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Our View: We Like It Coherent makes the laser-based connections that AI data centers can't function without. Demand is overwhelming — customers want four times more product than Coherent can make. A new CEO cleaned house and got the company added to the S&P 500. The stock is near all-time highs but the growth story is just getting started. Start small and add on dips.

01

The Story

Here's a simple way to think about Coherent: every AI data center is a city, and Coherent builds the highways.

When companies like Nvidia ship a cluster of AI chips, those chips need to talk to each other. At the speeds AI requires, regular copper cables can't keep up — the data literally moves too fast. So data centers use laser-based optical connections instead. Coherent makes those connections: the lasers, the specialized semiconductor wafers they're built on, and the finished transceiver modules that plug into every AI server rack.

What makes Coherent special is that they control the entire supply chain. Most competitors buy their laser components from someone else and assemble them. Coherent grows its own semiconductor wafers, fabricates its own lasers, and builds its own modules. That's like a car company that also owns the steel mill and the tire factory. When demand surges — and right now, it's surging — Coherent can scale faster and more profitably than anyone else.

And demand is surging. Right now, customers are ordering four times more product than Coherent can deliver. Coherent's biggest problem isn't finding customers — it's building factories fast enough.

The company has also been through a dramatic cleanup. CEO Jim Anderson, who joined in mid-2024, has shut down 33 non-core factories and offices, paid down $400 million in debt, and refocused the company almost entirely on AI networking. The market rewarded this: Coherent was added to the S&P 500 in March 2026 — a stamp of institutional legitimacy that forces every index fund in the world to buy the stock.

The next wave is the transition from 800G to 1.6T transceivers — a generational upgrade that roughly doubles the speed of every connection. Coherent has three different technologies ready for this transition, and mass production starts in the second half of 2026. Management says next year's growth rate will be even faster than this year's.

02	The Numbers

Here's the data for those who want to dig in.

Stock Price $281.79

Market Cap ~$45B

DC Book-to-Bill >4x

Gross Margin 39%

Quarter	Revenue	Growth	EPS (Non-GAAP)
Q1 FY2026	$1.43B	+17%	$0.74 (beat)
Q2 FY2026	$1.69B	+17%	$1.29 (beat)
Q3 FY2026 Guide	$1.70–$1.84B	Accelerating	$1.28–$1.48

What the numbers tell us:

Revenue is growing and accelerating. Five consecutive earnings beats. Revenue up 17% with guidance pointing higher. Management says next fiscal year will grow even faster — rare for a company this size to be speeding up, not slowing down.

The company is making good money. Gross margins of 39% are healthy for a hardware business, and they're expanding as the company sheds lower-margin operations. The new CEO has cut 33 sites and paid off $400M in debt — the business is leaner and more profitable than it was 18 months ago.

It's not cheap. At roughly 39x next year's expected earnings, you're paying a premium. The stock has more than doubled in the past year. That premium is justified by the 4x book-to-bill and accelerating growth — but it also means there's less cushion if something goes wrong.

03

The Chart

The Trend	Strong uptrend — well above its 50-day ($147) and 200-day ($79) moving averages
Momentum (RSI)	Getting hot — RSI at 73–74, approaching overbought territory. A near-term pullback wouldn't be surprising.
Where it sits	About 6% below its all-time high of ~$300. The stock has more than tripled from its 52-week low of ~$56.

What this tells us: the stock is in a powerful uptrend and near all-time highs, which means big institutional investors are buying. But it's run a long way, fast — momentum is getting stretched, and a short-term pullback wouldn't be surprising. The S&P 500 addition creates a structural floor of demand from index funds.

The ideal entry would be a pullback to the $220–$250 range, which would cool off the momentum and give you a better risk/reward. But if earnings on May 6 come in strong (look for revenue above $1.8B), the stock may not pull back before breaking to new highs.

04	The Bottom Line

How We're Thinking About It

The business is firing on all cylinders, but the stock has already tripled — so the question is timing. Before the recent breakout, COHR spent several weeks consolidating in the $220–$250 range. If it pulls back there again, the risk/reward gets a lot more attractive. There's no guarantee it does — strong stocks sometimes just keep going — but patience tends to pay off with names that have already had this kind of run.

The next big moment is May 6 earnings. If revenue clears $1.8 billion and the next-gen transceiver ramp is on track, the growth story gets even stronger. On the flip side, a bad quarter or a broader cooldown in AI spending could mean a sharp pullback from these levels. That's worth knowing going in.