Coherent: AI drives Q3 performance growth; SiPh CPO business contributes revenue in the second half of the year

Recently, optical technology and solutions provider Coherent announced the company’s third quarter financial report as of March 31, 2026. During the reporting period, Coherent achieved strong performance growth, with quarterly revenue reaching US$1.81 billion, an increase of 21% over the same period last year.

In terms of profitability, the company's GAAP gross profit margin was 37.7%, while the non-GAAP gross profit margin increased to 39.6%, an increase of 10 basis points year-on-year. Non-GAAP earnings per share for the quarter were $1.41, an increase of $0.50 from the same period last year. CEO Jim Anderson pointed out that this performance was mainly due to strong demand in the data center and communications business.

As the scale of artificial intelligence data center infrastructure continues to expand, Coherent's business structure is undergoing significant changes.

At present, the data center and communications department has become the company's core growth engine, with quarterly revenue reaching US$1.36 billion, accounting for 75% of total revenue. Compared with the same period last year, the segment's revenue growth reached 41%, fully reflecting the market expansion driven by AI. In response to continued strong demand, the company is rapidly expanding production capacity and plans to double internal production of indium phosphide (InP) by the end of 2026, and again by 2027.

In terms of cutting-edge technology layout, Coherent has established a partnership with NVIDIA to jointly develop advanced laser and optical network products for AI data centers. Notably, Nvidia invested $2 billion in Coherent to support its capacity expansion and manufacturing in the United States.

In terms of co-packaged optics (CPO) technology, which has attracted much attention, Coherent regards it as one of the important growth drivers in the future. The company's technology roadmap shows that a variety of architectures including SiPh CPO, NPO, silicon photonics technology, indium phosphide and vertical cavity surface emitting lasers (VCSEL) will support flexible network construction. The deployment of SiPh CPO-related products is expected to contribute to the company's revenue in the second half of 2026.

In addition, Coherent’s iteration in optical module technology is also accelerating. The company is committed to developing 1.6T, 3.2T and even 6.4T high-speed optical transceivers to meet the needs of higher bandwidth and faster data transmission.

At the same time, new businesses including optical circuit switches and thermal management solutions will also significantly increase the company's potential market space in the next few years.

Looking forward to the fourth quarter of fiscal 2026, Coherent expects the company's revenue to be between US$1.91 billion and US$2.05 billion, non-GAAP gross profit margin is expected to be between 39.0% and 41.0%, and non-GAAP earnings per share is expected to be between US$1.52 and US$1.72. Sherri Luther, the company's chief financial officer, said the company will continue to focus on increasing capital investment to expand production capacity and take advantage of strong market demand to achieve continued growth. (Source: compiled by TrendForce Optical Communications)

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