Summary of Conference Call on Greater China Technology Hardware - Transceiver Industry Industry Overview - The transceiver industry has experienced a significant rally in stock prices over the past several months, driven by positive sentiment surrounding AI infrastructure and high-end GPU deliveries [2][12] - Despite the bullish outlook, the current level of market enthusiasm is deemed unsustainable, prompting recommendations to take profits [12] Key Company Insights Eoptolink - Eoptolink's stock surged 460% since April 1, 2025, with a notable 338% YoY earnings growth in 2Q25 [2][4] - A double downgrade to Underweight (UW) is recommended due to anticipated deceleration in growth and high current valuations [4][15] - Price target raised to 255.00 CNY, but downside potential is noted [7][10] Innolight - Innolight is recognized as a pioneer in 1.6T products, expected to achieve significant growth in 2026 [5][15] - The stock rating is maintained at Overweight (OW) with a price target raised to 435.00 CNY, indicating further upside potential [5][7] TFC - TFC's stock has increased by 269% YTD, but is downgraded to UW as current valuations exceed historical levels [7][10][15] - Price target raised to 142.00 CNY, but growth potential is already reflected in the share price [7][15] Accelink - Accelink's stock has underperformed with a 62% increase YTD, and is maintained at UW due to weaker fundamentals and expensive valuation compared to peers [7][10][15] - Price target remains at 45.00 CNY, indicating a downside potential [7] ZTE and YOFC - ZTE's H-shares increased by 49% YTD despite a 12% YoY earnings decline in 1H25 [3] - YOFC's earnings fell 22% YoY in 1H25, yet its H-shares surged 319% YTD, driven by high-end fiber products [3] Market Performance and Valuation - Aggregate earnings of four key transceiver companies (Eoptolink, TFC, Innolight, Accelink) reached 5.57 billion RMB in 2Q25, up 132% YoY and 53% QoQ [17] - Valuations have increased significantly, with Innolight's forward P/E rising from 14x to 24x, while Eoptolink's increased from 8x to 20x [22] - Current valuations for Eoptolink and TFC are above +1 standard deviation, indicating that positive fundamentals are already priced in [22] Future Outlook - Anticipated rapid volume growth in 1.6T transceivers is expected to drive revenue and earnings in 2H25 and 2026 [31][32] - Demand for 800G transceivers is expected to remain robust, potentially offsetting price pressures from lower-end products [33] Risks and Considerations - Potential risks include slower-than-expected ramp-up of 1.6T volumes, larger-than-expected price cuts, and downward revisions of cloud capex by key players [70] - The market's current enthusiasm may not be sustainable, and investors are advised to remain disciplined in profit-taking [12] Conclusion - The transceiver industry shows strong growth potential, particularly with the upcoming 1.6T product launches, but current valuations suggest a cautious approach is warranted. Investors are encouraged to take profits on overvalued stocks while maintaining positions in companies with strong growth prospects like Innolight.

Financial Data and Key Metrics Changes - Fourth quarter revenue reached $910 million, exceeding guidance and up over 20% year-over-year and 4% sequentially [4][11] - Full fiscal year 2025 revenue was a record $3.4 billion, representing a 19% increase from the prior year [5][16] - Non-GAAP EPS for Q4 was $2.65, a new quarterly record, while full year non-GAAP EPS hit $10.17 [5][11] Business Line Data and Key Metrics Changes - Optical Communications revenue was $689 million, up 15% year-over-year and 5% sequentially, with telecom revenue at $412 million, a 46% increase from a year ago [12][16] - Datacom revenue was $277 million, down 12% year-over-year but up 10% sequentially, driven by demand for higher data rate products [13][19] - Non-optical communications revenue was $221 million, a 41% increase year-over-year and 3% sequentially, with automotive revenue at $128 million [14][16] Market Data and Key Metrics Changes - Telecom revenue growth was primarily driven by data center interconnect (DCI) products, which represented 12% of overall revenue at $107 million [12][19] - DCI revenue grew 45% year-over-year, indicating strong demand trends [7][68] - The automotive segment showed a slight decline but performed better than expected, while industrial laser revenue remained stable [9][14] Company Strategy and Development Direction - The company established a significant partnership with Amazon Web Services, expected to be a meaningful revenue driver in fiscal year 2026 [5][79] - Construction began on Building 10, which will add 2 million square feet of capacity, with plans to accelerate completion due to increasing customer demand [5][17] - The company is introducing a new revenue category for high-performance computing (HPC) to better capture growth in this area [20][79] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for fiscal year 2026, citing strong customer demand and multiple growth drivers [6][19] - There are temporary component supply challenges impacting Datacom revenue, but these are expected to be resolved [9][54] - The company anticipates healthy year-over-year and sequential growth in Q1, with revenue guidance between $910 million and $950 million [21][19] Other Important Information - The company returned $126 million to shareholders through a buyback program, with continued repurchases expected in fiscal year 2026 [5][18] - The effective GAAP tax rate was 6.5%, and the company ended the year with cash and short-term investments of $934 million [16][17] Q&A Session Summary Question: Clarification on Datacom revenue dip - Management clarified that the expected dip in Datacom revenue for September does not include contributions from the new HPC segment, which will be reported separately [25][26] Question: Future hyperscaler transceiver opportunities - Management indicated that future hyperscaler opportunities would predominantly be on 1.6 terabit port speeds, while 800 gig opportunities remain [27][28] Question: Growth prospects for fiscal year 2026 - Management remains optimistic about growth prospects, citing strong demand for 1.6 terabit products and continued telecom trends [36][38] Question: Impact of component shortages on Datacom - Management acknowledged that component shortages are causing a temporary dip in Datacom revenue but expressed confidence in resolving these issues [54][55] Question: Amazon PCB business potential - Management believes the Amazon PCB business could represent a significant opportunity, with revenue expected to ramp in fiscal Q1 [78][79] Question: Visibility on 800 gig demand - Management confirmed good visibility on 800 gig demand, indicating that supply constraints are currently more of an issue than demand constraints [87][88] Question: Tariffs impact - Management stated that they have not seen significant impacts from tariffs, as shipping terms place the responsibility on customers [90][91]

Core Viewpoint - Coherent Corp. reported strong financial results for the third quarter of fiscal 2025, driven by significant demand in AI-related datacenter products and the introduction of new optical networking technologies [1][2][5]. Financial Performance - Revenue for Q3 FY2025 was $1.50 billion, representing a year-over-year increase of 24% [5][19]. - GAAP gross margin was 35.2%, up 491 basis points year-over-year, while non-GAAP gross margin was 38.5%, an increase of 490 basis points year-over-year [5][19]. - The company reported a GAAP net loss of $0.11 per diluted share, an improvement of $0.18 year-over-year, and a non-GAAP net income of $0.91 per diluted share, up $0.53 year-over-year [5][19]. Operational Highlights - The company paid down $136 million of its outstanding debt, emphasizing cash and capital allocation as priorities [2]. - Operating income for Q3 FY2025 was $72 million, a decrease of 47.6% quarter-over-quarter but a significant increase of 222% year-over-year [19]. - Total operating expenses for Q3 FY2025 were $456 million, a 22.4% increase year-over-year [19]. Product and Market Developments - Coherent was recognized as an NVIDIA Ecosystem Innovation Partner, collaborating on silicon photonics and co-packaged optics for AI infrastructure [8]. - The company received six Product Innovation Awards at the Optical Fiber Communication Conference 2025, highlighting its advancements in datacenter and communications technologies [8]. - Coherent demonstrated groundbreaking technologies, including a 400G EML for next-generation transceivers and a portfolio of co-packaged optics solutions [8][9]. Business Outlook - For Q4 FY2025, revenue is expected to range between $1.425 billion and $1.575 billion, with a non-GAAP gross margin percentage anticipated between 37% and 39% [15]. - Total operating expenses for Q4 FY2025 are projected to be between $290 million and $310 million on a non-GAAP basis [15].