Investment Rating - Industry Rating: Outperform the market (maintained rating) [6] Core Insights - The AI industry is experiencing rapid growth, with significant investments from major companies like Alibaba, which is building large-scale AI infrastructure to provide advanced AI services globally [1][14] - Lumentum and Coherent have reported strong financial results, indicating high demand in the AI-related sectors, with Lumentum achieving a 58% year-over-year revenue growth and Coherent reporting a 17% increase [2][19] - The report emphasizes the ongoing high demand for computing power in the AI sector, with expectations for continued growth in related industries [3][25] Summary by Sections 1. AI and Digital Economy - Recommended stocks in the optical module and optical device sector include Zhongji Xuchuang, Xinyi Sheng, Tianfu Communication, and Yuanjie Technology [4][28] - For switch server PCBs, recommended stocks are Huadian Co., ZTE, and Unisplendour [4][28] - Low valuation and high dividend stocks include China Mobile, China Telecom, and China Unicom [4][28] - In the AIDC and cooling sector, recommended stocks are Yingweike, Runze Technology, and Runjian Co. [4][28] - For AIGC applications and edge computing, recommended stocks include Guohua Communication and Meige Intelligent [4][28] 2. Offshore Wind and Submarine Cables - Recommended stocks in the offshore wind and submarine cable sector include Hengtong Optic-Electric and Zhongtian Technology [5][30] - The report highlights the recovery of the offshore wind industry and the potential for significant investment opportunities [5][30] 3. Commercial Aerospace - The report notes the acceleration of low-orbit satellite development and the positive outlook for the low-altitude economy, recommending stocks like Huace Navigation and Haige Communication [6][31] 4. Financial Performance Overview - Lumentum's first-quarter revenue reached $540 million, with a projected sales range of $630 million to $670 million for the next quarter [22][25] - Coherent's first-quarter revenue was $1.58 billion, with expectations for the next quarter's revenue between $1.56 billion and $1.7 billion [19][21] 5. Market Trends - The optical module market is expected to grow significantly, driven by AI demand, with a projected 93% increase in the Ethernet optical module market in 2024 [17][18] - The report suggests that the AI and digital economy will continue to be a strong investment theme, with a focus on ICT equipment, optical modules, and cloud computing infrastructure [26][27]

Investment Rating - The report maintains a "Buy" rating for key stocks in the semiconductor and storage sectors, including companies like 香农芯创, 东山精密, 胜宏科技, and 工业富联 [5] Core Insights - The storage market is undergoing a significant structural transformation, with DRAM and NAND flash experiencing unprecedented supply shortages, expected to last until at least 2026 [1][10] - The demand for optical chips is surging, exacerbating the supply-demand imbalance, particularly in the data center sector [1][37] - SK Hynix is transitioning towards a comprehensive AI storage strategy, introducing customized HBM and AI-focused DRAM and NAND products [2][13] - SanDisk reported exceptional FY26 Q1 results, driven by strong NAND demand, with revenue reaching $2.308 billion, a 21% increase quarter-over-quarter [3][29] Summary by Sections Storage Supply and Demand - The DRAM market is experiencing a severe shortage, with prices for DDR5 and DDR4 expected to rise until 2027, driven by a lack of new capacity and high demand from data centers [1][10] - NAND flash supply is also tight, with significant price increases observed in November, reflecting a 50% rise in quotes [1][10] - SanDisk's NAND bit shipments grew by approximately 15%, with expectations of continued strong demand through 2026 [3][29] Optical Chip Demand - Lumentum and Coherent reported strong earnings, benefiting from increased demand for optical chips in data centers, with Lumentum noting a supply-demand gap widening to 25-30% [1][43][49] - Coherent's Q1 revenue reached $1.58 billion, with a significant portion coming from data center and communication sectors [2][51] Key Company Developments - SK Hynix unveiled its product roadmap focusing on AI storage solutions, including customized HBM and AI DRAM, aiming to enhance computational efficiency [2][13] - Lumentum's Q1 revenue was $533.8 million, with a gross margin of 39.4%, driven by strong demand in data center interconnects [43][44] - Coherent's Q1 revenue was $1.58 billion, with a focus on expanding its phosphide production capacity to meet growing demand [50][58]

Core Insights - Coherent Corp. achieved a new all-time high stock price due to strong earnings performance driven by demand from AI data centers [1] - The company reported a net income of $226 million, a significant increase of 769% from the previous $26 million [2] - Revenues rose by 17% year-on-year to $1.581 billion, attributed to robust demand from AI-related data centers and communications [3] Financial Performance - The net income attributable to shareholders reached $226 million, marking a substantial increase from the previous year [2] - Revenue for the first quarter of fiscal year 2026 was $1.581 billion, up from $1.348 billion [3] - Coherent Corp. projects second-quarter revenues between $1.56 billion and $1.70 billion, with a gross margin percentage of 38% to 40% and earnings per share of $1.10 to $1.30 [3] Future Outlook - The CEO of Coherent Corp. expressed confidence in continued strong growth throughout the fiscal year, driven by increasing demand in data centers and communications, along with production capacity expansion [4]

Group 1 - A-shares opened lower but turned positive, with sectors like power grid equipment, photovoltaic equipment, and batteries leading the gains [1] - The AI ETF (515070) saw its intraday decline narrow to 0.89%, with holdings such as Amlogic, Xichuang Data, and others rebounding [1] - Coherent, a leader in optical modules, reported Q1 revenue of $1.58 billion, a 17% year-over-year increase, exceeding market expectations [1] - Coherent's non-GAAP EPS was $1.16, surpassing the expected $1.05, marking four consecutive quarters of better-than-expected earnings [1] - The growth in Coherent's performance is driven by strong demand in AI data centers and communications, with CPO and LPO technologies becoming key for next-gen data center architectures [1] Group 2 - Galaxy Securities noted that the evolution of AI data center architecture is driving demand for high-end optical modules, indicating strong long-term growth potential in the industry [1] - The shift towards high-speed, low-power AI data center architectures is pushing the optical module industry to upgrade from 800G to 1.6T and above [1] - The maturity of new technology paths like CPO and LPO is expected to enhance industry barriers, allowing leading companies to capture larger market shares [1] Group 3 - The AI ETF (515070) tracks the CS AI Theme Index (930713), selecting stocks that provide technology, basic resources, and applications for AI [2] - The top ten weighted stocks in the ETF include leading domestic tech companies such as Zhongji Xuchuang, New Yisheng, and others [2] - Related products include the AI ETF (515070), the ChiNext AI ETF (159381), and the Sci-Tech AI ETF (589010) [2]

Core Viewpoint - Coherent (NYSE: COHR) reported its fourth consecutive earnings beat, with adjusted EPS of $0.74, exceeding expectations of $0.61, marking a 21.3% surprise and a significant recovery from previous losses [3][6]. Financial Performance - The company achieved a net income of $49.4 million in fiscal 2025, a turnaround from a loss of $156 million in the prior year, driven by revenue growth and disciplined cost management [6][8]. - Total quarterly revenue increased by 28% year-over-year, with datacom revenue surging 89% year-over-year, indicating strong demand in the AI datacenter market [4][8]. Margin Expansion - Gross margins improved to 35.2% in fiscal 2025, up from 30.9% in fiscal 2024, with management targeting sustained margins above 40% through pricing optimization and cost reduction initiatives [5][8]. - The margin expansion is seen as a key element of Coherent's transition from recovery to sustainable profitability, with a clear path to achieving higher margins [8]. Strategic Focus - Management emphasized a strategic transformation towards becoming a faster and more agile company, focusing on operational discipline and margin targets rather than aggressive growth [9][10]. - The company is cautious about future demand trends, particularly in the AI-driven market, and is prioritizing sustainable profitability over market share expansion [10][11]. Future Outlook - Coherent's near-term performance will depend on the robustness of datacom demand through calendar 2025 and the successful launch of 1.6-terabit transceivers [11]. - Analyst consensus suggests a target price of $121.79, indicating potential upside, although the stock's high beta of 1.88 suggests expected volatility [11].

Core Insights - The Technology Services industry has experienced significant growth since the pandemic, driven by remote work adoption and technological advancements such as 5G, blockchain, AI, and ML [1][5][7] Industry Overview - The Zacks Technology Services industry includes companies that produce, develop, and design software support, data processing, computing hardware, and communications equipment [3] - This industry serves both consumer and business markets, offering a wide range of services including advanced analytics, clinical research, data storage technology, and technology-enabled financial services [4] Future Trends - The industry is mature with a healthy demand for services, and revenues are expected to return to pre-pandemic levels, supporting stable dividends for most players [5] - Economic recovery is benefiting the sector, with GDP growth of 3.8% in Q2 2025 and a strong Services PMI indicating robust non-manufacturing sector activity [6] - The global shift towards digitization is creating opportunities in markets like 5G, blockchain, and AI, with the GenAI market projected to reach $59 billion in 2025 and a CAGR of 37.6% from 2025 to 2031 [7] Industry Performance - The Zacks Technology Services industry has outperformed the broader Zacks Business Services sector and the S&P 500, with a 53% increase over the past year compared to a 7.5% decline in the sector and a 17.9% rise in the S&P 500 [10] - The industry is currently trading at an EV-to-EBITDA ratio of 17.19X, lower than the S&P 500's 18.33X, indicating potential valuation opportunities [11] Company Highlights - **Futu Holdings**: A digitalized securities brokerage with a 69.7% year-over-year revenue increase in Q2 2025, and a 1,570 basis points expansion in operating margin. The company added 262,000 funded accounts, totaling 2.7 million [12][13] - **Dave**: A financial services platform that added 843,000 members, resulting in a 60% year-over-year revenue increase. The company raised its full-year revenue guidance to $544-$547 million [15][19] - **Coherent Corp.**: A leader in photonics with a 16.4% year-over-year revenue growth in Q4 2025, driven by demand for 800G transceivers. The company introduced a new 1.6T transceiver, enhancing its market position [20][21]

Market Overview - U.S. stock futures declined on Thursday following a positive close on Wednesday, with major benchmark indices showing lower futures [1] - The 10-year Treasury bond yielded 4.14%, while the two-year bond was at 3.61%, with a 67.3% likelihood of the Federal Reserve cutting interest rates in December [2] - Major indices' futures changes included Dow Jones -0.06%, S&P 500 -0.02%, Nasdaq 100 -0.06%, and Russell 2000 -0.19% [2] Company Performance - Coherent Corp. (NYSE:COHR) saw a significant increase of 14.31% after reporting revenue of $1.58 billion, a 17% year-over-year increase, and earnings of $1.16 per share compared to $0.67 from the same quarter last year [5] - Airbnb Inc. (NASDAQ:ABNB) rose 0.041% in premarket trading ahead of its earnings report, with expectations of $2.34 earnings per share on revenue of $4.08 billion [6] - Apple Inc. (NASDAQ:AAPL) fell 0.27% after news of a deal to pay Alphabet Inc. approximately $1 billion yearly for AI technology to improve Siri [6] - Marvell Technology Inc. (NASDAQ:MRVL) surged 8.55% amid reports of SoftBank Group exploring a potential takeover of the company [6] Sector Performance - Sectors with the biggest gains included communication services, consumer discretionary, and materials, while consumer staples and information technology closed lower [8] Analyst Insights - Sean Peche, founder of Ranmore Fund Management, expressed concerns about the stock market being overvalued, drawing parallels to Japan's late-1980s bubble, citing high valuations and euphoria driven by U.S. tech dominance [10][11] - Peche highlighted that the Magnificent 7 trades at 58x free cash flow, which worsens to 77x when adjusting for stock-based compensation, suggesting a reconsideration of reliance on the U.S. market [11][12] Upcoming Economic Data - Initial jobless claims data and third-quarter U.S. productivity data will be delayed, with several Federal Reserve officials scheduled to speak throughout the day [14][15] Commodities and Global Markets - Crude oil futures increased by 1.06% to around $60.23 per barrel, while Gold Spot rose 0.83% to approximately $4,012.21 per ounce [16] - Bitcoin traded 1.01% higher at $102,968.08 per coin [16] Global Market Performance - Asian markets closed higher, except for India's NIFTY 50 index, with notable gains in South Korea, Japan, Australia, Hong Kong, and China [17]

Coherent (COHR) came out with quarterly earnings of $1.16 per share, beating the Zacks Consensus Estimate of $1.04 per share. This compares to earnings of $0.74 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of +11.54%. A quarter ago, it was expected that this Laser and optics manufacturer would post earnings of $0.93 per share when it actually produced earnings of $1, delivering a surprise of +7.53%.Over the last four quarters, ...

Financial Data and Key Metrics Changes - Revenue for Q1 2026 was a record $1.58 billion, up 3% sequentially and 17% year-over-year, driven by growth in AI data center and communications demand [24][25] - Non-GAAP gross margin improved to 38.7%, a 70 basis point increase from the prior quarter and a 200 basis point increase year-over-year [25] - Non-GAAP EPS was $1.16, compared to $1.00 in the prior quarter and $0.67 in the year-ago quarter, reflecting a 16% sequential growth and 73% year-over-year growth [27] Business Line Data and Key Metrics Changes - Data center and communications segment revenue grew by 7% sequentially and 26% year-over-year, with data center revenue increasing by 4% sequentially and 23% year-over-year [6][17] - Communications market revenue grew 11% sequentially and 55% year-over-year, driven by strong demand for data center interconnect products [17] - Industrial segment revenue grew 2% quarter-over-quarter and 4% year-over-year on a pro forma basis, with expectations for stability in the current quarter [19] Market Data and Key Metrics Changes - The company is experiencing unprecedented demand for optical networking products, particularly in AI data centers, with record bookings indicating strong future growth [5][8] - Strong demand for both 800 gig and 1.6T transceivers is noted, with expectations for significant growth in calendar 2026 [9][14] - The optical circuit switch (OCS) platform is expected to add over $2 billion of addressable market opportunity, with growing customer engagement [15][16] Company Strategy and Development Direction - The company is focused on streamlining its portfolio and concentrating investments in areas with the greatest long-term growth potential, having divested its aerospace and defense business [20][21] - Continued expansion of production capacity for transceiver modules and key optical components is a priority to meet strong demand [10][12] - The company aims for a gross margin target of greater than 42%, with ongoing cost reduction and pricing optimization initiatives [25][27] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in strong sequential revenue growth throughout the fiscal year, driven by robust demand in the data center and communications segments [5][24] - The company anticipates continued strong demand for its products, with significant improvements in supply chain capacity expected [10][36] - Management remains cautious about near-term demand in the industrial segment due to macroeconomic factors but expects stability [19] Other Important Information - The company has sold or exited 23 sites over the past five quarters as part of its portfolio optimization initiative [23] - The proceeds from divestitures are being used to pay down debt, significantly reducing the debt leverage ratio to 1.7 times [27][28] - The company is ramping production of 6-inch indium phosphide, which is expected to enhance gross margins due to lower production costs [11][52] Q&A Session Summary Question: Can you elaborate on the demand side and its breadth? - Management indicated very strong demand across both data center and communications, with record bookings extending well into the future, providing good visibility for planning [31][32] Question: What milestones should investors watch regarding indium phosphide capacity? - Key milestones include the ramping of production at two sites, with initial yields from the 6-inch indium phosphide production exceeding expectations [34][35] Question: How does the company view its position in the OCS market? - The company feels confident about its technology differentiation and expects meaningful revenue contributions from OCS in the coming years, with a steady ramp anticipated [38][39] Question: What is the outlook for the 1.6T transceivers? - The company expects a balanced ramp across multiple customers for 1.6T transceivers, with strong engagement and accelerated timelines from several customers [57][58]

Q1 FY2026 Performance Highlights - Revenue reached $1.58 billion in Q1 FY26, a 17% increase compared to $1.35 billion in Q1 FY25 [6] - Gross margin was 38.7% in Q1 FY26, a 200 basis point increase from 36.7% in Q1 FY25 [6] - Earnings per share (EPS) was $1.16 in Q1 FY26, a 73% increase compared to $0.67 in Q1 FY25 [6] Revenue Segmentation - Datacenter & Communications accounted for 69% of the revenue in Q1 FY26 [6, 10] - Industrial segment accounted for 31% of the revenue in Q1 FY26 [6, 10] - Datacenter and Communications revenue was $1.09 billion in Q1 FY26 [9] - Industrial revenue was $491 million in Q1 FY26 [9] Q2 FY2026 Outlook - Revenue is projected to be between $1.56 billion and $1.70 billion [14] - Non-GAAP gross margin is expected to be between 38% and 40% [14] - Non-GAAP operating expenses are projected to be between $300 million and $320 million [14] - Non-GAAP EPS is expected to be between $1.10 and $1.30 [14]