Sign in
CC

COHERENT CORP. (COHR)·Q3 2025 Earnings Summary

Executive Summary

  • Record quarter: Revenue $1.50B (+23.9% Y/Y, +4.4% Q/Q), non-GAAP gross margin 38.5% (+490 bps Y/Y), and non-GAAP EPS $0.91; strength driven by AI datacenter and a third straight quarter of telecom growth .
  • Beat vs S&P consensus: Revenue $1.498B vs $1.441B estimate (+$57M beat); non-GAAP EPS $0.91 vs $0.857 estimate (+$0.05 beat). EBITDA came in below consensus ($292M vs $323M)*.
  • Q4 FY25 outlook: Revenue $1.425–$1.575B; non-GAAP GM 37–39%; non-GAAP OpEx $290–$310M; non-GAAP EPS $0.81–$1.01; tax 21–24% .
  • Segment dynamics: Networking +10% Q/Q and +45% Y/Y; Lasers -3% Q/Q, +4% Y/Y; Materials -3% Q/Q, -1% Y/Y .
  • Balance sheet catalyst: $136M debt paydown in Q3; leverage 2.1x (credit agreement)—continued deleveraging and margin expansion remain core focus .

Items marked with * are Values retrieved from S&P Global.

What Went Well and What Went Wrong

What Went Well

  • AI-driven Networking strength and product cadence: “We delivered strong growth and profitability… record revenue driven by another quarter of strong AI-related datacenter demand.” — CEO Jim Anderson .
  • Margin execution: Non-GAAP GM rose to 38.5% (+30 bps Q/Q, +490 bps Y/Y) on pricing optimization, manufacturing cost reductions, and yield improvements .
  • Portfolio/technology milestones: Multiple 1.6T transceiver demos (EML, VCSEL, SiPh), 400G differential EML (foundation for 3.2T), and NVIDIA collaboration on co-packaged optics .

What Went Wrong

  • GAAP drag from restructuring and mix: $73.8M restructuring charges and unfavorable mix; GAAP EPS was $(0.11) despite strong non-GAAP results .
  • Industrial softness: Materials and broad-based industrial end-markets were soft; Materials -3% Q/Q and -1% Y/Y; management remains cautious near-term .
  • Higher non-GAAP tax rate: Increased to 25% (vs 17.4% prior quarter) primarily due to restructuring charges in higher-tax jurisdictions, modestly weighing on EPS leverage .

Financial Results

Headline P&L vs prior periods (GAAP and non-GAAP)

MetricQ3 FY24Q2 FY25Q3 FY25
Revenue ($B)$1.209 $1.435 $1.498
GAAP Gross Margin (%)30.3% 35.5% 35.2%
Non-GAAP Gross Margin (%)33.6% 38.2% 38.5%
GAAP Diluted EPS ($)$(0.29) $0.44 $(0.11)
Non-GAAP Diluted EPS ($)$0.38 $0.95 $0.91
Non-GAAP Operating Margin (%)12.6% 18.5% 18.6%

Actuals vs Wall St. consensus (S&P Global)

MetricQ1 FY25Q2 FY25Q3 FY25
Revenue ($B) – Estimate*1.316*1.369*1.441*
Revenue ($B) – Actual*1.349*1.435*1.498*
Primary EPS ($) – Estimate*0.614*0.674*0.857*
Primary EPS ($) – Actual*0.74*0.95*0.91*
EBITDA ($M) – Estimate*265*302*323*
EBITDA ($M) – Actual*237*279*292*

Items marked with * are Values retrieved from S&P Global.

Segment Revenue ($M)

SegmentQ3 FY24Q2 FY25Q3 FY25
Networking618.8 815.9 897.3
Materials239.0 243.5 236.7
Lasers351.0 375.3 363.9
Total1,208.8 1,434.7 1,497.9

Notes: Networking +10% Q/Q, +45% Y/Y; Lasers -3% Q/Q, +4% Y/Y; Materials -3% Q/Q, -1% Y/Y .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent Guidance / ActualChange
Revenue ($B)Q3 FY25$1.39–$1.48 (non-GAAP frame) Actual $1.498 Beat vs midpoint
Non-GAAP Gross Margin (%)Q3 FY2537–39 Actual 38.5 In range (upper half)
Non-GAAP OpEx ($M)Q3 FY25285–305 Actual 297 In range
Non-GAAP Tax Rate (%)Q3 FY2517–19 Actual 25 Above guide (mix of jurisdictions)
Non-GAAP EPS ($)Q3 FY250.75–0.95 Actual 0.91 Within/near top half
Revenue ($B)Q4 FY25—1.425–1.575 New
Non-GAAP Gross Margin (%)Q4 FY25—37–39 New
Non-GAAP OpEx ($M)Q4 FY25—290–310 New
Non-GAAP Tax Rate (%)Q4 FY25—21–24 New
Non-GAAP EPS ($)Q4 FY25—0.81–1.01 New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 FY25, Q2 FY25)Current Period (Q3 FY25)Trend
AI datacenter demandDatacom +16% Q/Q in Q1; 800G ramp broadening; 1.6T samples delivered; strong TAM expansion narrative Record DC revenue; DC +11% Q/Q, +54% Y/Y; continued strength and share gains focus Accelerating
1.6T and 3.2T roadmap1.6T samples shipped; ramp in CY25 expected 1.6T to begin ramping this calendar year; 400G differential EML demo for 3.2T Advancing
Optical Circuit Switch (OCS)First order in Q2; initial revenue in CY25 Customer enthusiasm; initial CY25 revenue reaffirmed Building
Telecom / DCICautiously optimistic; 2nd straight Q/Q growth; DCI leading 3rd straight Q/Q growth; +21% Y/Y; DCI main driver; traditional transport improving Improving
Supply chain & tariffsTariff impact not significant near-term; resilient, geo-diverse, vertically integrated supply chain Impact not significant to quarter; ~60+ sites/14 countries; ~half in U.S. Stable preparedness
Industrial end-marketsMixed with display and semi-cap strength; broad-based softness Materials softness; lasers mixed; cautious near-term outlook Cautious
Gross margin expansionMulti-quarter focus: pricing optimization and product cost/yield Non-GAAP GM 38.5%; benefits from yields, cost, pricing; target >40% reiterated Progressing

Management Commentary

  • Strategic focus and demand drivers: “We also continue to make solid progress towards achieving our gross margin target of operating above 40% on a non-GAAP basis.” — CEO .
  • Technology breadth as a differentiator: “We showcased 3 different 1.6T transceiver designs… EML, 200G VCSEL and silicon photonics.” — CEO .
  • Portfolio optimization and asset realignment: “We shut down development of silicon carbide devices and modules… announced intent to sell our underutilized Champaign, IL facility.” — CEO .
  • Operating discipline and deleveraging: “We paid down $136 million in debt… reducing our debt leverage to 2.1x.” — CFO .
  • On tariffs and manufacturing flexibility: “We don’t expect any significant impact… we have over 60 production facilities across 14 countries, roughly half within the U.S.” — CEO .

Q&A Highlights

  • Tariffs and supply chain: Management reiterated negligible near-term tariff impact, highlighting geo-diverse manufacturing and vertical integration; U.S. customers can be fully served from Malaysia transceiver production .
  • Datacenter demand and inventory: No obvious inventory build at customers; 800G demand strong alongside ongoing 400G demand .
  • Pricing and competition: Transceiver pricing characterized as stable; margin expansion emphasis remains on product cost and yield improvements rather than pricing in datacom .
  • Mix and margin outlook: Q4 GM guidance midpoint implies potential mix headwind; pricing optimization and cost reductions are offsetting levers across segments .
  • EML sourcing and capacity: Majority of EML-based transceivers use internal EMLs; strategy mixes internal/external suppliers; 6-inch InP ramp to broaden capacity and lower costs .

Estimates Context

  • Q3 FY25 beats: Revenue $1.498B vs $1.441B estimate (+$57M); EPS $0.91 vs $0.857 estimate (+$0.05)*.
  • EBITDA shortfall: Q3 EBITDA $292M vs $323M estimate, potentially reflecting mix and restructuring-tax interactions not fully captured in non-GAAP EBITDA frameworks*.
  • Forward lens: With Q4 guide broadly consistent on GM and EPS range, positive estimate revisions may concentrate in Networking/AI-exposed revenue and EPS, tempered by industrial softness and mix.

Items marked with * are Values retrieved from S&P Global.

Key Takeaways for Investors

  • AI-led Networking remains the engine: multi-gen product leadership (EML, VCSEL, SiPh) and share-gain intent underpin sustained revenue momentum .
  • Margin trajectory intact: Non-GAAP GM reached 38.5% with tangible cost/yield/pricing actions; >40% target remains credible as 6-inch InP and product cost initiatives scale .
  • Near-term mix risks vs secular strength: Guidance implies mix headwinds and industrial softness, but datacenter/telecom DCI strength offsets in aggregate .
  • Balance sheet de-risking: $136M Q3 paydown and 2.1x leverage support valuation resilience through macro uncertainty .
  • Catalysts: 1.6T initial ramp in CY25; OCS first revenues in CY25; continued awards and collaborations (e.g., NVIDIA CPO) can expand TAM and narrative .
  • Watch EBITDA conversion: Despite revenue/EPS beats, EBITDA underperformed consensus*, suggesting analysts may refine cost/mix and tax flow-through assumptions.
  • Execution priorities: Monitor yield/cost roadmaps, 6-inch InP ramp timing, industrial demand inflections, and any tariff-policy shifts; management emphasized readiness to adapt .

Appendix: Supporting Data and Disclosures

  • Core Q3 FY25 financial statements (condensed): income statement, balance sheet, cash flow, and GAAP-to-non-GAAP reconciliations .
  • Business outlook (Q4 FY25): ranges for revenue, non-GAAP GM, OpEx, tax, EPS .
  • Segment revenue detail by quarter .

Items marked with * are Values retrieved from S&P Global.