Coherent Earnings Preview: Can AI Optics Keep the Momentum Going?
$COHERENT(COHR)$
Core Financial Indicators
– Revenue: consensus is about $1.98 billion, up roughly 30% YoY and 10% QoQ; prior guidance was $1.91 billion to $2.05 billion.
– Non-GAAP gross margin: Street expectations center around 40%, up about 1.9 ppts YoY and 0.4 ppts QoQ; prior guidance was 39% to 41%.
– Non-GAAP net income: current EPS expectations imply roughly $315 million to $320 million, up about 65% YoY and 15% QoQ. Coherent does not guide net income directly; prior non-GAAP EPS guidance was $1.52 to $1.72.
Three Things to Watch
Can datacenter growth stay this strong?
Datacenter & Communications revenue reached $1.36 billion in Q3, up about 41% YoY and 13% sequentially, representing roughly 75% of total revenue. The segment has climbed from $1.02 billion in Q4 FY25 to $1.09 billion, $1.21 billion and then $1.36 billion over the past four quarters.
Another roughly 10% sequential increase would push the segment toward $1.5 billion.
The underlying transceiver cycle also remains strong. Management said 800G should continue growing, while the 1.6T ramp is progressing faster than previously expected and should remain a major contributor to sequential growth over the coming quarters.
Can gross margin break through 40%?
Revenue growth is already clear. The next question is how much of that growth reaches earnings.
Non-GAAP gross margin rose to 39.6% in Q3, versus 39.0% in Q2 and 38.1% a year earlier. Management now guides to 39% to 41%.
The 6-inch InP ramp is an important lever. $Coherent (COHR.US)$ says its 6-inch platform is already producing EMLs, CW lasers and photodiodes at higher yields than its 3-inch lines. Internal InP output remains on track to double by year-end and more than double again in 2027.
A sustained move above 40% would show that the AI optics boom is delivering operating leverage alongside revenue growth.
Is CPO still on schedule?
This is the biggest sentiment test. Coherent expects initial scale-out CPO revenue to begin in H2 2026, with scale-up CPO revenue following in 2027. Its broader new-growth roadmap also includes OCS revenue already beginning and multi-rail revenue targeted for H1 2027.
The company also has a multiyear strategic agreement with $NVIDIA (NVDA.US)$ that includes a multibillion-dollar purchase commitment, alongside NVIDIA's separate $2 billion equity investment in Coherent.
Recent concerns about CPO deployment timing have pressured optical stocks, so confirmation that Coherent's own roadmap remains intact could matter more for sentiment than near-term CPO revenue itself.
Options Strategy
$Coherent (COHR.US)$ 's options tape carries a defensive undertone with total open interest at 258.61K and a put/call ratio pushing 1.20, reinforced by Aug 14 weekly volume where puts outpace calls 4.89K to 3.09K, yet implied vol at 94.34% sits well beneath 129.63% realized while IV Rank of 72 and a 71% IV Percentile flag elevated but not extreme pricing, painting a market leaning cautious into a name where hedgers are paying up for downside protection around the 325 to 355 strike corridor.
$Coherent (COHR.US)$ 's gamma structure for the Aug 14 weekly finds shares at $326.33 hovering just above the Gamma Flip at $320.17, placing dealers in a fragile positive gamma regime where the Call Wall at $300 has already been breached and the Put Wall at $355 looms overhead as a volatility magnet, a setup that leaves the tape vulnerable to accelerated swings should price slip back beneath the flip line into short gamma territory.
Summary
$Coherent (COHR.US)$ enters earnings with AI datacenter demand still exceptionally strong. The quarter will come down to three questions: Can Datacenter & Communications approach $1.5 billion, can gross margin move above 40%, and does CPO remain on schedule?
A fiscal Q1 guide comfortably above the $2 billion revenue level would be the clearest signal that the AI optics cycle still has room to run.
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