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Can Coherent Corp's AI-Driven Growth Keep Up Its Momentum?
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Key Takeaways
Coherent posted $5.8B in fiscal 2025 revenues, up 23% y/y, driven by AI and datacom demand.
Data center revenues soared 61% y/y, highlighting COHR's strength in high-performance computing.
COHR began shipping 1.6T transceivers and is generating revenues from its Optical Circuit Switch platform.
Coherent Corp. (COHR - Free Report) is well-positioned to capitalize on the growing AI and high-performance computing markets. COHR’s shifting focus toward AI and datacom is yielding tangible results.
In fiscal 2025, the data center and communications market witnessed a 51% increase in revenues with a 61% year-over-year surge in the data center alone. This growth has inadvertently positioned the company to achieve record-breaking full-year revenues of $5.8 billion, up 23% from the previous year. This explosive growth, coupled with a 358-basis-point expansion in the non-GAAP gross margin, highlights the high-value nature of AI-centric products.
The market may fixate on Coherent Corp’s current performance. However, the true potential lies in its future product pipeline. In the recently reported quarter, the company informed that it began initial revenue shipments of its 1.6T transceivers, which are vital for the upcoming high-speed AI interconnects high tide.
Furthermore, COHR’s Optical Circuit Switch platform is generating revenues, and this innovation can certainly solidify its market position. Management’s optimistic first-quarter fiscal 2026 top-line guidance of $1.46-$1.60 billion points at continuous growth.
COHR’s performance over the past few quarters suggests efficient AI-led growth. In the second and third quarters of fiscal 2025, management explicitly attributed consistent top-line growth and margin expansion to strong AI-fueled datacenter demand.
Hence, it is safe to say that growth is not accidental; rather, it is a direct influence of Coherent Corp’s business thriving in an environment wherein data centers are being reconfigured to deal with the immense AI workload. Per McKinsey, with the increasing AI workload, data center capacity is expected to rise at an annual rate of 19-22% from 2023 to 2030, presenting an enormous opportunity for COHR to capture this growing demand.
COHR’s Price Performance, Valuation & Estimates
The stock grew 10.4% in the past three months against the industry’s 12.3% growth and the 10.6% rise of the Zacks S&P 500 Composite. COHR’s industry peer Priority Technology (PRTH - Free Report) has gained 4.2%, while Vimeo (VMEO - Free Report) has lost 9.6% in the same period.
3 Months' Price Performance
Image Source: Zacks Investment Research
From a valuation perspective, COHR trades at a forward price-to-earnings ratio of 18.15X, lower than the industry’s 86.56X. Priority Technology appears more affordable, with forward price-to-earnings ratios of 6.18X, while Vimeo, with 47.72X, looks expensive.
P/E - F12M
Image Source: Zacks Investment Research
Coherent Corp, Priority Technology and Vimeo carry a Value Score of C, A and B, respectively.
The Zacks Consensus Estimate for COHR’s earnings for 2025 and 2026 has increased 3.9% and 11.6%, respectively, over the past 60 days.
Image: Bigstock
Can Coherent Corp's AI-Driven Growth Keep Up Its Momentum?
Key Takeaways
Coherent Corp. (COHR - Free Report) is well-positioned to capitalize on the growing AI and high-performance computing markets. COHR’s shifting focus toward AI and datacom is yielding tangible results.
In fiscal 2025, the data center and communications market witnessed a 51% increase in revenues with a 61% year-over-year surge in the data center alone. This growth has inadvertently positioned the company to achieve record-breaking full-year revenues of $5.8 billion, up 23% from the previous year. This explosive growth, coupled with a 358-basis-point expansion in the non-GAAP gross margin, highlights the high-value nature of AI-centric products.
The market may fixate on Coherent Corp’s current performance. However, the true potential lies in its future product pipeline. In the recently reported quarter, the company informed that it began initial revenue shipments of its 1.6T transceivers, which are vital for the upcoming high-speed AI interconnects high tide.
Furthermore, COHR’s Optical Circuit Switch platform is generating revenues, and this innovation can certainly solidify its market position. Management’s optimistic first-quarter fiscal 2026 top-line guidance of $1.46-$1.60 billion points at continuous growth.
COHR’s performance over the past few quarters suggests efficient AI-led growth. In the second and third quarters of fiscal 2025, management explicitly attributed consistent top-line growth and margin expansion to strong AI-fueled datacenter demand.
Hence, it is safe to say that growth is not accidental; rather, it is a direct influence of Coherent Corp’s business thriving in an environment wherein data centers are being reconfigured to deal with the immense AI workload. Per McKinsey, with the increasing AI workload, data center capacity is expected to rise at an annual rate of 19-22% from 2023 to 2030, presenting an enormous opportunity for COHR to capture this growing demand.
COHR’s Price Performance, Valuation & Estimates
The stock grew 10.4% in the past three months against the industry’s 12.3% growth and the 10.6% rise of the Zacks S&P 500 Composite. COHR’s industry peer Priority Technology (PRTH - Free Report) has gained 4.2%, while Vimeo (VMEO - Free Report) has lost 9.6% in the same period.
3 Months' Price Performance
From a valuation perspective, COHR trades at a forward price-to-earnings ratio of 18.15X, lower than the industry’s 86.56X. Priority Technology appears more affordable, with forward price-to-earnings ratios of 6.18X, while Vimeo, with 47.72X, looks expensive.
P/E - F12M
Coherent Corp, Priority Technology and Vimeo carry a Value Score of C, A and B, respectively.
The Zacks Consensus Estimate for COHR’s earnings for 2025 and 2026 has increased 3.9% and 11.6%, respectively, over the past 60 days.
COHR currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.