Coherent Live: Complete Coverage Of COHR’s Q2 Earnings

Coherent’s share price has been fading during their call. Its similar to Alphabet, which followed a similar pattern.

Shares have still seen a significant rebound from earlier when they were down 20%.

Optical circuit switching (OCS) is one of the highest growth areas in the optical space, here’s Coherent’s commentary on growth from the market on tonight’s call.

Samik Chatterjee JPMorgan Chase & Co, Research Division

Yes. Just quick. OCS, I mean, clearly, demand is strong, but any way to quantify for us what the magnitude of the backlog from the [ 10 ] customers is or maybe in terms of like material impact to revenues, how should we be thinking about when does it get to maybe more than like a $100 million revenue number in terms of timing? Should it be this fiscal year or next year? How to think about that?

James Anderson Chief Executive Officer

Yes. Thanks, Samik. Yes, in terms of OCS, this is going to sound Like a common theme. But here again, demand is very strong. We are very focused on the production ramp now. So backlog is good. It grew in the December quarter versus the September quarter.

We expect revenue to ramp to grow this quarter and really the revenue to ramp throughout this calendar year and into next year. And we are just 100% focused on ramping capacity and production as fast as possible. The demand is very strong.

We’re engaged with over 10 customers. The size of the market has only grown since we assessed it about a year ago. And so tremendous opportunity and we’re ramping production as fast as possible. And we’ll probably give us some more specific milestones in terms of revenue as we progress through the year, but it will certainly contribute to our revenue growth throughout this calendar year and certainly a contributor next year as well.

We’re into the Q&A portion of Coherent’s conference call and the first question is fishing for how much growth could be coming in the second half of 2026.

Here’s what was asked:

Samik Chatterjee JPMorgan Chase & Co, Research Division

Yes. Jim hope your leg is healing now. Hopefully, things are better on that front. Maybe for the first question really just on demand, how would you characteristic? I mean you gave some of the book-to-bill numbers that you’re seeing, but how would you characterize the visibility there in terms of maybe duration?

Like how long is the visibility in terms of demand that the customers are providing and vis-a-vis how should we think about the capacity ramp for indium phosphide in particular, how are you planning that out, particularly how to think about contribution of 6-inch to that capacity ramp? And I have a follow-up.

James Anderson Chief Executive Officer

Yes. Thanks, Samik. And yes, the leg is doing much better for that. I appreciate that. On the demand question, yes, I would say, I’d call the demand that we’re seeing and the visibility extraordinary. If I just look at a couple of highlights from last quarter. If we look at our data center business, I was really pleased with the acceleration of our sequential growth rate to 14% sequential growth. And then we also saw, as I mentioned in the prepared remarks, over 4x book-to-bill ratio.

So just seeing incredibly strong demand. And we’re seeing bookings go further out in time than we would have in the past, which is great for us for visibility. So number one, bookings being booked out through the rest of this calendar year. Most of the bookings we’re getting now are into calendar ’27.

So most of our calendar ’26 is booked out. And calendar ’27 is feeling very, very quickly. That’s important to us because it gives us just great visibility. And then we’re also getting really good detailed long-term forecast from our big customers. A lot of times, those forecasts go out 2, 3 years. So we’re getting forecast to go out into calendar ’28, which again is great for visibility.

And then the third thing I would mention with respect to visibility is a number of long-term supply agreements that we’ve either signed with customers or in the process of signing where the will provide a guarantee to our customers for a certain amount of supply in an exchange that give us a guarantee on a certain amount of demand. And there’s often some sort of financial commitment from our customers like investment for CapEx, et cetera.

So I would say all those things combined, the visibility of the business is the best it’s ever been, which gives us just kind of great confidence in terms of the go-forward growth that we’re seeing. On the second part of your question on indium phosphide capacity ramp, again, we’re really pleased with the team’s execution here on the 6-inch indium phosphide ramp. One of the key metrics that I look at in terms of how the progress — how we’re making progress is wafer starts.

And remember, our goal that we mentioned last quarter was that we wanted to double indium phosphide capacity by the end of this calendar year. And if you look at the number of wafer starts that were starting this quarter, we’re basically at 80% of that target capacity already. So we’re starting wafers at 80% of the goal of doubling capacity, which is really strong and, frankly, ahead of schedule. In fact, last quarter, we more than quadrupled the number of wafer starts from our September quarter to our December quarter.

So I think that, for me, that’s a really good, important leading indicator on how we’re progressing on the indium phosphide ramp is that be at 80% of target in terms of initial wafer starts. Now that’s the beginning of the production line, right? It does take a number of quarters before those wafer starts or a number of months before those wafer starts transition into products and ship to customers. And a typical time from a wafer start to like a transceiver shipment is about 6 months.

But that’s a great leading indicator on our indium phosphide ramp. And we’re already seeing the benefits this quarter from the initial production that started in our September quarter of last year. So I’m really pleased with that ramp. And again, the reason we’re so focused on that is because 6-inch wafer versus a 3-inch wafer is more than 4x as many chips at less than half the cost. And so we’re really pleased with that ramp. And then Samik, it sounded like you had a follow-up?

Here’s what James Anderson (Coherent CEO) said to move shares:

“In particular, we expect continued strong sequential revenue growth in both our March and June quarters, and we expect our fiscal ’27 revenue growth rate to exceed our fiscal ’26 growth rate.

The key growth drivers that we see over the coming quarters are growth in both 800 gig and 1.6T transceivers, growth from the ramps of new products such as OCS and CPO solutions and ongoing exceptionally strong demand in our products for DCI and scale across.”

And he continued…

“We expect 1.6T to ramp significantly over the coming quarters with the early phase of the ramp driven by our EML and silicon photonics-based transceivers followed by our 200-gig VCSEL-based 1.6 transceivers ramping in the second half of this calendar year. On the supply side to address the extraordinary growth in demand, we are investing in the rapid expansion of our production capacity. “

What a reversal! 

Coherent shares have gone from down 20% to up 3%. Incredible. We’ll post commentary form the company’s call shortly.

We said earlier the reaction to Coherent’s earnings was an overreaction and shares have surged back nearly 17% since then.

Shares are now down only 3% as investors digest management commentary on Coherent’s earnings call. Another prediction we made earlier.

If you want more AI commentary, make sure to subscribe to our AI Investor Podcast.

I (Eric Bleeker) host it and just discussed the big drivers behind the optics market in 2026 in our new episode filmed today. We also manage a portfolio that includes winning investments in Lumentum, Coherent, Fabrinet, Applied Optoelectronics, and Ciena.

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Bull Case: Why COHR Could Sustain Momentum

Datacenter demand trajectory: Bulls point to 140% one-year stock gain driven by AI infrastructure build-out. The forward P/E of 30x versus trailing P/E of 323x suggests the market expects substantial earnings normalization.

Beat consistency: Management has delivered five consecutive quarterly beats, averaging a 15.7% surprise. Today’s 8.7% EPS beat extends that pattern.

Analyst conviction: 75% of analysts rate COHR a buy, with 96% institutional ownership providing sophisticated backing.

Bear Case: Why Skeptics See Trouble

Valuation stretched: Trading at 6x sales and 39x forward earnings leaves little room for disappointment.

Insider selling: Directors and executives sold 120,000+ shares from November through December with zero open-market purchases.

Guidance underwhelms: Despite beating estimates, shares dropped 11%. 

Shares of Coherent are down about 12% as of 4:19 p.m. ET.

The company’s report beat last quarter and had guidance above Wall Street expectations. However, the size of the beat paled in comparison to Lumentum.

The bottom line is Coherent doesn’t have the same level of catalysts behind the business. Still, I think it will be important to listen to the company’s conference call as commentary of accelerating revenue in late calendar 2026 could lead to losses moderating even further.

Coherent’s revenue  is for $1.77 billion at the midpoint. That tops Wall Street’s etsimates of $1.71 billion,

However, shares were up 97% headed into earnings so a simple ‘beat’ on guidance isn’t good enough.

Still, this seems like an overreaction to us, and we’ll have to see if the company’s conference call turns sentiment, especially if the company discusses an acceleration in the second half of 2026.

After an extreme initial reaction that saw shares down more than 20%, Coherent losses have moderated and are currently down about 10%.

Coherent just posted EPS of $1.29 (versus expectations of $1.21) and revenue of $1.69 billion (versus expectations of $1.64 billion.

Shares are down a whopping 20% as expectations were very high headed into earnings.

Combined with today’s sell-off that’s a 27% drop.

Coherent shares opened the morning up after Lumentum issued incredibly bullish earnings last night.

However, shares slid throughout the day as investors broadly sold off stocks associated with the AI trade.

We expect Coherent to report at about 4:05 p.m. ET and will immediately begin updating this live blog with news and analysis. 

To follow along all you have to do is stay on this page and new updates will post automatically.

• Strong beat on AI datacenter demand: Revenue of $1.58 billion (up 19% YoY pro forma) and EPS of $1.16 beat estimates, driven by 26% YoY growth in Datacenter and Communications segment. Received record bookings with customers placing orders extending over a year out, signaling unprecedented demand for 800G and 1.6T transceivers.
• Aggressive capacity expansion underway: Launching world’s first 6-inch indium phosphide production at two sites simultaneously (Texas and Sweden), expecting to roughly double internal InP capacity over next year. Initial 6-inch yields already exceeding mature 3-inch lines. Opening new transceiver facilities in Penang and expanding Vietnam site to meet surging AI networking demand.
• Multiple growth vectors emerging: Optical circuit switch (OCS) revenue and backlog both grew sequentially with shipments to 7 customers and expanding $2B+ TAM opportunity. 1.6T transceivers ramping faster than expected across multiple customers. Communications business posted 5th consecutive quarter of sequential growth (up 11% sequentially, 55% YoY) driven by DCI and telecom recovery.