Will Datacenter Momentum Keep Powering Coherent's Growth?

Coherent Corp.’s COHR quarterly revenues climbed to $2.05 billion in the fourth quarter of fiscal 2026, up 34% year over year and 13% sequentially. The standout was Datacenter & Communications, where sales reached $1.62 billion, increasing 59% from the prior-year quarter and 19% from the fiscal third quarter. The business supplied nearly 79% of total revenues, underscoring how rapidly AI infrastructure demand is reshaping Coherent’s portfolio.

That momentum is also lifting profitability. GAAP gross margin expanded 277 basis points year over year to 38.5%, while adjusted operating margin improved 381 basis points to 21.8%. Management expects first-quarter fiscal 2027 revenues of $2.2-$2.4 billion and adjusted earnings of $1.85-$2.05 per share. The outlook suggests optical-connectivity demand and capacity additions can extend the growth run. However, Industrial revenues fell 16% year over year to $431 million, leaving results increasingly dependent on datacenter spending, production ramps and customer execution.

Two Optical Peers to Watch

Among optical peers, Lumentum Holdings LITE and Applied Optoelectronics AAOI provide useful benchmarks. Lumentum Holdings generated fiscal fourth-quarter revenues of $1.01 billion, more than doubling year over year, and guided to further sequential growth. Applied Optoelectronics posted second-quarter revenues of $191.9 million, up 86%, as its 800G ramp strengthened.

Lumentum Holdings offers broader scale and stronger margins, whereas Applied Optoelectronics brings faster expansion from a smaller base. Coherent’s greater revenue scale is an advantage, but the progress of both rivals shows that competition for AI-optics demand remains intense. Sustaining leadership will require converting demand into consistent margins and cash.

COHR’s Price Performance & Estimates

The stock has gained 226.5% over the past year against the industry’s 9% fall.

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From a valuation standpoint, COHR trades at a forward price-to-earnings ratio of 31.55X, well above the industry’s 21.17X. It carries a Value Score of D.

                                                                Image Source: Zacks Investment Research

The Zacks Consensus Estimate for COHR’s fiscal 2027 earnings increased over the past 60 days.

COHR currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.      

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This article originally published on Zacks Investment Research (zacks.com).

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