A month has gone by since the last earnings report for Coherent (COHR Quick QuoteCOHR - Free Report) . Shares have lost about 10.4% in that time frame, underperforming the S&P 500.

But investors have to be wondering, will the recent negative trend continue leading up to its next earnings release, or is Coherent due for a breakout? Well, first let's take a quick look at its latest earnings report in order to get a better handle on the recent drivers for Coherent Corp. before we dive into how investors and analysts have reacted as of late.

COHR Q4 Earnings Beat Estimate

Coherent reported fiscal fourth-quarter adjusted EPS of $1.74, which increased 74% year over year and 23.4% quarter over quarter, beating the Zacks Consensus Estimate by 7.4%. Revenues crossed $2 billion, beating the Consensus Estimate by 2.7% and increasing 33.8% year over year and 13.3% sequentially.

COHR’s Revenue Growth Accelerates Into the Year-End

Full-year revenues rose 22.5% year over year to a record $7.1 billion from $5.8 billion. Pro forma growth was stronger at approximately 28%, reinforcing that the underlying portfolio expanded faster than the reported total after accounting for business sales.

The Datacenter & Communications segment provided nearly all the momentum. Quarterly segment revenues climbed to $1.6 billion, up 58.6% year over year and 18.6% quarter over quarter. It represented roughly 79% of consolidated revenues, compared with about 67% a year earlier.

Industrial revenues moved in the opposite direction, falling 15.8% year over year and 3% sequentially to $430.5 million. For the full year, Datacenter & Communications advanced 40.5% to $5.275 billion, while Industrial declined 10.3% to $1.8 billion. Coherent’s growth profile is therefore becoming more concentrated around AI networking and optical connectivity.

Margin Expansion Made the Growth More Valuable

The earnings quality improved alongside revenues. GAAP gross margin expanded to 38.5%, up 277 basis points year over year and 82 basis points sequentially. Adjusted gross margin reached 40.2%, improving 215 basis points annually and 66 basis points from the fiscal third quarter.

Manufacturing yields, lower input costs, pricing actions and progress on six-inch indium phosphide production contributed to the expansion. The six-inch platform is especially important because it can produce roughly four times the output at about half the cost of the older three-inch process.

Adjusted operating income increased 62.1% year over year and 21.8% sequentially to $446 million. The corresponding operating margin reached 21.8%, expanding 381 basis points year over year and 152 basis points quarter over quarter.

Adjusted net income rose 82.7% annually and 27.2% sequentially to $351 million. GAAP EPS improved to $1.19 from a loss of $0.83 one year earlier and $0.97 in the preceding quarter.

Capacity Spending Raises Both Potential and Risk

Indium phosphide production remains the principal constraint, although output is scheduled to double year over year during the current quarter. Demand visibility extends into calendar 2028, supported by long-term agreements running through the decade. Additional growth should come from 800-gigabit and 1.6-terabit transceivers, optical circuit switching, co-packaged optics, multi-rail systems and the PhotonLink platform.

Supporting those opportunities requires substantial spending. Fourth-quarter capital expenditures reached $556 million, while full-year additions to property, plant and equipment surged 150.2% to $1.103 billion. Annual operating cash flow nevertheless fell 87.5% to $79.5 million.

Inventory increased 79.5% year over year to $2.581 billion, considerably faster than revenues. Although expanding inventory can support a rapid production ramp, it also raises working-capital and demand-forecasting risk. Positively, total debt declined approximately 12.6% to $3.222 billion and cash increased 27.8% to $1.162 billion.

COHR’s Guidance Points to Another Step-Up

For the first quarter of fiscal 2027, Coherent expects revenues of $2.2 billion to $2.4 billion. The $2.3 billion midpoint implies approximately 12.4% sequential growth and about 45.6% growth from first-quarter fiscal 2026 revenues of $1.58 billion. The comparison is not perfectly like-for-like because of portfolio changes, but the acceleration remains substantial.

The company expects an adjusted gross margin of 39.5%-41.5%. Its 40.5% midpoint would represent a modest 30-basis-point sequential improvement. Projected adjusted EPS of $1.85-$2.05 implies midpoint growth of 12.1% from the fiscal fourth quarter and approximately 68% year over year.

Guidance exceeded the prior quarter’s scale and established a credible path toward a quarterly revenue run rate above $3 billion by fiscal 2027’s end.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a upward trend in fresh estimates.

The consensus estimate has shifted 10.08% due to these changes.

VGM Scores

At this time, Coherent has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. Charting a somewhat similar path, the stock has a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Coherent has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.

Performance of an Industry Player

Coherent belongs to the Zacks Technology Services industry. Another stock from the same industry, Dave Inc. (DAVE Quick QuoteDAVE - Free Report) , has gained 7.4% over the past month. More than a month has passed since the company reported results for the quarter ended June 2026.

DAVE INC reported revenues of $170.8 million in the last reported quarter, representing a year-over-year change of +29.7%. EPS of $4.12 for the same period compares with $3.14 a year ago.

For the current quarter, DAVE INC is expected to post earnings of $4.35 per share, indicating a change of +2.6% from the year-ago quarter. The Zacks Consensus Estimate has changed +2% over the last 30 days.

DAVE INC has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.