Aug 12, 2026 earnings call — Capacity ramp and AI data center growth
Q4 revenue hit a record $2.05 billion and management guided Q1 revenue to $2.2 billion–$2.4 billion.
Revenue $2.0B (est $2.0B) · EPS $1.74 (est $1.62) · Next-quarter revenue outlook $2.3B
Key quotes
"We remain on track to double our internal Indium Phosphide output capacity year over year by the end of the current quarter, 1 quarter ahead of our original plan."
"At the ECOC industry event in September, we plan to unveil coherent PhotonLink, our new platform for integrated optics."
"Our order coverage through calendar 27 is exceptional. Customer orders now extend into calendar 28. Customer LTAs extend through the end of the decade."
Analyst Q&A 9
6-inch Indium Phosphide ramp and revenue
Q (Joe · JPMorgan): Analyst asked for an update on the 6-inch Indium Phosphide ramp and how it will affect revenue and gross margins. He also asked about CPO timing and the market noise around delays.
A: Management said the 6-inch Indium Phosphide ramp is ahead of plan, with production growing fast and 80% more lasers produced year over year in the June quarter. They said those lasers go into 800G and 1.6T transceivers and that the June-quarter lasers drive transceiver shipments in the current quarter. They also noted yields on 6-inch are better than 3-inch and that ultra high power CW lasers for CPO will show revenue in the December quarter.
"As I mentioned in the prepared remarks, we are on track to double the output capacity of Indium Phosphide production." — James Robert Anderson (CEO)
Potential US import limits and gross margin outlook
Q (Simon Leopold · Raymond James): Analyst asked what potential import restrictions would mean for Coherent and whether manufacturing could move to the U.S. He also asked for an update on gross margin targets and trajectory.
A: Management said the report on import restrictions is speculative but noted Coherent already has a large U.S. manufacturing footprint with over 20 U.S. production facilities and could expand U.S. manufacturing if needed. They also said gross margin has improved substantially (up 66 basis points sequentially and 250 basis points year over year) and reiterated the Investor Day target of greater than 42%, saying most 6-inch Indium Phosphide ramp and new product ramps that should drive further margin gains are still ahead.
"We increased gross margin 66 basis points sequentially and 250 basis points year over year." — Sherri R. Luther (CFO)
Insourcing lasers and VCSEL progress
Q (George Notter · Wolfe): Analyst asked what share of laser datacom chips are now insourced and when Coherent might sell Indium Phosphide lasers externally. He also asked about progress on the 200G VCSEL.
A: Management said current data center transceiver demand is using all internal Indium Phosphide capacity, so they do not expect to sell Indium Phosphide lasers externally in the near term. Over time they expect a larger percentage of transceivers will use internal Indium Phosphide as internal production grows, and they are making good progress on the 200G VCSEL and expect it to be used in integrated optics/NPO applications.
"I do not see any near term ability to do that." — James Robert Anderson (CEO)
Capacity constraints and telecom monetization
Q (Ryan Koontz · Needham and Company): Analyst asked which capacity constraints (inputs or internal production) are limiting growth and where the sharpest pain points are for the next 12 months. He also asked how Coherent plans to monetize telecom multi-rail and pump lasers.
A: Management said Indium Phosphide capacity is the primary constraint and they are focused on ramping 6-inch production; assembly and test capacity are not constrained today. For telecom, they sell at multiple levels (components, subsystems, and full systems), see strong growth across products like ZR/ZR+ and pump lasers, and expect multi-rail revenue to start in the first half of calendar 2027.
"Indium Phosphide capacity continues to be our primary constraint." — James Robert Anderson (CEO)
OCS demand and NPO/CPO content
Q (Blayne Curtis · Jefferies): Analyst asked how broad OCS demand is and where Coherent sees applications expanding. He also asked how many NPO/CPO projects they are working on and the content differences between NPO and CPO.
A: Management said OCS applications have widened from scale-out to scale-up and they doubled their market outlook from $2 billion to over $4 billion based on stronger demand. They said they have active CPO or NPO projects with almost every major customer, and they view the content per project as comparable between CPO and NPO, representing incremental addressable market.
"We doubled it from 2 to over 4 billion." — James Robert Anderson (CEO)
Drivers of $3B revenue target and LTAs/backlog
Q (Karl Ackerman · BNP Paribas): Analyst asked what is driving the target of revenue exceeding $3 billion by Q4 fiscal 2027 and how much comes from 1.6T transceivers, OCS, multi-rail, backlog, or pricing. He also asked whether LTAs into 2028 include volume commitments and how commitments have changed recently.
A: Management said the revenue target is driven primarily by data center and communications (about 80% of revenue), with strong contributions from 800G and fast-ramping 1.6T transceivers, OCS, CPO, multi-rail, and some pricing improvements via LTAs. They said June-quarter bookings were record level, fiscal 27 is basically booked out, customers are placing orders into calendar 2028, and many LTAs extend to the end of the decade with increasing supply, pricing commitments, and minimum demand guarantees.
"our backlog now extends out--you know, fiscal 27 is basically completely booked out" — James Robert Anderson (CEO)
Yields vs mix for gross margin; customer urgency change
Q (Meta Marshall · Morgan Stanley): Analyst asked Sherri how much next-year gross margin improvement comes from 6-inch yield gains versus product mix or pricing. He also asked Jim whether customer urgency to get product has changed recently given potential restrictions.
A: No management answer is included for this exchange in the provided transcript. The analysts' questions are recorded but the transcript does not show any reply from executives for these questions.
CPO timing and breadth
Q (Given Arya · BofA): Analyst asked when CPO for scale-up will start for Coherent and how broad customer engagement is, plus what pushback exists from customers reluctant to adopt early.
A: Management said they expect revenue from CPO for scale-up to start in the second half of calendar 2027, with CPO initially going into scale-out and then expanding to scale-up. They said almost every major customer is engaged in either CPO or NPO discussions, choices depend on the customer's architecture, and some customers may move from NPO to CPO over time.
"we continue to expect revenue from CPO for scale up applications to start to flow in the second half of calendar 27." — James Robert Anderson (CEO)
Confidence in CPO laser readiness and LTA pricing visibility
Q (Michael · Rosenblatt): Analyst asked for color on confidence that CPO laser revenues will appear in the December quarter and for progress made recently. He also asked whether LTAs give pricing visibility and how far into the future laser prices are committed.
A: Management said they are pleased with progress, believe the laser design has technical and production advantages, and have already started production wafers for December-quarter shipments with the customer asking for more. They also said LTAs typically include both volume and agreed pricing over their term (some LTAs are 3 years, many extend through the decade), giving visibility on volume and pricing.
"we have already started production wafers for those shipments in our December quarter, and that customer continues to tell us to please ship more as fast as possible." — James Robert Anderson (CEO)