Coherent corp（COHR.US AI Earnings Summary）

Revenue landed in the mid-to-upper end of guidance and Non-GAAP EPS exceeded the upper end of guidance this quarter, driven by the dual engines of Datacom and Telecom.

1. Record Revenue, Non-GAAP EPS Above the Upper End of Guidance: FY2027 Q1 revenue reached $2.37B, landing in the mid-to-upper end of the $2.2B to $2.4B guidance range provided last quarter; revenue was up 50% Y/Y (56% on a pro forma basis, excluding divested businesses) and 16% QoQ. Non-GAAP EPS was $2.09, approximately 2.0% above the upper limit of internal expectations ($2.05), representing an 80% YoY increase, with profit growth significantly outstripping revenue growth.

2. Datacom and Telecom Acceleration, Fourth Consecutive Quarter of Double-Digit QoQ Growth: The Datacom and Telecom segment grew 79% YoY and 21% QoQ, now accounting for 82% of total revenue. This marks the fourth consecutive quarter of simultaneous QoQ and YoY acceleration. Specifically, the Datacom sub-segment grew 85% YoY and 17% QoQ, while Telecom grew 84% YoY and 34% QoQ, both hitting recent record growth rates.

3. PhotonLink Platform Secures $20B Long-Term Agreement, Integrated Optics Enters Harvest Phase: COHR signed a five-year, $20B long-term supply agreement (LTA) with a major AI company this quarter. The agreement covers the full suite of PhotonLink integrated optical platform products, centered on 400mW continuous wave (CW) lasers, with revenue recognition expected to begin in early 2028. Additionally, the company has engaged over 10 CPO (Co-Packaged Optics) customers, over 10 NPO (Near-Packaged Optics) customers, and over 5 chip-to-chip customers.

4. Scale Across DCI Business Grows Nearly Fourfold, Approaching $1B Annualized Scale: Q1 Scale Across Data Center Interconnect (DCI) revenue exceeded $200M, up nearly four times YoY and 53% QoQ. The annualized revenue scale is nearing $1B, making it one of the company's fastest-growing businesses. CEO Jim Anderson stated during the earnings call that this growth rate even exceeded management's own expectations.

5. Indium Phosphide (InP) Capacity Target Met One Quarter Early, 6-inch Expansion Ahead of Schedule: COHR achieved its goal of doubling internal InP capacity YoY in Q1, one quarter ahead of the original plan. Yields for the 6-inch production lines in Texas and Sweden continue to outperform the old 3-inch lines. Q1 saw the highest production of Electro-absorption Modulated Lasers (EML) in the company's history, directly driving Datacom growth.

6. Non-GAAP Gross Margin Continues to Expand, Long-term Target Significantly Raised: Q1 Non-GAAP gross margin reached 40.6%, an increase of 37 basis points QoQ and 184 basis points YoY. CFO Sherri Luther announced that the long-term gross margin target has been significantly raised from "above 42%" to "above 45%" (expected to be reached by the end of 2028), which is 300 basis points higher than the target set at the Investor Day 18 months ago.

7. Operating Expense Ratio Continues to Decline, Operating Margin Reaches 23.2%: Non-GAAP operating expenses as a percentage of revenue dropped to 17.4%, down significantly from 18.4% last quarter and 19.2% in the same period last year. Non-GAAP operating margin rose to 23.2%, continuing to expand from 21.8% last quarter and 19.5% last year, demonstrating strong operating leverage.

8. Capital Expenditures Surge, Order Visibility Extends to 2028: Q1 CapEx reached $776M, up 40% QoQ from $556M and more than sixfold YoY from $104M, with all funds directed toward Datacom and Telecom capacity expansion. Management noted that almost all orders for calendar year 2027 have been confirmed, and customer orders are starting to extend into calendar year 2028.