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COHERENT CORP. (COHR)·Q1 2026 Earnings Summary

Executive Summary

  • Q1 FY26 delivered record revenue and EPS with clear beats vs consensus and raised guidance. Revenue was $1.58B (+3% q/q; +17% y/y) and non-GAAP EPS was $1.16; both exceeded S&P Global consensus estimates (Revenue: $1.54B; EPS: $1.04) on strength in AI datacenter networking and DCI *.
  • Non-GAAP gross margin expanded to 38.7% (+70 bps q/q; +200 bps y/y) driven by pricing optimization, input cost reductions, and yield improvements, primarily in the datacenter & communications segment .
  • Guidance raised for Q2 FY26: revenue $1.56–$1.70B, non-GAAP GM 38–40%, OpEx $300–$320M, tax 18–20%, EPS $1.10–$1.30, reflecting strong demand and improving indium phosphide laser supply; Q4 FY25 guidance had been lower (revenue $1.46–$1.60B; GM 37.5–39.5%; EPS $0.93–$1.13) .
  • Catalysts: ramp of 1.6T transceivers, doubling internal indium phosphide capacity via world-first 6-inch lines (Sherman, TX; Järfälla, Sweden) with initial yields above 3-inch, expanding transceiver assembly capacity (Malaysia, Vietnam), and increasing OCS backlog/revenue with non-mechanical liquid crystal technology .

What Went Well and What Went Wrong

  • What Went Well

    • Strong demand with record bookings across datacenter (800G, 1.6T) and DCI; CEO: “record level of bookings… orders… over a year from now” .
    • Technology/production execution: 6-inch indium phosphide yields “higher than our current 3-inch indium phosphide yields”; capacity ramp at two sites to roughly double internal production over the next year .
    • Margin expansion: non-GAAP GM 38.7% (+200 bps y/y) from pricing optimization and yield improvements; CFO: “pricing optimization contributed meaningfully” .

  • What Went Wrong

    • Supply constraints limited data center growth to +4% q/q in Q1; EML laser supply was the primary bottleneck (improving in Q2/Q3) .
    • Industrial segment remains cautious on near-term demand given macro/tariff uncertainties; sequential flat to slightly up expected, with ongoing portfolio streamlining .
    • FX headwinds impacted prior quarter gross margin; though immaterial in Q1, FX remains a variable in modeling GM trajectory .

Financial Results

MetricQ3 FY25Q4 FY25Q1 FY26
Revenue ($USD Billions)$1.498 $1.529 $1.581
GAAP Gross Margin %35.2% 35.7% 36.6%
Non-GAAP Gross Margin %38.5% 38.1% 38.7%
Non-GAAP Operating Margin %18.6% 18.0% 19.5%
GAAP Diluted EPS ($)-0.11 -0.83 1.19
Non-GAAP Diluted EPS ($)0.91 1.00 1.16
Segment Revenue ($USD Millions)Q1 FY25Q4 FY25Q1 FY26
Datacenter & Communications$863.6 $1,018.3 $1,090.0
Industrial$484.5 $511.1 $491.4
KPIs / Balance Sheet HighlightsQ4 FY25Q1 FY26
Cash & Equivalents ($MM)$909.2 $852.8
Inventories ($MM)$1,437.6 $1,632.6
Total Debt ($MM)$3,498.6 $3,259.4
Revolving Credit Facility ($MM)$350 prior†$700 (doubling)
Debt Leverage Ratio (Non-GAAP)~2.0x prior†1.7x

†Prior figures referenced in management remarks; formal Q4 ratio commentary provided in Q4 call .

Actual vs S&P Global ConsensusQ3 FY25Q4 FY25Q1 FY26
Revenue Actual ($MM)1,497.9 1,529.4 1,581.4
Revenue Consensus Mean ($MM)1,440.7*1,512.7*1,535.7*
EPS Actual (Primary/Non-GAAP) ($)0.91 1.00 1.16
Primary EPS Consensus Mean ($)0.8576*0.9199*1.0425*

Values retrieved from S&P Global*.

Guidance Changes

MetricPeriodPrevious Guidance (Q4 FY25)Current Guidance (Q1 FY26)Change
Revenue ($B)Q2 FY26$1.46–$1.60 $1.56–$1.70 Raised
Non-GAAP Gross Margin %Q2 FY2637.5–39.5 38–40 Raised
Non-GAAP OpEx ($MM)Q2 FY26290–310 300–320 Raised (discipline maintained)
Non-GAAP Tax Rate %Q2 FY2618–22 18–20 Tightened lower
Non-GAAP EPS ($)Q2 FY260.93–1.13 1.10–1.30 Raised

Earnings Call Themes & Trends

TopicQ3 FY25 (Prior-2)Q4 FY25 (Prior-1)Q1 FY26 (Current)Trend
AI Datacenter transceivers (800G/1.6T)Record revenue; showcased 1.6T (EML, SiPh, VCSEL) Initial 1.6T revenue shipped; 800G growing 1.6T adoption accelerating; sequential growth driven by 1.6T Strengthening
Indium phosphide (InP) capacityAnnounced 6-inch Sherman start (Aug) Tripled capacity y/y; 6-inch ramp beginning 6-inch yields > 3-inch; ramping Sherman & Järfälla; doubling internal capacity over next year Rapidly improving supply
Supply chain & assembly footprintEmphasis on resilient global footprint Vietnam facility; expanding module capacity Expanding module assembly in Ipoh, Penang, Vietnam Capacity expansion underway
Optical Circuit Switch (OCS)Initial revenue shipments Pipeline healthy; capacity adds 7 customers shipped; backlog up; 64×64 and 320×320 sizes; revenue ramp through CY26 Building backlog; 2H CY26 revenue skew
DCI (ZR/ZR+)Product awards; portfolio ramp Comms +11% q/q; strong ZR/ZR+ Continued sequential growth; 100G/400G/800G ZR/ZR+ ramp Sustained demand
Tariffs/macroNoted potential advantage from US manufacturing Cautious on industrial; FX headwind GM Ongoing caution in industrial (macro/tariffs); FX immaterial in Q1 Mixed; industrial cautious
Portfolio optimization—A&D sale announced; proceeds to debt paydown A&D sale closed; Munich materials processing divestiture agreed; accretive to GM/EPS Streamlining accelerates
Regional trends——Region revenue mix provided (North America strength) NA stronger

Management Commentary

  • CEO on bookings: “record level of bookings… orders… over a year from now” highlighting visibility and mix planning capability .
  • CEO on 6-inch InP: “initial 6-inch indium phosphide production yields are actually higher than our current 3-inch indium phosphide yields” and ramp at Sherman and Järfälla to double capacity .
  • CFO on margin drivers: “pricing optimization… yield improvements… lower product input costs” driving GM expansion toward >42% target .
  • CEO on OCS differentiation: non-mechanical liquid crystal tech with “superior reliability, performance” and wider-than-expected TAM; 7 customers shipped .

Q&A Highlights

  • Indium phosphide supply: Capacity constraints primarily EML; both internal and external supply improving sequentially into Q2 and fiscal Q3 .
  • 1.6T ramp: Multi-customer adoption; early wave driven by SiPh (CW lasers) and EML; VCSEL-based 1.6T targeted for mid-CY26 ramp .
  • OCS trajectory: Backlog and revenue growing; more meaningful contributions in CY26, weighted to 2H; differentiated non-mechanical tech .
  • Pricing/environment: Transceiver pricing consistent with expectations; supply constraints supportive of pricing; ongoing optimization benefits .
  • Capacity expansion: Parallel module assembly growth in Malaysia (Ipoh, Penang) and Vietnam; footprint consolidation (23 sites sold/exited in ~5 quarters) .

Estimates Context

  • Q1 FY26 beats: Revenue $1,581.4MM vs $1,535.7MM consensus; Primary EPS $1.16 vs $1.0425 consensus; both exceeded on strength in datacenter & communications and margin execution *.
  • Prior beats: Q4 FY25 revenue $1,529.4MM vs $1,512.7MM; EPS $1.00 vs $0.9199; Q3 FY25 revenue $1,497.9MM vs $1,440.7MM; EPS $0.91 vs $0.8566 *.
  • Implications: Street models should reflect raised Q2 guidance, accelerating 1.6T mix, improving EML supply, and GM tailwinds from 6-inch InP cost structure and pricing optimization .

Values retrieved from S&P Global*.

Key Takeaways for Investors

  • Demand momentum and visibility: Record bookings across datacenter/DCI with multi-quarter visibility; sequential growth guided despite recent supply constraints .
  • Capacity inflection: 6-inch InP yields above legacy with two-site ramp; internal capacity expected to roughly double over next year, reducing bottlenecks and aiding margins .
  • Product cycle catalysts: 1.6T transceivers adoption accelerating; OCS backlog building with differentiated technology; ZR/ZR+ portfolio ramp continues .
  • Margin trajectory: Non-GAAP GM at 38.7% with tailwinds from 6-inch InP (cost), new products (1.6T), yield/pricing initiatives; long-term target >42% reiterated .
  • Portfolio & balance sheet: A&D divestiture closed; Munich tools sale agreed; proceeds reduce debt; leverage down to 1.7x and revolver doubled to $700M, improving flexibility .
  • Industrial caution vs resilience: Near-term macro/tariff caution; focus on margin expansion and growth areas (OLED display capital, semicap equipment, thermal materials for AI data centers) .
  • Trading setup: Raised Q2 guide and supply improvement are near-term positives; watch capacity ramp milestones (EML/CW laser supply) and OCS revenue conversion as key stock drivers .