Coherent Corp (COHR) Q4 2025 Earnings Call Highlights: Record Revenue and Strategic Moves ...

Full Year Revenue: $5.81 billion, up 23% year over year. Q4 Revenue: $1.53 billion, up 16% year over year. Data Center Revenue Growth: 61% increase for the full year; 38% year over year growth in Q4. Communications Revenue Growth: 23% increase for the full year; 42% year over year growth in Q4. Non-GAAP Gross Margin: 37.9% for the full year, up 358 basis points; 38.1% in Q4, up 220 basis points year over year. Non-GAAP EPS: $3.53 for the full year, up 191% year over year; $1 per share in Q4, approximately doubling year over year. Debt Reduction: $437 million paid down in fiscal 2025, reducing debt leverage ratio to 2 times. Operating Expenses: $1.17 billion for the full year, up from $998 million in 2024. Sale of Aerospace and Defense Business: $400 million, expected to close this quarter, reducing employee count by approximately 550. Guidance for Q1 Fiscal 2026 Revenue: $1.46 billion to $1.6 billion. Guidance for Q1 Fiscal 2026 Non-GAAP Gross Margin: 37.5% to 39.5%. Guidance for Q1 Fiscal 2026 EPS: $0.93 to $1.13 on a non-GAAP basis.

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Release Date: August 13, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Coherent Corp (NYSE:COHR) reported a 23% increase in full-year revenue, reaching a record $5.81 billion, driven by strong growth in data center and communications business. The company achieved a gross margin expansion of 358 basis points, leading to a threefold increase in non-GAAP EPS over the prior year. Coherent Corp (NYSE:COHR) saw a 51% revenue growth in the data center and communications market for fiscal '25, with a 39% year-over-year increase in Q4. The company began initial revenue shipments of its new 1.6T Transceivers and expects volumes to ramp throughout the year, with more meaningful contributions in calendar '26. Coherent Corp (NYSE:COHR) announced a new multi-year agreement with Apple for Vixel products, expected to generate revenue starting in the second half of calendar '26.

Negative Points

The industrial-related markets saw a revenue decrease of 2% for the year, with a 2% sequential and 8% year-over-year decline in fiscal Q4. The company experienced a drop in silicon carbide demand during fiscal '25, which was a headwind to overall industrial revenue. Coherent Corp (NYSE:COHR) is taking a cautious view on the broad-based industrial market due to macroeconomic uncertainties and tariff concerns. The sequential decline in Q4 gross margin was primarily driven by unfavorable foreign exchange impacts. The company announced the sale of its aerospace and defense business, which contributed to a reduction in revenue and employee count.

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Q & A Highlights

Q: How should we think about the growth outlook for Coherent's data center business in fiscal '26? A: Jim Anderson, CEO, highlighted that Coherent experienced strong growth in fiscal '25, with data center revenue increasing over 60%. Looking forward, the demand outlook remains strong, driven by the ramp of 800 gig and 1.6T transceivers, as well as the optical circuit switch (OCS) product. Coherent expects sequential growth in data center and communications for the upcoming quarter.

Q: Can you provide an update on the ramp of the 6-inch indium phosphide platform in Sherman, Texas, and its significance? A: Jim Anderson, CEO, stated that production of the 6-inch indium phosphide line began in August. This platform is expected to significantly increase capacity and reduce costs, providing a competitive advantage. The US manufacturing footprint is a strategic advantage, as evidenced by the expanded partnership with Apple, which will contribute to revenue in the second half of calendar '26.

Q: What product categories might be down sequentially at the midpoint of your guidance? A: Jim Anderson, CEO, mentioned that while data center and communications are expected to be up sequentially, industrial-related markets are anticipated to be flat to down, partly due to macroeconomic uncertainties and tariffs. However, over the long term, industrial segments are seen as growth opportunities.

Q: Can you discuss the competitive landscape for the optical circuit switch (OCS) and its advantages? A: Jim Anderson, CEO, explained that Coherent's OCS uses digital liquid crystal technology, which is non-mechanical and offers higher reliability compared to traditional MEMS-based solutions. This reliability is crucial for AI data centers, and Coherent is seeing strong customer engagement and demand for the product.

Q: How is Coherent addressing the competitive dynamics in the transceiver market, particularly with Chinese competitors? A: Jim Anderson, CEO, noted that Coherent believes it gained market share in fiscal '25, especially in higher data rate transceivers. The company is well-positioned due to its technology roadmap and resilient supply chain, which includes US manufacturing and vertical integration. Pricing has been as expected, and Coherent is ramping capacity to meet demand.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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