Coherent’s AI-optics growth, NVIDIA alignment, and 6-inch InP scale-up create substantial upside, but leverage and a thin base-case return demand disciplined execution.
Overview
Coherent Corp. (COHR) is a vertically integrated photonics and advanced-materials company whose growth is shifting from cyclical Industrial products toward optical infrastructure for AI datacenters. Its Datacenter & Communications segment generated $1.62 billion in Q4 FY26 revenue, up 59.0% year over year, while Industrial revenue declined 15.8% to $430.50 million. **FY26 revenue rose 22.5% to $7.12 billion**, non-GAAP operating margin reached 20.5%, and non-GAAP diluted EPS was $5.61 versus a GAAP loss in the prior year. Q4 revenue of $2.05 billion and non-GAAP EPS of $1.74 exceeded consensus by approximately $70 million and $0.12, respectively. The Sherman 6-inch InP ramp, 1.6T transceivers, OCS, CPO, and a $2.00 billion NVIDIA investment are the principal catalysts. Management guided Q1 FY27 revenue to $2.20–$2.40 billion and non-GAAP EPS to $1.85–$2.05. The valuation is balanced: the probability-weighted five-year target is $371.97 versus a $325.21 baseline, but the base case implies only $329.39, making execution and upside-case realization critical.