Earnings Recap — Q4 FY2026
CY Q3 2026 · Reported August 12, 2026 · Beat 7 of last 7 quarters
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Coherent's accelerating growth and record backlog underscore the surging demand for optical connectivity in AI data centers, reinforcing the thesis that optical infrastructure is scaling alongside compute. The company's aggressive capacity expansion in indium phosphide and new product ramps (OCS, CPO, multi-rail) position it as a critical supplier in the AI buildout, with potential implications for the broader optical supply chain.
Coherent delivered record Q4 revenue of $2.05 billion, up 13% sequentially and 34% YoY, with pro forma growth of 42% YoY. The Datacenter & Communications segment drove 79% of revenue, growing 19% sequentially and 59% YoY, with data center revenue up 24% sequentially and 66% YoY. Non-GAAP gross margin expanded to 40.2%, and non-GAAP EPS grew 74% YoY to $1.74. The company reported record bookings, with orders extending into calendar 2028 and LTAs through the end of the decade. CapEx accelerated to $556 million, and debt leverage fell to 0.7x.
Management expects fiscal 2027 growth to accelerate significantly, with revenue reaching over $3 billion in a single quarter by the end of fiscal 2027. They guided Q1 FY27 revenue of $2.2–2.4 billion, non-GAAP gross margin of 39.5–41.5%, and non-GAAP EPS of $1.85–2.05. The company plans to double internal indium phosphide output capacity by the end of the current quarter (one quarter ahead of plan) and more than double it again by end of calendar 2027, with additional capacity planned beyond that. New revenue streams—OCS, CPO, multi-rail, and thermal management—are expected to ramp over the coming quarters. Management reiterated confidence in reaching the greater-than-42% gross margin target, citing the 6-inch ramp and new product ramps still ahead, and expects continued operating leverage with OpEx already below the 18% target model.
“AI runs on compute, but it scales on optical connectivity.”
on AI infrastructure thesis
“We have seen absolutely no push out of CPO demand. In fact, it's been the opposite. We have seen demand increase and demand requests from customers and demand getting pulled in.”
on CPO demand
“The bulk of the 6-inch Indium Phosphide product ramp is still ahead of us, that's still to come.”
on Gross margin expansion
Can you provide an update on the 6-inch ramp and how it translates into revenue and gross margins?
Jim Anderson said they are on track to double internal indium phosphide output capacity this quarter, one quarter ahead of plan, and more than double again by end of calendar 2027. He noted 80% YoY growth in indium phosphide lasers produced in the June quarter, which supports data center revenue growth exceeding 80% YoY this quarter. Yields on 6-inch are better than 3-inch across all three devices.
What does the potential import restriction on optical transceivers mean for Coherent, and can you move manufacturing to the US?
Jim Anderson said the report is speculative, but Coherent would benefit as the largest US supplier. He highlighted over 20 US production facilities, including Sherman, Texas, which makes critical components for transceivers, CPO, and NPO. He said they are open to increasing US manufacturing if needed.
How much of your datacom laser mix is insourced, and what is the roadmap for selling EMLs externally?
Jim Anderson said they use a mix of internal and external sources, but given demand, they do not see near-term ability to sell indium phosphide lasers externally. He expects a greater percentage of transceivers to be serviced with internal indium phosphide over time as production ramps.