Coherent Beat Estimates as AI Optics Sales Jumped 79% and the Growth Outlook Rose Above 60%

Coherent beat estimates for its September quarter, as surging demand for optical connections in AI data centers lifted revenue by half and management raised the year's growth outlook.

Coherent reported revenue of $2.37 billion for the fiscal first quarter ended September 30, 2026, up 50% from a year earlier. That topped the $2.31 billion analysts polled by FactSet expected, according to Barron's.

Adjusted earnings were $2.09 a share, up 80% from $1.16 a year earlier and 10 cents above the FactSet estimate Barron's reported. On a GAAP basis, earnings were $1.90 a share, up from $1.19 a year earlier.

Coherent makes the transceivers, lasers and optical parts that move data inside AI data centers. It is a leading supplier of photonics, the technology that uses light instead of electricity to carry data, behind the industry's shift from copper wiring to optical links.

One segment did the work

Datacenter & Communications revenue rose 79% to $1.95 billion, from $1.09 billion a year earlier. The segment supplied about 82% of total revenue, a calculation from the release's segment table.

Industrial revenue fell 15% to $419 million, from $491 million a year earlier. The decline reflects what Coherent has sold: its pro forma figures strip out the aerospace and defense business, sold in September 2025, and a Munich business sold in January 2026.

Growth came with wider margins. GAAP gross margin rose to 39.1%, from 36.6%, and adjusted gross margin reached 40.6%. Net income on a GAAP basis rose to $385 million, and operating income to $378 million.

"Our Q1 results delivered substantial operating leverage and durable gross margin expansion, driven by pricing optimization and cost improvements," Chief Financial Officer Sherri Luther said.

The outlook moved more than the quarter

For the current quarter, Coherent guided revenue to between $2.55 billion and $2.75 billion, with adjusted earnings of $2.28 to $2.48 a share. At its midpoint, the revenue guide implies growth of about 12% from the quarter just reported, a calculation from the two figures.

The bigger move was the year. Management now expects fiscal 2027 pro forma revenue growth to exceed 60%, more than double fiscal 2026's pro forma rate. It expects the first $3 billion revenue quarter by the end of fiscal 2027, and the first $4 billion quarter in fiscal 2028.

"Q1 marked a strong start to fiscal 2027, with pro forma revenue up 56% year over year and non-GAAP EPS up 80%," Chief Executive Jim Anderson said. "As AI datacenters transition from copper to optical connectivity, Coherent's broad photonics platform and manufacturing scale position us to help customers meet rising needs for bandwidth and energy efficiency."

PhotonLink is the next leg management is selling

The investor presentation furnished with the results puts a new platform, PhotonLink, at the center of the next leg. It expects PhotonLink revenue above $100 million in the March 2027 quarter, rising past $250 million a quarter before the end of 2027.

Separately, the presentation values a PhotonLink long-term agreement at about $20 billion over five years, with that agreement's revenue beginning to ramp in early 2028. The presentation does not name the customer, so the value is a company statement about an agreement, not a disclosed order book.

The same presentation says revenue from scale-across data-center interconnect products passed $200 million in the quarter, roughly four times a year earlier. Output capacity for indium phosphide, a key laser input, doubled a quarter ahead of plan.

A falling stock met a rising print

The shares had fallen 6.22% in Wednesday's regular session to close at $194.59, before the results were released. Barron's tied the day to fears that the Democrats' midterm wins could stall data-center development.

The reaction reversed most of that move. In extended trading, the shares rose 7.80% to $209.76 as of 6:48 p.m. ET, according to MarketBeat quote data. Even after the gain, the shares sit far below the 52-week high of $440 the same quote page records.

Cash and equivalents ended the quarter at $2.14 billion, up from $1.77 billion at the end of June. The balance gives the capacity build a funded base, though the release does not break out the quarter's spending plans.

What remains unknown

The release does not say which customers drove the Datacenter & Communications jump, or how concentrated it is among a few large buyers. PhotonLink's anchor agreement is unnamed, and its revenue ramp starts in 2028, beyond the current guidance.

The release also does not address whether the data-center restrictions voters backed in Tuesday's local elections touch any customer building plans. The guidance is not reconciled to GAAP figures, which the company says it cannot forecast without unreasonable effort.

What to watch next

Watch the second-quarter print against the guide: revenue between $2.55 billion and $2.75 billion, and adjusted earnings between $2.28 and $2.48 a share.

Watch the March 2027 quarter for the first PhotonLink test management has set: revenue above $100 million from the platform.

Watch adjusted gross margin against 40.6%. The new target is a first quarter above 45% before the end of 2028, and the path there runs through the pricing and cost work the finance chief described.