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].

Core Insights - Symbotic (SYM) and Coherent Corp. (COHR) are prominent players in the Zacks Technology Services industry, with SYM focusing on AI-enabled robotics for supply chain operations and COHR on advanced optical and semiconductor technologies [1][2] Group 1: Symbotic (SYM) - SYM has a significant backlog of $22.4 billion, positioning it for substantial revenue generation in the near future [5] - The company reported a 26% year-over-year revenue increase, with expectations of revenues between $590 million and $610 million for the fourth quarter of fiscal 2025 [6] - SYM's partnership with Walmart is crucial, contributing significantly to its revenues, but poses customer concentration risks [8] - Despite revenue growth, SYM has a history of negative earnings surprises, with an average negative surprise of 78.3% over the last four quarters [7] Group 2: Coherent Corp. (COHR) - COHR experienced a 23% revenue increase in fiscal 2025, driven by AI datacenter demand and telecom recovery [9] - The company is advancing its product offerings, including new 1.6T transceivers, which are expected to contribute positively to revenues in fiscal 2026 [10] - COHR has consistently outperformed earnings estimates, with an average beat of 13% over the past four quarters [11] - COHR's valuation is more attractive compared to SYM, trading at a forward price-to-sales multiple of 2.1 versus SYM's 10.33 [14] Group 3: Market Performance and Valuation - Over the past month, SYM shares have declined over 5%, while COHR shares have seen a more significant decline [12] - Concerns regarding COHR's market share in datacom offerings have contributed to its stock performance [12] - COHR's attractive valuation and strong product portfolio make it a more appealing investment compared to SYM [16]

Core Insights - Coherent Corp.'s stock price has increased by 13.9% over the past three months, outperforming the industry average of 12% and the Zacks S&P 500 Composite's growth of 9.3% [1][7] - The company reported a significant revenue increase of 51% for fiscal 2025, primarily driven by a 61% surge in the data center market [5][7] - Coherent Corp. is developing new products, including 1.6T and 3.2T transceivers, and has increased its indium phosphide capacity by three times year-over-year to meet rising demand [6][8] Financial Performance - In the year-to-date period, Coherent Corp. experienced a 4.5% decline, contrasting with Microvast's 28% rise and Vimeo's 35.6% decline [4] - The company has a forward P/E ratio of 19.02, which is lower than the industry average of 25.94, and an EV-to-EBITDA ratio of 11.98 compared to the industry's 36.38 [12] - Coherent Corp. has a return on equity (ROE) of 12.2%, significantly higher than the industry's 6%, and a return on invested capital (ROIC) of 6.1%, compared to the industry's -9.1% [15] Market Growth and Future Prospects - The company expects fiscal 2026 revenues to reach $6.7 billion, indicating a year-over-year growth of 9.7%, with further growth of 13.8% anticipated for fiscal 2027 [20] - Analysts have revised EPS estimates upward for both fiscal 2026 and 2027, reflecting confidence in the company's performance [21] - Coherent Corp. has secured a multi-year agreement with Apple for new Vertical-Cavity Surface-Emitting Laser products, expected to contribute to revenue in the second half of 2026 [10] Product Development and Strategic Initiatives - The company began initial revenue shipments of its Optical Circuit Switch (OCS) in fiscal 2025, with the global OCS market projected to grow at a CAGR of 11.6% from 2025 to 2030 [9] - Revenue from communications increased by 42% year-over-year in the fourth quarter of fiscal 2025, driven by demand for high-capacity coherent transceivers [11] - Coherent Corp. is taking significant steps in co-packaged optics-related technologies, which are expected to provide cost and volume advantages [8]

Financial Data and Key Metrics Changes - Fourth quarter revenue reached $910 million, exceeding guidance and up more than 20% year-over-year and 4% sequentially [5][12] - Full fiscal year 2025 revenue was a record $3.4 billion, representing a 19% increase from the prior year [6][18] - Non-GAAP EPS for Q4 was $2.65, a new quarterly record, while full year non-GAAP EPS hit $10.17 [6][12] Business Line Data and Key Metrics Changes - Optical Communications revenue was $689 million in Q4, up 15% year-over-year and 5% sequentially [13] - Telecom revenue reached $412 million, a 46% increase from a year ago and 1% from Q3, driven by data center interconnect (DCI) products [9][13] - DCI revenue was reported for the first time at $107 million, representing 12% of overall revenue [13] - Datacom revenue was $277 million, down 12% year-over-year but up 10% sequentially [14] - Non-optical communications revenue was $221 million, a 41% increase year-over-year [16] Market Data and Key Metrics Changes - Telecom business momentum is expected to continue into Q1, particularly with the ramp-up of a next-generation system program [9][21] - Datacom demand is anticipated to surge, although temporary component supply challenges are being faced [10][21] - Automotive revenue was $128 million, showing a slight decline but better than expected [16] Company Strategy and Development Direction - The company is evaluating options to accelerate the completion of Building 10 to meet increasing customer demand [8][19] - A significant partnership with Amazon Web Services is expected to be a meaningful revenue driver in fiscal year 2026 [6][8] - The introduction of a new revenue category for high-performance computing (HPC) is planned for Q1 [21][22] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for fiscal year 2026, citing strong demand across multiple growth drivers [11][38] - Temporary supply constraints are expected to impact Datacom revenue in Q1, but these issues are anticipated to be short-lived [21][56] - The company remains confident in maintaining excellent execution while continuing to grow revenue and earnings [11][21] Other Important Information - The company returned $126 million to shareholders through a buyback program, with continued repurchases expected [8][20] - The effective GAAP tax rate was 6.5% for the quarter [18] Q&A Session Summary Question: Clarification on Datacom revenue dip - Management clarified that the expected dip in Datacom revenue for Q1 does not include contributions from the new HPC segment, which will be reported separately [26][27] Question: Future hyperscaler transceiver opportunities - Management indicated that future opportunities will predominantly focus on 1.6 terabit speeds, while 800 gig opportunities will still be pursued [28][30] Question: Growth prospects for fiscal year 2026 - Management remains optimistic about growth prospects, citing strong demand trends and new customer wins [36][39] Question: Impact of component shortages on Datacom - Management acknowledged that component shortages are significant enough to impact Datacom revenue but are expected to be temporary [56][105] Question: Amazon business potential - Management believes the Amazon PCB business could represent a significant opportunity, with revenue expected to ramp in fiscal Q1 [83][84]

Financial Data and Key Metrics Changes - Full year revenue for fiscal 2025 increased by approximately 23% year over year to a record $5,810,000,000, driven by strong growth in data center and communications business [6][27] - Q4 revenue was a record $1,530,000,000, up 2% sequentially and 16% year over year [27] - Non-GAAP EPS for Q4 approximately doubled year over year to $1 per share, while full year non-GAAP EPS was $3.53, representing a 191% year over year growth [6][30] - Non-GAAP gross margin for Q4 was 30%, down 43 basis points sequentially but up 220 basis points year over year; full year gross margin was 37.9%, up 358 basis points from 2024 [27][28] Business Line Data and Key Metrics Changes - Data center and communications revenue grew by 51% in fiscal 2025, with Q4 revenue increasing 39% year over year [9] - Communications revenue increased 23% for fiscal 2025, with Q4 growth of 42% year over year [15] - Industrial related markets saw a revenue decrease of 2% for the year, with Q4 revenue down 8% year over year [17] Market Data and Key Metrics Changes - Strong growth in AI data centers and communications was noted, with full year data center revenue increasing by 61% [9] - Initial revenue shipments of new 1.6T transceivers began in Q4, with expectations for ramping volumes throughout the calendar year [10] - The company expects revenue from a new multiyear agreement with Apple for VCSEL products to begin in 2026 [13] Company Strategy and Development Direction - The company is focused on photonics technology, which is critical for applications in AI data centers, communications, and industrial applications [8] - A strategic decision was made to sell the Aerospace and Defense business for $400,000,000 to streamline the portfolio and concentrate investments in high-growth areas [19][32] - The company plans to use proceeds from the sale to pay down debt, which is expected to be accretive to EPS [30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong demand signals for data center and communications, expecting sequential growth in the upcoming quarter [40] - The company views its U.S. manufacturing footprint as a competitive advantage, particularly in light of recent tariff policies [21][22] - Management remains optimistic about achieving long-term financial targets and gross margin improvements, aiming for greater than 42% gross margin in the future [90] Other Important Information - The company has tripled its indium phosphide capacity year over year and is ramping production at its new six-inch indium phosphide line in Sherman, Texas [12] - The company is experiencing strong bookings and demand forecasts across data center customers, particularly for transceivers [10] Q&A Session Summary Question: What is the growth outlook for the data center business in fiscal 2026? - Management noted strong demand signals and expects data center and communications to be up sequentially, driven by 800 gig and 1.6T transceivers [40][41] Question: Can you provide an update on the six-inch indium phosphide platform? - Production began in August, with expectations for increased capacity and lower costs as the ramp progresses [46][47] Question: What product categories might be down sequentially in the guidance? - Industrial markets are expected to be flat to down sequentially, with a cautious view due to macroeconomic factors [58] Question: How much incremental revenue is expected from the Apple relationship? - Revenue from the expanded partnership is expected to kick in during the second half of the next calendar year [51][66] Question: What are the competitive advantages of the OCS technology? - The OCS technology is based on digital liquid crystal, offering higher reliability and performance compared to traditional mechanical solutions [74][76] Question: What is the outlook for gross margins? - Management expects gross margins to benefit from the Apple arrangement and ongoing gross margin expansion initiatives [90]

Company Overview - Coherent Corp. (COHR) is set to report its third-quarter fiscal 2025 results on May 7, with revenue expectations of $1.4 billion, reflecting a year-over-year growth of 19.1% and earnings per share (EPS) estimated at 86 cents, indicating a 62.3% increase from the previous year [1] - The company has a strong earnings surprise history, having surpassed the Zacks Consensus Estimate in the last four quarters with an average surprise of 20.3% [2] Earnings Estimates - Current earnings estimates for Q1 and Q2 are 0.86 and 0.92 respectively, with full-year estimates of 3.47 and 4.28 [2] - There have been no recent changes in analyst estimates, with a slight downward revision of -0.29% for F1 and -0.70% for F2 [2] Market Performance - COHR shares have increased by 23.7% over the past year, outperforming its industry growth of 24.6% and the Zacks S&P 500 composite's 10% growth [6] - The stock is currently trading at a trailing 12-month price-to-earnings ratio of 2.67X, which is higher than the industry average of 1.76X and Alithya Group's 1.28X, but lower than AirJoule Technologies' 7.83X [9] Industry Insights - The telecom segment is expected to drive revenue growth, with a reported 11% year-over-year increase in Q2 fiscal 2025, attributed to strong demand for new products like 100G, 400G, and 800ZR/ZR+ coherent transceivers [5] - The rise in data traffic due to AI workloads is anticipated to boost investments in higher-capacity interconnects, benefiting Coherent's optical transport networks [10] Future Outlook - Management projects that 1.6T transceivers will be a key contributor to revenue in 2025, ensuring growth beyond the current 800G cycle [12] - The demand for high-speed optical transceivers is expected to increase as hyperscalers expand their AI training and inference workloads [11] Investment Considerations - Despite the positive outlook, potential revenue growth may be hindered by delayed AI infrastructure spending and geopolitical risks, particularly between the U.S. and China [13] - The company is viewed as fundamentally strong but carries a premium valuation, suggesting that investors may benefit from holding the stock while waiting for a more favorable entry point [15]