Market Overview - The overall market performance for the week of November 3 to November 9, 2025, saw the Shanghai Composite Index rise by 1.08%, the Shenzhen Component Index increase by 0.19%, and the ChiNext Index grow by 0.65% [2] - The Shenwan Communication Index increased by 0.92% during the same period, reflecting a continuation of high industry prosperity driven by AI, 5.5G, and satellite communications [2] Subsector Performance - Among the three sub-industries within the communication sector, communication network equipment and devices had the highest increase at 1.98%, while other communication devices experienced the largest decline at 3.31% [2] - Overall, most sub-sectors within the communication industry showed a trend of retreat during the week [2] Individual Stock Performance - Notable stock performances in the communication sector included Wanlong Optoelectronics with a rise of 23.34%, Yihua Co. with an increase of 12.18%, and Tianfu Communication up by 10.75% [2] Focus Areas - The report suggests focusing on the computing power supply chain and satellite industry [3] - Recent earnings reports from overseas AI communication hardware suppliers Lumentum and Coherent exceeded expectations, with Lumentum reporting record high shipments of 100G and 200G EML lasers [3] - Coherent plans to double its indium phosphide laser production capacity within the next 12 months, which is expected to significantly enhance production efficiency and reduce costs [3] Market Dynamics - The supply chain for upstream chips is facing bottlenecks due to a mismatch in supply and demand, creating opportunities for domestic suppliers to enter the supply chain [3] - Concerns about the cost of computing power hardware have been raised, but the demand for computing hardware is not expected to decline significantly as the current models are entering an application penetration phase [4]

Core Insights - Coherent reported strong performance in Q1 of the fiscal year, with revenue and earnings per share exceeding market expectations, driven by surging demand in AI data centers [1][3] - The company is actively expanding capacity to meet ongoing customer demand, particularly in optical networking products [1][9] Financial Performance - Earnings per share for the quarter reached $1.16, surpassing Wall Street's average estimate of $1.04, marking the fourth consecutive quarter of exceeding earnings expectations [1] - Revenue for the quarter was $1.58 billion, a 17% year-over-year increase, also exceeding the expected $1.54 billion [1][8] - Excluding aerospace and defense, revenue growth was 19% year-over-year [1] - Non-GAAP gross margin improved to 38.7%, up 70 basis points quarter-over-quarter and 200 basis points year-over-year [6][8] - Non-GAAP operating profit margin increased from 18% to 19.5%, with operating expenses slightly reduced [6][8] - Net profit reached $226.3 million, with a debt reduction of $400 million, lowering the debt leverage ratio to 1.7 times [8][9] Capacity Expansion - Coherent is doubling its indium phosphide production capacity within the next 12 months, with simultaneous enhancements at facilities in Texas and Sweden [9] - The company is constructing the world's first 6-inch indium phosphide production line, expected to significantly improve production efficiency and reduce costs [9] - Record order volumes were recorded in the data center business, with longer order timelines providing good visibility for future planning [9] Market Demand - The demand for optical networking products, particularly for AI data centers, has reached unprecedented levels, resulting in record bookings [6][9] - The company anticipates continued growth in the data center and telecommunications sectors, with strong order visibility extending to 2028 [12][15] Strategic Focus - The management emphasizes a pricing strategy focused on the value provided by products, particularly in exclusive supply areas, which supports long-term gross margin targets exceeding 42% [6][8] - Ongoing restructuring efforts are aimed at optimizing the product portfolio and operational footprint, with a focus on enhancing efficiency and productivity [20][32]