Executive Summary

Q4 FY25 revenue reached a record $1.53B with non-GAAP EPS of $1.00; GAAP gross margin was 35.7% and non-GAAP gross margin was 38.1% .
Revenue grew 2% q/q and 16% y/y; non-GAAP EPS doubled y/y, while non-GAAP gross margin declined 43 bps sequentially due to FX headwinds but rose 220 bps y/y .
Networking segment drove the quarter (+39% y/y), with first revenue from 1.6T transceivers and initial Optical Circuit Switch (OCS) revenue; OCS expands addressable data center market opportunity by >$2B by 2030 .
Strategic portfolio actions: agreement to sell Aerospace & Defense for $400M (expected close in Q3 CY25), with proceeds to reduce debt and be EPS accretive; FY25 operating cash flow was $633.6M and debt repayments totaled ~$437M .

What Went Well and What Went Wrong

What Went Well

Strong Q4 execution with record revenue and non-GAAP EPS; CEO: “We delivered a strong fiscal 2025… well positioned… given our exposure to key growth drivers such as AI datacenters” .
Product milestones: first revenue from 1.6T datacom transceivers and initial OCS shipments; CFO guided continued ramp of these products .
Balance sheet progress: paid down $51M of debt in Q4 and ~$437M in FY25; leverage ratio reduced to ~2x; A&D sale proceeds to further reduce interest expense and be EPS accretive .

What Went Wrong

Sequential non-GAAP gross margin compression to 38.1% (down 43 bps q/q) primarily on unfavorable FX, partially offset by pricing and cost reductions; CFO noted margins would have exceeded guidance high-end absent FX .
GAAP EPS was a loss of $(0.83) driven by restructuring charges ($53.9M) and $85.0M impairment of assets held-for-sale in Q4 .
Industrial end markets expected flat-to-down near term given macro and tariff uncertainty; management took a cautious stance despite long-term opportunity .

Financial Results

Headline Metrics vs Prior Periods and Prior Year

Metric	Q4 2024	Q2 2025	Q3 2025	Q4 2025
Revenue ($USD Millions)	$1,314.4	$1,434.7	$1,497.9	$1,529.4
GAAP Gross Margin %	32.9%	35.5%	35.2%	35.7%
Non-GAAP Gross Margin %	35.9%	38.2%	38.5%	38.1%
GAAP Diluted EPS ($)	$(0.52)	$0.44	$(0.11)	$(0.83)
Non-GAAP Diluted EPS ($)	$0.51	$0.95	$0.91	$1.00
Non-GAAP Operating Margin %	15.4%	18.5%	18.6%	18.0%

Segment Revenue Breakdown

Segment Revenue ($USD Millions)	Q4 2024	Q3 2025	Q4 2025
Networking	$679.8	$897.3	$945.2
Materials	$279.3	$236.7	$236.2
Lasers	$355.3	$363.9	$348.0
Total	$1,314.4	$1,497.9	$1,529.4

KPIs and Cash Flow

KPI ($USD Millions unless noted)	FY 2024	FY 2025
Cash from Operations	$545.7	$633.6
Capital Expenditure (Additions to PP&E)	$(346.8)	$(440.8)
Debt Payments	$228.8	$437.0
Ending Cash, Cash Equivalents & Restricted Cash	$1,789.7	$1,632.9

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue ($USD Billions)	Q4 FY25	$1.425–$1.575	Actual: $1.529	Within range (above midpoint)
Non-GAAP Gross Margin %	Q4 FY25	37%–39%	Actual: 38.1%	Within range
Non-GAAP OpEx ($USD Millions)	Q4 FY25	$290–$310	Actual: $307	Within range
Non-GAAP Tax Rate %	Q4 FY25	21%–24%	Actual: 52.8% (non-GAAP tax expense level; tax rate not disclosed)	N/A clarification (company reports tax expense)
Non-GAAP EPS ($)	Q4 FY25	$0.81–$1.01	Actual: $1.00	High end of range
Revenue ($USD Billions)	Q1 FY26	N/A	$1.46–$1.60 (excludes ~$20M A&D)	New
Non-GAAP Gross Margin %	Q1 FY26	N/A	37.5%–39.5%	New
Non-GAAP OpEx ($USD Millions)	Q1 FY26	N/A	$290–$310	New
Non-GAAP Tax Rate %	Q1 FY26	N/A	18%–22%	New
Non-GAAP EPS ($)	Q1 FY26	N/A	$0.93–$1.13	New

Notes: Company does not provide GAAP reconciliations for forward-looking non-GAAP metrics due to variability of excluded items .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q2 FY25)	Previous Mentions (Q3 FY25)	Current Period (Q4 FY25)	Trend
AI Data Centers & Datacom Transceivers	Record datacom; 800G ramp; 1.6T samples; 3.2T development; strong 79% y/y datacom growth	Data center rev +11% q/q, +54% y/y; showcasing 1.6T variants and 400G EML for 3.2T; capacity expansion	Initial revenue from 1.6T; continued 800G growth; strong bookings; share gains claimed; Chinese competition manageable; capacity ramp	Strengthening
Optical Circuit Switch (OCS)	First customer order; revenue expected CY25; liquid crystal advantage vs MEMS	Pipeline strong; initial revenue expected CY25; capacity ramp planned	Initial revenue in Q4; robust pipeline; material revenue expected CY26	Ramping
Supply Chain Resiliency & U.S. Manufacturing	CHIPS Act support for InP; 60+ sites, ~half in U.S.; vertical integration	6-inch InP production next quarter; 3x capacity y/y; Malaysia supports U.S. hyperscalers	World’s first 6-inch InP production starting in Sherman, TX; multi-year Apple VCSEL agreement; thousands employed across 20+ U.S. sites	Expanding
Tariffs/Macro	Tariffs impact not significant in Q3 guide; cautious on industrial	Current quarter tariff impact not significant; cautious industrial outlook	No significant tariff impact expected; potential competitive advantage from semiconductor tariff exemptions	Neutral-to-positive
Industrial & Materials (SiC, OLED, Semi Cap)	Semi cap & OLED strength; SiC devices shut down; cautious broader industrial; automotive weak	Industrial flat-to-down near term; OLED and semi cap strong; SiC headwind	Industrial expected flat-to-down sequentially; SiC demand stabilized; services mix a margin tailwind	Mixed/Cautious

Management Commentary

CEO: “We delivered a strong fiscal 2025 with revenue growth of 23% and non-GAAP EPS expansion of 191%… well positioned… AI datacenters… optimize… sell our Aerospace and Defense business” .
CEO: “In fiscal Q4, we were pleased to see initial revenue shipments of our new 1.6T transceivers… and initial revenue for our optical circuit switch” .
CEO: “We will begin production this month of our new six inches indium phosphide line in Coherent’s Sherman, Texas facility… the world’s first” .
CFO: “Sequential decline in gross margin was primarily driven by unfavorable foreign exchange… if not for FX, our gross margin would have exceeded the high end of our guide” .
CFO: “We paid down $51M in debt during the quarter… total debt payments to $437M… reduced our debt leverage ratio to 2x” .
Strategy: Agreement to sell Aerospace & Defense for $400M; “Proceeds will be used to reduce debt, which will be immediately accretive to Coherent’s EPS” .

Q&A Highlights

Data center outlook: Expect datacenter and communications up sequentially; 800G continues to grow with 1.6T layering on top; strong DCI demand (100G/400G/800G ZR/ZR+) .
OCS trajectory: Healthy pipeline; adding capacity; differentiated non-mechanical liquid crystal tech vs MEMS; reliability advantage .
Apple VCSEL agreement: Multi-year, revenue in 2H CY26; supports Sherman, TX utilization; expected to benefit gross margins .
Capacity/technology mix: Tripled InP capacity y/y; commencing 6-inch InP; continued mix of internal/external EMLs for resiliency .
Industrial caution: Near-term flat-to-down; macro/tariff uncertainty; long-term growth intact (semi cap, OLED displays, services tailwind) .

Estimates Context

Q4 FY25 Actual vs Street (S&P Global):

Metric	Consensus	Actual	Beat/Miss
Revenue ($USD Millions)	1,512.7*	1,529.4	Beat
Primary EPS ($)	0.920*	1.00	Beat
EBITDA ($USD Millions)	342.9*	296.8*	Miss

Values retrieved from S&P Global.
Interpretation: Above-consensus revenue and EPS likely reflect strong Networking demand and initial 1.6T/OCS contributions; below-consensus EBITDA implies mix/FX headwinds and elevated non-GAAP OpEx investment in datacenter/communications .

Key Takeaways for Investors

Datacenter optical demand remains robust: 800G still growing while 1.6T has begun contributing; expect further ramp through CY26; DCI (ZR/ZR+) is a second leg of growth .
Near-term headwind from FX masked underlying gross margin progress; pricing and cost/yield initiatives continue to support margin trajectory toward the >42% long-term target .
Strategic portfolio simplification (A&D sale) should accelerate deleveraging and EPS accretion; reinforces focus on core photonics growth engines .
Supply chain and U.S. manufacturing footprint are differentiators (6-inch InP ramp, Apple VCSEL deal); supports share gains in higher-speed transceivers and future CPO .
Industrial exposure remains mixed near term; focus on recurring services in lasers and OLED/semi-cap markets provides margin tailwinds despite macro uncertainty .
Watch catalysts: 1.6T and OCS ramp pace, DCI traction, FX normalization, and timing/close of A&D sale; each can drive estimate revisions and stock reaction .
Estimate implications: Consensus likely to move up modestly for revenue/EPS given beats and product ramps, while EBITDA may lag until mix and FX headwinds abate (see Estimates Context).

Appendix: Non-GAAP Adjustments

Q4 non-GAAP excludes share-based comp, amortization of acquired intangibles, restructuring charges, impairment of assets held-for-sale, integration/site consolidation costs, FX, and tax impacts; reconciliations provided in Tables 6–9 .

COHERENT CORP. (COHR)·Q4 2025 Earnings Summary