR’s Valuation Model lets you plug in your own assumptions for a company’s revenue growth, operating margins, and P/E multiple, and calculates the stock’s expected returns.
Here’s what we used for COHR stock:
1. Revenue Growth: 30.5%
Q4 guidance already implies acceleration beyond Q3.
Management expects fiscal 2027 growth to exceed fiscal 2026. The capacity picture supports that view. Coherent is on track to double indium phosphide output this quarter, then double it again by the end of calendar 2027.
That is a fourfold increase in two years. CPO, multi-rail, and thermal products are all incremental to the existing transceiver business.
2. Operating margins: 23.3%
Margins are expanding steadily. The shift to 6-inch indium phosphide wafers, which yield more than 4x as many devices at less than half the cost of 3-inch, is the primary driver.
Management targets gross margins above 42% over the long term, with operating leverage building as revenue scales.
3. Exit P/E Multiple: 37.6x
Coherent trades near 52x forward earnings today. We assume compression to 37.6x, slightly above the historical average of 20–34x, reflecting the company’s improved growth profile post-AI transition.
The NVIDIA partnership and long-term supply agreements provide visibility that justifies a premium.
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What Happens If Things Go Better or Worse?
Optical component makers face capacity constraints and technology transitions. Here’s how Coherent stock might perform under different scenarios through June 2030:
- Low Case: If revenue grows 26.8% a year and net margins settle near 18%, investors still see a 79.6% total return (15.5% annually).
- Mid Case: With 29.8% growth and 19.1% margins, the model points to a 150.1% total return (25.4% annually).
- High Case: If AI demand pushes 32.8% growth and margins reach 20%, returns could hit 238.5% total (35.1% annually).
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The range depends on how fast CPO adoption scales, whether Coherent captures meaningful multi-rail revenue in 2027, and how quickly 6-inch indium phosphide ramps across all three production sites.
In the low case, capacity expansion lags demand and margin improvement stalls.
In the high case, NVIDIA and additional hyperscaler CPO programs ramp ahead of schedule, and the new thermal products open a sizeable incremental market.
How Much Upside Does Coherent Stock Have From Here?
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All it takes is three simple inputs:
- Revenue Growth
- Operating Margins
- Exit P/E Multiple
If you’re not sure what to enter, TIKR automatically fills in each input using analysts’ consensus estimates, giving you a quick, reliable starting point.
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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!
