Can Coherent Corp's AI-Driven Growth Keep Up Its Momentum?

Core Insights - Coherent Corp. (COHR) is strategically positioned to benefit from the expanding AI and high-performance computing markets, with a notable shift towards AI and datacom yielding positive results [1][2]. Financial Performance - In fiscal 2025, COHR achieved record revenues of $5.8 billion, reflecting a 23% increase year-over-year, driven by a 61% surge in data center revenues [2][8]. - The company experienced a 358-basis-point expansion in non-GAAP gross margin, indicating the high-value nature of its AI-centric products [2]. Product Development - COHR has initiated revenue shipments of its 1.6T transceivers, essential for upcoming high-speed AI interconnects, showcasing the potential of its future product pipeline [3]. - The Optical Circuit Switch platform is also generating revenues, contributing to the company's market position [4]. Market Trends - The demand for data centers is expected to grow significantly, with McKinsey projecting an annual capacity increase of 19-22% from 2023 to 2030, presenting substantial opportunities for COHR [5]. Stock Performance and Valuation - COHR's stock increased by 10.4% over the past three months, slightly underperforming the industry average of 12.3% [6]. - The company trades at a forward price-to-earnings ratio of 18.15X, significantly lower than the industry average of 86.56X, indicating a favorable valuation [10]. Earnings Estimates - The Zacks Consensus Estimate for COHR's earnings has risen by 3.9% and 11.6% for 2025 and 2026, respectively, over the past 60 days [13].