COHR · Q1 2026 Earnings

Bullish

Coherent Corp.

Reported November 5, 2025

30-second summary

30-second take: Q1 revenue of $1.581B grew 17.3% YoY and beat the high end of last quarter's $1.46B–$1.60B guide, with Datacenter & Communications up 26.1% YoY to $1.09B and non-GAAP gross margin at 38.7% — landing in the upper half of guide. Management raised Q2 datacom sequential growth to "approximately 10%" (versus 4% last quarter), committed to roughly doubling internal indium phosphide capacity over the next year, and pulled forward initial CPO deployments to calendar 2026. The Q2 guide of $1.56B–$1.70B revenue and $1.10–$1.30 non-GAAP EPS implies sequential acceleration, not a digest quarter.

Headline numbers

EPS

Q1 FY2026

$1.16

Revenue

Q1 FY2026

$1.58B

+17.3% YoY

Gross margin

Q1 FY2026

36.6%

Operating margin

Q1 FY2026

16.4%

Key financials

Q1 FY2026

Metric	Q1 FY2026	YoY	Q4 FY2025	QoQ
Revenue	$1.58B	+17.3%	$1.53B	+3.3%
EPS	$1.16	—	$1.00	+16.0%
Gross margin	36.6%	—	35.7%	+90bps
Operating margin	16.4%	—	0.4%	+1600bps

Guidance

Strong Q1 FY2026 beat on revenue, EPS, and margins; Q2 guidance implies acceleration in sequential growth driven by datacenter strength and capacity expansion.

Guidance is issued for both next quarter and the full year. Both may appear below.

Actuals vs prior guidance

Metric	Period	Prior guide	Actual	Δ	Result
Revenue	Q1 FY2026	$1.46 billion to $1.60 billion	$1.581 billion	+$0.02B above high end of guide range (+1.3% above midpoint)	Beat
Non-GAAP EPS	Q1 FY2026	$0.93 to $1.13	$1.16	+$0.03 above high end of guide range (+12.6% above midpoint)	Beat
Non-GAAP Gross Margin	Q1 FY2026	37.5% to 39.5%	38.7%	Within upper half of range, consistent with strong execution	Beat
Non-GAAP Operating Expenses	Q1 FY2026	$290 million to $310 million	Not separately disclosed in actuals	—	Met

New guidance

Metric	Period	Guide	YoY
Revenue	Q2 FY2026	$1.56 billion to $1.70 billion	—
Non-GAAP EPS	Q2 FY2026	$1.10 to $1.30	—
Non-GAAP Gross Margin	Q2 FY2026	38% to 40%	—
Non-GAAP Operating Expenses	Q2 FY2026	$300 million to $320 million	—
Non-GAAP Tax Rate	Q2 FY2026	18% to 20%	—

Segment performance

Q1 FY2026

Segment	Q1 FY2026	YoY
Datacenter & Communications	$1.09B	+26.1%
Industrial	$0.491B	+1.4%
Datacenter & Communications Revenue	$1,090.0M	—
Industrial Revenue	$491.4M	—

Platform metrics

Q1 FY2026

Segment	Q1 FY2026
Pro Forma Revenue Growth (YoY, Aerospace & Defense Adjusted)	19%

Profitability

Q1 FY2026

Segment	Q1 FY2026
Non-GAAP Gross Margin	38.7%
Non-GAAP Operating Margin	19.5%
Operating Cash Flow (Q1)	$46.0M
Capital Expenditures (Q1)	$103.9M
Debt Repayment (Q1)	$400M

Management tone

Q3 FY25 supply-constrained → Q4 FY25 capacity story queued up → Q1 FY26 capacity story executing → Q2 FY26 capacity becoming a moat

Supply constraints have flipped from a near-term ceiling to a structural advantage in the span of two quarters. Last quarter's Sherman 6-inch line was a roadmap item; this quarter management disclosed that initial 6-inch yields already exceed mature 3-inch yields, parallel ramp is underway at Jarfalla, and total internal indium phosphide capacity will roughly double in 12 months. Management framed it as: "Our deep portfolio of optical networking technology combined with our vertical integration and diversified supply chain are key competitive advantages with our customers and uniquely positioned coherent within the industry." The shift signals that the bottleneck that capped Q4 datacom growth at 4% sequentially is now the thing being sold to hyperscalers as a sourcing-reliability story.

The 1.6T narrative has moved from "calendar 2026 contribution" to "driver of the December quarter." Last quarter management said 1.6T revenue would become "more meaningful in calendar 2026." This quarter management said "a significant portion of the sequential growth we expect in the current quarter is driven by 1.6T adoption" with multiple customers accelerating their ramps. That is a six-month pull-forward and pushes the 1.6T inflection inside the current guide rather than as an FY27 setup.

Optical circuit switch and CPO are now disclosed as discrete, time-bound revenue waves. Q4 framed OCS as a $2B TAM opportunity with no customer count. This quarter OCS revenue has shipped to seven customers with both revenue and backlog growing, and management added a brand-new product line — CPO (Coherent Pluggable Optics) — with explicit "initial CPO deployments in calendar 2026" guidance. The cadence of disclosure (TAM → customers → deployment timing) is the standard pattern of a product transition becoming real.

Gross margin target framing tightened from aspiration to operational milestone. Last quarter the 42% target was held as a long-term goal. This quarter management linked it to specific structural drivers: "I am especially pleased with the progress we have made on gross margin expansion, driven by the cost reduction and pricing optimization initiatives that we continue to focus on as we drive to our target model of greater than 42%." The 6-inch cost structure (less than half the cost per chip vs. 3-inch) was explicitly cited as a calendar-2026 margin tailwind, putting a clock on the trajectory.

Industrial moved from "macro headwind" to a measured AI-thermal-management opportunity. Last quarter industrial was a drag with a stabilization claim. This quarter industrial grew 1.4% YoY and management called out engagement "with multiple hyperscaler customers" on materials technology for AI data center thermal management — a small but notable reframing from a defensive position to one with optionality.

Recurring themes management leaned on this quarter:

Record demand and bookings in data center optical networkingSupply chain expansion as competitive moat and margin driverMulti-generational technology roadmap (800G → 1.6T → CPO → OCS)Vertical integration and diversified manufacturing footprint as differentiationPortfolio optimization for margin expansion and debt reductionEmerging AI data center opportunities (thermal management, optical circuit switching)

Risks management surfaced:

Macroeconomic uncertainty and tariff/regulatory headwinds affecting industrial segmentSupply chain execution risk on parallel ramp of 6-inch indium phosphide at two sitesCompetitive risk in emerging form factors (CPO/OCS) with broader customer base than expectedExecution risk on new facility ramps in Malaysia (Penang) and VietnamDependency on external supplier partnerships for EML capacity

Q&A highlights

Samik Chatterjee · JPMorgan Chase

How broad-based is the demand across the portfolio, what are the demand drivers, and what are the milestones for doubling indium phosphide capacity over the next 12 months?

Management reported very broad-based demand with record bookings extending over a year ahead. Six-inch indium phosphide production started at Sherman, Texas with higher yields than mature three-inch lines. Parallel ramp now underway at Jarfalla, Sweden facility to achieve 2x capacity in ~12 months. Strong demand for 800 gig and 1.6T transceivers, plus DCI and traditional telecom segments showing five consecutive quarters of growth.

Record bookings in Q1 with visibility extending over a year outFive consecutive quarters of sequential growth in communications segmentCommunications grew 11% sequentially and 55% year-over-year in prior quarterSix-inch indium phosphide yields exceed mature three-inch production lines

Blaine Curtis · Jefferies

How much of the 10% datacom sequential growth guidance is constrained by supply, and what components beyond EMLs are constrained?

Management confirmed that indium phosphide capacity, specifically EMLs, was the primary constraint in the prior quarter limiting growth to 4%. Current quarter shows significant improvement with both external and internal supply growing sequentially. Further improvement expected from current quarter into next quarter with supply improving throughout the next calendar year. No other significant component constraints mentioned.

Prior quarter datacom growth: 4% sequential (constrained by EML supply)Current quarter guidance: 10% sequential growthEML-specific bottleneck confirmed as primary constraintIncremental supply improvements expected sequentially through next calendar year

Tom O'Malley · Barclays

What are the sequential growth drivers for datacom and communications into December quarter, and how will six-inch indium phosphide production impact gross margin improvement?

Management guided datacom acceleration from 4% to 10% sequential growth. Communications expected to grow sequentially in single digits (down from prior quarter's 11%). Six-inch production impact on gross margin minimal in current quarter but meaningful in calendar 2026. Six-inch cost structure less than half that of three-inch, providing margin tailwind alongside 1.6T products and capacity ramps.

Datacom December guidance: 10% sequential growth (vs. 4% prior quarter)Communications December guidance: single-digit sequential growth (vs. 11% prior quarter)Industrial segment: expected to be sequentially stable, maybe slightly upSix-inch production impact on gross margin: minimal current quarter, more meaningful in calendar 2026

Simon Leopold · Raymond James

How should investors think about OCS revenue trajectory for calendar 2026 relative to competitors, and clarification on indium phosphide production split between lasers and photodiodes?

Management expressed confidence in OCS market position based on non-mechanical liquid crystal technology superiority. Shipped to seven different customers with revenue and backlog growing last quarter, expecting continued growth. Revenue ramp weighted toward second half of calendar 2026. Clarified that six-inch ramp supports production of EML lasers, CW lasers, and photodiodes in parallel across two facilities. All three product types are critical to transceiver functionality.

OCS shipped to seven different customersBoth revenue and backlog grew last quarter and expected to grow this quarterMeaningful revenue contribution expected in calendar 2026 (weighted to H2)Six-inch indium phosphide products: EML lasers, CW lasers, and photodiodes (all three in parallel production)

Michael Manny · Bank of America

What is confidence level in gaining 1.6T share versus 800 gig, and is the 1.6T ramp concentrated or balanced across multiple customers?

Management expressed strong positioning for 1.6T ramp across multiple customers in parallel, with some customers accelerating their ramp timelines. Highlighted that Coherent was the only vendor to demonstrate 1.6T transceivers using three different technologies (Silicon Photonics, EML, Vixel) at OFC. Expects both 800 gig to grow significantly year-over-year in calendar 2026 and 1.6T to ramp at healthy pace simultaneously.

Multiple customers engaged in 1.6T ramp (not concentrated)Some customers accelerating 1.6T ramp timelinesOnly vendor to demonstrate all three 1.6T technology platforms at OFC (Silicon Photonics, EML, Vixel)Vixel-based 1.6T expected to enter production mid-calendar 2026, generating revenue in H2 2026

Answers to last quarter's watch list

Whether 1.6T revenue is large enough to call out as a discrete figure. Not disclosed as a discrete revenue number, but management explicitly said "a significant portion of the sequential growth we expect in the current quarter is driven by 1.6T adoption" and noted multiple customers accelerating 1.6T ramps. The narrative pulled forward materially.

Resolved positively

Q1 FY26 Networking sequential growth. Datacom grew on the order of mid-single-digits sequentially within total D&C of $1.09B, and management guided Q2 datacom up ~10% sequentially — well above the "mid-single-digit" floor the prior brief flagged as a warning sign.

Resolved positively

Non-GAAP gross margin trajectory within 37.5%–39.5%. Landed at 38.7% — upper half of the range — and Q2 guide of 38%–40% raises both ends. Confirms the indium phosphide cost story without confirming full pricing leverage yet.

Resolved positively

A&D divestiture close and use of proceeds. $400M of debt repayment in Q1 lines up with A&D proceeds being applied to de-leveraging at the pace flagged last quarter.

Resolved positively

Materials segment trajectory. No longer reported as a discrete segment under the new D&C/Industrial framework — Industrial (which contains the former Materials business) grew 1.4% YoY, ending the double-digit YoY decline streak. The stabilization claim holds, though the segment-level comparison is no longer clean.

Not resolved

Optical circuit switch customer wins or revenue disclosure. OCS is now shipping to seven customers with both revenue and backlog growing, and management reiterated the >$2B addressable opportunity. Specific OCS revenue still not broken out, but customer count is a concrete incremental signal.

Resolved positively

What to watch into next quarter

Whether Q2 datacom delivers the ~10% sequential growth. This is the single most precise guide management has given, and the entire capacity-expansion thesis hinges on EML supply ramping fast enough to convert backlog into Q2 revenue. Anything below 8% sequential would imply the supply story is slipping by a quarter.

Non-GAAP gross margin landing in the upper half of the 38%–40% Q2 guide. Hitting 39.5%+ would re-rate the trajectory toward the 42% target; landing at 38% would suggest mix or pricing pressure is offsetting the early 6-inch benefit.

Discrete 1.6T revenue disclosure or customer count. Management is now positioning 1.6T as a Q2 growth driver — a credible quarter for the first explicit 1.6T number. If still not disclosed by Q2 print, watch whether it's because the ramp is uneven across customers.

Capex trajectory vs. operating cash flow. Q1 capex of $103.9M against $46.0M of operating cash flow is a deliberate front-loading. Watch whether capex stays >$100M/qtr through FY26 (signals capacity build is multi-quarter) or moderates after the parallel 6-inch ramp is established.

CPO deployment timing and customer count. Management has now committed to "initial CPO deployments in calendar 2026" — watch for a customer name, form factor, or revenue framing on the Q2 call.

Industrial YoY trajectory. Q1's 1.4% YoY growth is a tentative inflection. A second consecutive quarter of positive YoY growth would convert "stabilized" into "recovering" and add a non-AI lever to the FY26 story.

Sources

Coherent Corp. Q1 FY2026 press release / 8-K Exhibit 99.1 — SEC EDGAR: https://www.sec.gov/Archives/edgar/data/820318/000119312525266951/d27982dex991.htm

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