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COHR vs. APP: Which AI Growth Stock Offers the Better Investment?
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Key Takeaways
Coherent appears better positioned, backed by faster expected growth, estimate momentum and a lower valuation.
COHR expects fiscal 2027 sales and EPS growth of 50% and 67%, with EPS estimates trending higher.
APP offers stronger margins and cash generation, but its richer valuation weigh on appeal.
Coherent Corp. (COHR - Free Report) and AppLovin Corporation (APP - Free Report) are both high-growth technology companies benefiting from the broader expansion of artificial intelligence. Coherent supports AI infrastructure through optical networking, lasers, and communications technologies used in data centers and high-speed connectivity. AppLovin applies AI through its Axon advertising platform to improve targeting, monetization and performance marketing. Both stocks attract growth-oriented investors seeking exposure to companies with strong AI-related demand, expanding markets and significant long-term earnings potential.
COHR: Optical Demand Drives Strong Growth
Coherent's latest results show how rapidly AI infrastructure demand is reshaping its business. Fiscal fourth-quarter revenues crossed $2 billion, beating the Zacks Consensus Estimate by 2.7% and rising 33.8% year over year and 13.3% sequentially. Full-year revenues increased 22.5% to a record $7.1 billion. The Datacenter & Communications segment generated $1.6 billion in quarterly revenues, up 58.6% year over year, and accounted for about 79% of the total. However, Industrial revenues declined 15.8% to $430.5 million, making Coherent increasingly dependent on AI networking and optical connectivity.
Profitability improved along with sales. Non-GAAP gross margin reached 40.2%, while non-GAAP operating income jumped 62.1% to $446 million and the related margin expanded to 21.8%. Adjusted earnings of $1.74 per share increased 74% and beat the consensus mark by 7.4%. Better manufacturing yields, lower input costs, pricing actions and the shift to six-inch indium phosphide production supported the gains. The six-inch process can produce roughly four times the output at about half the cost of the older three-inch platform, improving Coherent's ability to convert demand into earnings.
The near-term outlook remains compelling. Coherent expects first-quarter fiscal 2027 revenues of $2.2-$2.4 billion. The $2.3 billion midpoint implies about 12.4% sequential growth, while the adjusted EPS guidance midpoint of $1.95 suggests another earnings step-up. Demand visibility extends into calendar 2028, supported by long-term agreements and ramps in 800-gigabit and 1.6-terabit transceivers, optical circuit switching, co-packaged optics and PhotonLink. These opportunities give Coherent substantial long-term growth potential.
The challenge is funding that expansion efficiently. Fourth-quarter capital expenditures reached $556 million, full-year property, plant and equipment additions surged 150.2% to $1.103 billion, and annual operating cash flow fell 87.5% to $79.5 million. Inventory increased 79.5% to $2.581 billion as the company prepared for higher output. Cash rose to $1.162 billion and total debt declined to $3.222 billion, but capacity constraints, heavy spending and weak Industrial demand leave execution and cash-conversion risks elevated.
APP: AI Advertising Delivers Exceptional Economics
AppLovin continues to post faster growth and much stronger cash generation. Second-quarter 2026 revenues rose 52.4% year over year to $1.92 billion, although they missed the Zacks Consensus Estimate by 0.8%. Adjusted earnings increased 66.4% to $3.76 per share and beat the consensus mark by 1.1%, extending the company's streak of earnings beats to four quarters. Adjusted EBITDA climbed 58% to $1.61 billion, or about 83.9% of revenues, while free cash flow totaled $863 million. This combination highlights the operating leverage of AppLovin's AI-driven advertising platform.
Management's third-quarter guidance points to renewed momentum. The $2.07 billion revenue midpoint implies about 7.8% sequential growth, nearly double the second quarter's pace of 4%. The adjusted EBITDA midpoint of $1.725 billion indicates 7.1% sequential growth, with the margin expected to remain near 83%. Importantly, the outlook incorporates model enhancements already deployed after the June quarter. Consumer-advertiser spending also reached a record, up 28% from fourth-quarter 2025 levels, supporting AppLovin's effort to diversify beyond gaming.
AppLovin's balance sheet provides additional flexibility. The company ended the quarter with $3.05 billion in cash and $3.7 billion in debt, while net leverage was only about 0.1 times trailing adjusted EBITDA. It also repurchased or withheld approximately 1.14 million shares for $551 million. Risks remain: gaming-model improvements can arrive unevenly, AI compute costs are rising, and creative-production and onboarding bottlenecks could slow consumer expansion. These concerns, together with a slight revenue miss, contributed to the stock's roughly 17% post-earnings decline despite healthy underlying demand.
How Do Zacks Estimates Compare for COHR & APP?
The Zacks Consensus Estimate for APP’s 2026 sales indicates year-over-year growth of 40%, and that for earnings indicates a year-over-year increase of 55%. EPS estimates have been trending downward over the past 60 days.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for COHR’s fiscal 2027 sales and EPS indicates year-over-year growth of 50% and 67%, respectively. EPS estimates have been trending upwards over the past 60 days.
Image Source: Zacks Investment Research
COHR’s Valuation More Attractive Than APP
COHR is trading at a forward price-to-sales multiple of 5.01X, below its 12-month median of 5.25X. APP’s forward price-to-sales multiple stands at 10.81X, below its median of 19.47X.
Coherent Appears Better Positioned
Coherent appears better positioned for investors seeking a more balanced AI growth opportunity, supported by stronger earnings-estimate momentum, faster expected growth and a more attractive valuation. Demand for AI-driven optical networking continues to accelerate, while improving manufacturing efficiency and a favorable product mix are strengthening margins. The company also enjoys extended demand visibility across advanced transceivers, optical circuit switching and co-packaged optics. Although AppLovin offers superior margins, cash generation and balance-sheet flexibility, and its AI-powered advertising platform is expanding, its richer valuation and downward earnings-estimate revisions temper its appeal.
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Image: Bigstock
COHR vs. APP: Which AI Growth Stock Offers the Better Investment?
Key Takeaways
Coherent Corp. (COHR - Free Report) and AppLovin Corporation (APP - Free Report) are both high-growth technology companies benefiting from the broader expansion of artificial intelligence. Coherent supports AI infrastructure through optical networking, lasers, and communications technologies used in data centers and high-speed connectivity. AppLovin applies AI through its Axon advertising platform to improve targeting, monetization and performance marketing. Both stocks attract growth-oriented investors seeking exposure to companies with strong AI-related demand, expanding markets and significant long-term earnings potential.
COHR: Optical Demand Drives Strong Growth
Coherent's latest results show how rapidly AI infrastructure demand is reshaping its business. Fiscal fourth-quarter revenues crossed $2 billion, beating the Zacks Consensus Estimate by 2.7% and rising 33.8% year over year and 13.3% sequentially. Full-year revenues increased 22.5% to a record $7.1 billion. The Datacenter & Communications segment generated $1.6 billion in quarterly revenues, up 58.6% year over year, and accounted for about 79% of the total. However, Industrial revenues declined 15.8% to $430.5 million, making Coherent increasingly dependent on AI networking and optical connectivity.
Profitability improved along with sales. Non-GAAP gross margin reached 40.2%, while non-GAAP operating income jumped 62.1% to $446 million and the related margin expanded to 21.8%. Adjusted earnings of $1.74 per share increased 74% and beat the consensus mark by 7.4%. Better manufacturing yields, lower input costs, pricing actions and the shift to six-inch indium phosphide production supported the gains. The six-inch process can produce roughly four times the output at about half the cost of the older three-inch platform, improving Coherent's ability to convert demand into earnings.
The near-term outlook remains compelling. Coherent expects first-quarter fiscal 2027 revenues of $2.2-$2.4 billion. The $2.3 billion midpoint implies about 12.4% sequential growth, while the adjusted EPS guidance midpoint of $1.95 suggests another earnings step-up. Demand visibility extends into calendar 2028, supported by long-term agreements and ramps in 800-gigabit and 1.6-terabit transceivers, optical circuit switching, co-packaged optics and PhotonLink. These opportunities give Coherent substantial long-term growth potential.
The challenge is funding that expansion efficiently. Fourth-quarter capital expenditures reached $556 million, full-year property, plant and equipment additions surged 150.2% to $1.103 billion, and annual operating cash flow fell 87.5% to $79.5 million. Inventory increased 79.5% to $2.581 billion as the company prepared for higher output. Cash rose to $1.162 billion and total debt declined to $3.222 billion, but capacity constraints, heavy spending and weak Industrial demand leave execution and cash-conversion risks elevated.
APP: AI Advertising Delivers Exceptional Economics
AppLovin continues to post faster growth and much stronger cash generation. Second-quarter 2026 revenues rose 52.4% year over year to $1.92 billion, although they missed the Zacks Consensus Estimate by 0.8%. Adjusted earnings increased 66.4% to $3.76 per share and beat the consensus mark by 1.1%, extending the company's streak of earnings beats to four quarters. Adjusted EBITDA climbed 58% to $1.61 billion, or about 83.9% of revenues, while free cash flow totaled $863 million. This combination highlights the operating leverage of AppLovin's AI-driven advertising platform.
Management's third-quarter guidance points to renewed momentum. The $2.07 billion revenue midpoint implies about 7.8% sequential growth, nearly double the second quarter's pace of 4%. The adjusted EBITDA midpoint of $1.725 billion indicates 7.1% sequential growth, with the margin expected to remain near 83%. Importantly, the outlook incorporates model enhancements already deployed after the June quarter. Consumer-advertiser spending also reached a record, up 28% from fourth-quarter 2025 levels, supporting AppLovin's effort to diversify beyond gaming.
AppLovin's balance sheet provides additional flexibility. The company ended the quarter with $3.05 billion in cash and $3.7 billion in debt, while net leverage was only about 0.1 times trailing adjusted EBITDA. It also repurchased or withheld approximately 1.14 million shares for $551 million. Risks remain: gaming-model improvements can arrive unevenly, AI compute costs are rising, and creative-production and onboarding bottlenecks could slow consumer expansion. These concerns, together with a slight revenue miss, contributed to the stock's roughly 17% post-earnings decline despite healthy underlying demand.
How Do Zacks Estimates Compare for COHR & APP?
The Zacks Consensus Estimate for APP’s 2026 sales indicates year-over-year growth of 40%, and that for earnings indicates a year-over-year increase of 55%. EPS estimates have been trending downward over the past 60 days.
The Zacks Consensus Estimate for COHR’s fiscal 2027 sales and EPS indicates year-over-year growth of 50% and 67%, respectively. EPS estimates have been trending upwards over the past 60 days.
COHR’s Valuation More Attractive Than APP
COHR is trading at a forward price-to-sales multiple of 5.01X, below its 12-month median of 5.25X. APP’s forward price-to-sales multiple stands at 10.81X, below its median of 19.47X.
Coherent Appears Better Positioned
Coherent appears better positioned for investors seeking a more balanced AI growth opportunity, supported by stronger earnings-estimate momentum, faster expected growth and a more attractive valuation. Demand for AI-driven optical networking continues to accelerate, while improving manufacturing efficiency and a favorable product mix are strengthening margins. The company also enjoys extended demand visibility across advanced transceivers, optical circuit switching and co-packaged optics. Although AppLovin offers superior margins, cash generation and balance-sheet flexibility, and its AI-powered advertising platform is expanding, its richer valuation and downward earnings-estimate revisions temper its appeal.
While COHR carries a Zacks Rank #2 (Buy), APP has a Zacks Rank #3 (Hold) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.