Coherent Corp’s Earnings Call: Record Growth and Strategic Moves

Coherent Corp. ((COHR)) has held its Q4 earnings call. Read on for the main highlights of the call.

Coherent Corp’s recent earnings call painted a picture of robust growth and strategic advancements, tempered by some challenges in the industrial markets and foreign exchange impacts. The company reported strong revenue growth, driven by its data center and communications business, alongside successful debt reduction and new product launches. However, concerns were raised about the industrial markets and foreign exchange effects on gross margins.

Record Revenue and Growth in Fiscal 2025

Coherent Corp achieved a record revenue of $5.81 billion for fiscal 2025, marking a 23% year-over-year increase. This impressive growth was primarily fueled by the company’s data center and communications segments, showcasing the strength and demand in these areas.

Significant Growth in Data Center and Communications

The data center sector was a standout performer, with revenue surging by 61% for the full year and 38% year-over-year in Q4. Similarly, the communications segment saw a 23% increase for fiscal ’25, with a notable 42% year-over-year rise in Q4, highlighting the company’s successful penetration and expansion in these markets.

Launch of New Products and Expansions

Coherent Corp made significant strides with the launch of new products, including the 1.6T Transceivers and Optical Circuit Switch, which began initial revenue shipments in fiscal Q4. Additionally, a new multiyear agreement with Apple for VCSEL products was announced, indicating promising future growth.

Successful Debt Reduction and Financial Health

The company demonstrated strong financial management by paying down $437 million in debt over the fiscal year, reducing its debt leverage ratio from 2.5x to 2x. This move underscores Coherent’s commitment to maintaining financial health and stability.

Indium Phosphide Production Milestone

Coherent Corp achieved a production milestone by commencing the world’s first 6-inch indium phosphide line in Sherman, Texas. This development is expected to provide significant cost and volume advantages, positioning the company favorably in the market.

Decline in Industrial-Related End Markets

Despite overall growth, the industrial-related revenue saw a decline of 2% for the year and 8% year-over-year in Q4, primarily due to a downturn in the silicon carbide business. This highlights the challenges faced in industrial markets.

Gross Margin Impact from Foreign Exchange

The company experienced a 43 basis point sequential decline in Q4 non-GAAP gross margin, attributed mainly to unfavorable foreign exchange impacts, which remains a concern for future profitability.

Cautious Outlook for Industrial Segment

Coherent Corp expressed a cautious outlook for the industrial market, citing macroeconomic uncertainties and tariff concerns. The company expects this segment to remain flat or decline sequentially in the near term.

Forward-Looking Guidance

Looking ahead, Coherent Corp provided guidance for the first quarter of fiscal 2026, forecasting revenue between $1.46 billion and $1.6 billion, excluding $20 million from the anticipated sale of the Aerospace and Defense business. The non-GAAP gross margin is expected to range from 37.5% to 39.5%, with operating expenses between $290 million and $310 million. The company anticipates a non-GAAP EPS between $0.93 and $1.13, and a tax rate of 18% to 22%.

In summary, Coherent Corp’s earnings call highlighted a strong performance in revenue growth and strategic advancements, particularly in the data center and communications sectors. While challenges persist in the industrial markets and foreign exchange impacts, the company’s forward-looking guidance suggests continued focus on growth and financial health. Investors will be keenly watching how Coherent navigates these challenges and capitalizes on its strategic initiatives.