Coherent Corp. ended fiscal 2025 with record results and a sharper focus on next-generation optics for AI data centers. Full-year revenue climbed 23% year-over-year to $5.81 billion, driven by a 61% surge in data center sales and 23% growth in communications. The company began initial shipments of its 1.6 Tbps datacom transceivers in Q4, with volumes expected to ramp through 2026, building on sustained 800 Gbps demand. Development is advancing on 3.2T products leveraging Coherent’s 400G-per-lane EML technology, which customers recognize as a differentiator. CEO Jim Anderson said multiple growth vectors—including 800G, 1.6T, co-packaged optics, and optical circuit switches—position the company to benefit from hyperscaler AI cluster expansion.
A critical part of this strategy is scaling component manufacturing. Coherent has tripled indium phosphide capacity over the past year and, in August, began production on the world’s first 6-inch indium phosphide wafer line at its Sherman, Texas facility. This line offers both cost advantages and volume headroom to meet accelerating demand for EML and CW lasers used in both pluggable and co-packaged optics. The Sherman site will also manufacture VCSELs under a new multi-year Apple supply agreement for iPhone and iPad, with shipments beginning in 2H 2026. This deal — highlighted publicly by Apple CEO Tim Cook at a White House event — underscores the strategic importance of U.S.-based photonics manufacturing. In parallel, Coherent launched its liquid-crystal–based optical circuit switch (OCS), a non-mechanical design aimed at higher reliability than MEMS-based alternatives, potentially adding $2 billion to its addressable datacenter market by 2030.
Financially, FY25 non-GAAP gross margin rose 358 bps to 37.9%, and non-GAAP EPS jumped 191% to $3.53. The company repaid $437 million in debt during the year, reducing its leverage ratio to 2.0x, and plans to use proceeds from its pending $400 million Aerospace & Defense divestiture for further deleveraging. Q1 FY26 guidance calls for $1.46–$1.60 billion in revenue, 37.5–39.5% non-GAAP gross margin, and $0.93–$1.13 EPS. “We are well positioned to continue to drive strong revenue and profit growth over the long term given our exposure to key growth drivers such as AI datacenters,” Anderson said.
- FY25 revenue: $5.81B, up 23% Y/Y; data center revenue up 61% Y/Y; communications revenue up 23% Y/Y
- Q4 data center revenue up 38% Y/Y; communications up 42% Y/Y; both expected to grow sequentially in Q1 FY26
- 800G demand strong through 2026; 1.6T shipments began in Q4 FY25; 3.2T development progressing with 400G-per-lane EML
- Co-packaged optics (CPO) development tied to CW laser ramp; CW laser production increased sequentially and Y/Y in Q4
- Indium phosphide capacity tripled Y/Y; first 6-inch production line live in Sherman, Texas—industry first
- New Apple multi-year VCSEL agreement; revenue starts in 2H 2026; publicly highlighted by Tim Cook at the White House
- Optical circuit switch (OCS) launched; liquid-crystal design offers higher reliability than MEMS; $2B market expansion expected by 2030
- DCI demand strong, driven by 100G, 400G, and 800G ZR/ZR+ coherent transceivers; multi-path go-to-market (direct and component sales)
- Industrial segment cautious near-term due to macro/tariff uncertainty, but service revenue growth outpaced product sales in FY25
- Non-GAAP gross margin FY25: 37.9% (+358 bps Y/Y); Q4 margin would have exceeded guidance without FX headwinds
- Debt repayment: $437M in FY25; leverage ratio reduced from 2.5x to 2.0x; A&D sale to further reduce interest expense
- Vietnam facility opened to diversify manufacturing footprint; supports materials businesses, including silicon carbide
- Silicon carbide demand stabilized; expected to return to growth in FY26
- Confident in long-term >42% gross margin target model outlined at May Investor Day
🌐 Analysis
Coherent’s entry into 1.6T production is a pivotal industry moment. Hyperscalers are already layering 1.6T alongside existing 800G deployments to support AI cluster interconnects, and Coherent’s early presence gives it a competitive edge in qualification cycles.
The launch of the world’s first 6-inch indium phosphide wafer line in Sherman, Texas, is equally significant — enabling high-volume, lower-cost manufacturing of the EML and CW lasers that will power both pluggable and co-packaged optics.
Meanwhile, the Apple VCSEL agreement, highlighted by Tim Cook at the White House, reinforces Coherent’s U.S. manufacturing leadership and positions the company as a trusted domestic source for critical photonics. Together, these moves strengthen Coherent’s role in both the near-term AI datacenter buildout and the broader long-term shift to higher-speed, more integrated optical systems.
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