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AXT vs. Coherent: Which Photonics Chip Supplier Is the Better Buy?
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Key Takeaways
AXT posted 39% Q1 2026 revenue growth as AI data center demand lifted InP wafer sales.
AXTI exited Q1 with record backlog above $100M and expects its biggest InP quarter in Q2.
Coherent's AI networking business drove strong growth, but execution spans multiple categories.
AXT (AXTI - Free Report) and Coherent (COHR - Free Report) are increasingly important suppliers in the photonics supply chain, supporting the AI infrastructure boom, though they occupy very different positions in the ecosystem. AXT is a niche semiconductor substrate provider specializing in indium phosphide (InP), gallium arsenide, and germanium wafers used in optical transceivers and high-speed photonics for hyperscale data centers.
Coherent, by contrast, is a vertically integrated photonics giant producing lasers, transceivers, optical systems, and networking solutions directly powering AI data centers. While both companies are benefiting from surging hyperscaler demand, AXT appears earlier in its growth curve and potentially offers greater upside leverage to the optical networking cycle.
Price Performance
So far this year, AXT has skyrocketed 761.4% compared with Coherent’s surge of 104.6%. While the broader Computer and Technology sector was up 17.5%, the S&P 500 Index gained 9.7% in the same period.
YTD Price Chart AXT vs COHR
Image Source: Zacks Investment Research
Market Leadership
AXT is emerging as a strategically important supplier in the indium phosphide ecosystem, benefiting from growing scarcity and demand for high-performance photonic substrates. Management emphasized that the company now supports nearly all leading optical customers, including Tier 1 laser manufacturers and transceiver makers globally, while also expanding relationships with hyperscalers indirectly through supply-chain partnerships. This increasing relevance positions AXTI as an essential upstream enabler of optical AI infrastructure.
COHR, meanwhile, remains the established market leader in photonics technology, particularly in AI networking infrastructure. Its data center and communications segment accounted for 75% of total company revenues during the third quarter of fiscal 2026, reflecting strong positioning in transceivers, optical circuit switches (OCS), and co-packaged optics (CPO). However, its larger scale also means that growth increasingly depends on flawless execution across multiple product categories.
Growth Momentum
AXT’s momentum appears promising, with first-quarter 2026 revenues rising 39% year over year to $26.9 million. The growth was primarily driven by indium phosphide demand tied to AI data center applications. The company exited the quarter with a record backlog exceeding $100 million and expects the second quarter to mark the largest indium phosphide quarter in its history, signaling acceleration rather than normalization. Management also expects profitability in the second quarter, highlighting a strong operational inflection point.
COHR is growing rapidly as well, posting 21% year-over-year revenue growth to a record $1.8 billion and 55% EPS growth during the fiscal third quarter. Demand remains exceptionally strong, with orders stretching into calendar 2028 and robust adoption of 800G and 1.6T optical transceivers. Yet, for a business already operating at scale, maintaining this pace may become incrementally more challenging over time.
Innovation Edge
AXT is investing aggressively in next-generation technology, particularly 6-inch indium phosphide wafers designed for increasingly sophisticated optical devices supporting scale-up and scale-out AI workloads. The company believes CPO could become another major growth inflection beginning in late 2027, positioning AXT within the next phase of hyperscaler infrastructure spending. Its vertically integrated raw-material ecosystem also strengthens supply reliability.
COHR possesses a broader innovation portfolio spanning OCS, transceivers, thermal technologies, and a high-profile NVIDIA partnership tied to CPO solutions. Its 6-inch indium phosphide ramp is already contributing to margins and production capacity, while multiyear agreements enhance visibility. Still, ongoing innovation across multiple domains can make capital allocation more complex.
Revenue Model Quality
AXT’s revenue profile is improving meaningfully as indium phosphide becomes a larger portion of mix, lifting margins and visibility. Gross margin improved to nearly 30% in the first quarter from negative levels a year earlier, supported by favorable mix and increasing pricing discipline. Longer-term supply agreements under discussion may further stabilize demand visibility.
AXTI’s Sales Estimate
Image Source: Zacks Investment Research
COHR offers stronger near-term visibility through record backlog, long-term agreements extending toward the end of the decade, and diversified photonics exposure. However, its capital-intensive model and large manufacturing investments require sustained execution to maintain profitability gains.
COHR’s Sales Estimate
Image Source: Zacks Investment Research
Competitive Positioning
AXT’s greatest advantage may be its ability to rapidly scale indium phosphide production in a supply-constrained environment. Management expects to double capacity in 2026 and again in 2027, while emphasizing that few competitors possess comparable flexibility or integrated raw material access. This creates meaningful strategic leverage as AI optical demand accelerates.
Coherent is exceptionally well positioned, but it faces the burden of managing large-scale execution across several fast-moving AI networking categories. While demand remains robust, expectations are already elevated.
Valuation Comparison
AXTI trades at a premium, but this valuation is supported by sustained double-digit growth, expanding global adoption, and a long runway in the hyperscaler data centers. The company currently trades at a forward 12-month P/S multiple of 54.98, well above the industry average of 9.58, and carries a Value Score of F.
AXTI’s P/S F12M Chart
Image Source: Zacks Investment Research
COHR offers a more balanced risk profile, with dependable earnings growth and margin expansion driven by operational discipline. Its upside potential appears comparatively constrained, given its mature and diversified business mix. The company currently trades at P/E F12M ratio of 12.87, above the industry average of 15.83. COHR carries a Value Score of D.
COHR’s P/S F12M Chart
Image Source: Zacks Investment Research
Conclusion
Both AXT and Coherent stand to benefit meaningfully from the rapid expansion of AI infrastructure and hyperscaler optical networking demand. However, AXT currently appears to offer the more compelling investment opportunity. Its record backlog, accelerating indium phosphide demand, capacity expansion roadmap, and growing relevance to hyperscaler supply chains create a favorable “early-cycle growth” narrative. Coherent remains a high-quality photonics leader with exceptional execution and visibility, but for investors seeking greater upside potential in the AI optical ecosystem, AXTI currently stands out as the better buy.
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AXT vs. Coherent: Which Photonics Chip Supplier Is the Better Buy?
Key Takeaways
AXT (AXTI - Free Report) and Coherent (COHR - Free Report) are increasingly important suppliers in the photonics supply chain, supporting the AI infrastructure boom, though they occupy very different positions in the ecosystem. AXT is a niche semiconductor substrate provider specializing in indium phosphide (InP), gallium arsenide, and germanium wafers used in optical transceivers and high-speed photonics for hyperscale data centers.
Coherent, by contrast, is a vertically integrated photonics giant producing lasers, transceivers, optical systems, and networking solutions directly powering AI data centers. While both companies are benefiting from surging hyperscaler demand, AXT appears earlier in its growth curve and potentially offers greater upside leverage to the optical networking cycle.
Price Performance
So far this year, AXT has skyrocketed 761.4% compared with Coherent’s surge of 104.6%. While the broader Computer and Technology sector was up 17.5%, the S&P 500 Index gained 9.7% in the same period.
YTD Price Chart AXT vs COHR
Image Source: Zacks Investment Research
Market Leadership
AXT is emerging as a strategically important supplier in the indium phosphide ecosystem, benefiting from growing scarcity and demand for high-performance photonic substrates. Management emphasized that the company now supports nearly all leading optical customers, including Tier 1 laser manufacturers and transceiver makers globally, while also expanding relationships with hyperscalers indirectly through supply-chain partnerships. This increasing relevance positions AXTI as an essential upstream enabler of optical AI infrastructure.
COHR, meanwhile, remains the established market leader in photonics technology, particularly in AI networking infrastructure. Its data center and communications segment accounted for 75% of total company revenues during the third quarter of fiscal 2026, reflecting strong positioning in transceivers, optical circuit switches (OCS), and co-packaged optics (CPO). However, its larger scale also means that growth increasingly depends on flawless execution across multiple product categories.
Growth Momentum
AXT’s momentum appears promising, with first-quarter 2026 revenues rising 39% year over year to $26.9 million. The growth was primarily driven by indium phosphide demand tied to AI data center applications. The company exited the quarter with a record backlog exceeding $100 million and expects the second quarter to mark the largest indium phosphide quarter in its history, signaling acceleration rather than normalization. Management also expects profitability in the second quarter, highlighting a strong operational inflection point.
COHR is growing rapidly as well, posting 21% year-over-year revenue growth to a record $1.8 billion and 55% EPS growth during the fiscal third quarter. Demand remains exceptionally strong, with orders stretching into calendar 2028 and robust adoption of 800G and 1.6T optical transceivers. Yet, for a business already operating at scale, maintaining this pace may become incrementally more challenging over time.
Innovation Edge
AXT is investing aggressively in next-generation technology, particularly 6-inch indium phosphide wafers designed for increasingly sophisticated optical devices supporting scale-up and scale-out AI workloads. The company believes CPO could become another major growth inflection beginning in late 2027, positioning AXT within the next phase of hyperscaler infrastructure spending. Its vertically integrated raw-material ecosystem also strengthens supply reliability.
COHR possesses a broader innovation portfolio spanning OCS, transceivers, thermal technologies, and a high-profile NVIDIA partnership tied to CPO solutions. Its 6-inch indium phosphide ramp is already contributing to margins and production capacity, while multiyear agreements enhance visibility. Still, ongoing innovation across multiple domains can make capital allocation more complex.
Revenue Model Quality
AXT’s revenue profile is improving meaningfully as indium phosphide becomes a larger portion of mix, lifting margins and visibility. Gross margin improved to nearly 30% in the first quarter from negative levels a year earlier, supported by favorable mix and increasing pricing discipline. Longer-term supply agreements under discussion may further stabilize demand visibility.
AXTI’s Sales Estimate
Image Source: Zacks Investment Research
COHR offers stronger near-term visibility through record backlog, long-term agreements extending toward the end of the decade, and diversified photonics exposure. However, its capital-intensive model and large manufacturing investments require sustained execution to maintain profitability gains.
COHR’s Sales Estimate
Image Source: Zacks Investment Research
Competitive Positioning
AXT’s greatest advantage may be its ability to rapidly scale indium phosphide production in a supply-constrained environment. Management expects to double capacity in 2026 and again in 2027, while emphasizing that few competitors possess comparable flexibility or integrated raw material access. This creates meaningful strategic leverage as AI optical demand accelerates.
Coherent is exceptionally well positioned, but it faces the burden of managing large-scale execution across several fast-moving AI networking categories. While demand remains robust, expectations are already elevated.
Valuation Comparison
AXTI trades at a premium, but this valuation is supported by sustained double-digit growth, expanding global adoption, and a long runway in the hyperscaler data centers. The company currently trades at a forward 12-month P/S multiple of 54.98, well above the industry average of 9.58, and carries a Value Score of F.
AXTI’s P/S F12M Chart
Image Source: Zacks Investment Research
COHR offers a more balanced risk profile, with dependable earnings growth and margin expansion driven by operational discipline. Its upside potential appears comparatively constrained, given its mature and diversified business mix. The company currently trades at P/E F12M ratio of 12.87, above the industry average of 15.83. COHR carries a Value Score of D.
COHR’s P/S F12M Chart
Image Source: Zacks Investment Research
Conclusion
Both AXT and Coherent stand to benefit meaningfully from the rapid expansion of AI infrastructure and hyperscaler optical networking demand. However, AXT currently appears to offer the more compelling investment opportunity. Its record backlog, accelerating indium phosphide demand, capacity expansion roadmap, and growing relevance to hyperscaler supply chains create a favorable “early-cycle growth” narrative. Coherent remains a high-quality photonics leader with exceptional execution and visibility, but for investors seeking greater upside potential in the AI optical ecosystem, AXTI currently stands out as the better buy.
While AXT currently carries a Zacks Rank #2 (Buy), Coherent has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.