Coherent (COHR.US), a leader in photonics technology, released its first fiscal quarter results for fiscal year 2027 (ended September 30, 2026) after the U.S. market close on Wednesday. Driven by strong demand from the AI data center transition from copper interconnects to optical interconnects, the company posted record quarterly revenue with significantly improved profitability. Its guidance for the next quarter continues to show high growth, and the company also laid out an ambitious medium-to-long-term roadmap.
Core Results: Revenue Up 50% to a Record High, Profitability Beat Expectations by About 20%
The financial report showed that Coherent achieved revenue of $2.37 billion in the first fiscal quarter, up 49.9% year-over-year (56% on a pro forma basis excluding divestiture impacts) and up 15.9% quarter-over-quarter, setting a record for a single quarter. According to market consensus, this figure beat analyst expectations by approximately 3%.
On the profitability side, results were even more impressive: GAAP gross margin was 39.1%, up 254 basis points year-over-year; non-GAAP gross margin was 40.6%, up 184 basis points year-over-year. GAAP net income attributable to the company was $385 million, up 70.2% year-over-year and up 59.9% quarter-over-quarter. GAAP diluted earnings per share were $1.90, up $0.71 year-over-year. Non-GAAP diluted earnings per share were $2.09, up approximately 80% year-over-year and beating market expectations by about 20%.
By business segment, the data center and communications business was the absolute growth engine: revenue surged 79% year-over-year, accounting for approximately 82% of total revenue. Industrial business revenue was essentially flat on both a year-over-year and quarter-over-quarter basis.
The Only Blemish: Operating Cash Flow Turned Negative
The only notable weakness this quarter came from cash flow: net cash from operating activities was negative $92.7 million, mainly due to seasonal working capital usage and significantly expanded capital expenditures. Capital expenditures this quarter reached $775.5 million, aimed at capacity expansion. As of the end of the quarter, the company held approximately $1.7 billion in cash and short-term investments, with a debt-to-asset ratio of 42.4%, up slightly quarter-over-quarter. For a company in the midst of an AI demand surge, this is a classic "trading cash flow for growth" balance sheet.
Next Quarter Guidance and Medium-to-Long-Term Roadmap: Targeting $3 Billion and $4 Billion in Quarterly Revenue
The company's guidance for the second fiscal quarter of 2027 indicates that growth is still accelerating: revenue is expected to be between $2.55 billion and $2.75 billion (midpoint of approximately $2.65 billion, representing a further increase of about 12% at the midpoint quarter-over-quarter). Non-GAAP gross margin is expected to be between 40% and 42%, continuing to rise from this quarter. Non-GAAP earnings per share are expected to be between $2.28 and $2.48, with the midpoint representing a further increase of about 14% from this quarter's $2.09.
Even more noteworthy are the medium-to-long-term targets: the company expects pro forma revenue growth of over 60% for fiscal year 2027 and will achieve its first $3 billion quarterly revenue quarter within fiscal year 2027, followed by its first $4 billion quarterly revenue quarter in fiscal year 2028. It also expects to achieve its first quarter with non-GAAP gross margin exceeding 45% before the end of calendar year 2028.
Quantified targets for new growth curves have also been made clear: the next-generation PhotonLink protocol optical interconnect platform is expected to generate more than $100 million in revenue in the March 2027 fiscal quarter and reach $250 million per quarter before the end of calendar year 2027. The data center interconnect (Scale-across/DCI) business already exceeded $200 million in revenue this quarter, with an annualized run rate approaching $1 billion, and is expected to double its quarterly revenue from this quarter before the end of calendar year 2027.
On the supply side, the company's InP (indium phosphide) capacity has doubled year-over-year and was achieved one quarter ahead of schedule. Long-term agreement (LTA) order visibility extends beyond 2028.
Comments