Analyst(s): Ray Wang
Publication Date: August 15, 2025
Coherent’s latest earnings highlight robust growth from AI datacenter and communications demand, supported by margin expansion from pricing optimization and cost reductions. The planned sale of the Aerospace and Defense business further streamlines the portfolio and strengthens the company’s focus on core growth areas.
What is Covered in this Article:
- Coherent’s Q4 FY 2025 financial results
- Breakout launches in 1.6T/3.2T transceivers and optical circuit switching
- Capacity gains in indium phosphide manufacturing
- Strong ZR/ZR+ module momentum across speeds
- Aerospace and Defense sale to refocus and cut debt
- FY 2026 outlook supported by multiple growth drivers
The News: Coherent Corp. (NYSE: COHR) reported Q4 FY 2025 revenue of $1.53 billion, up 16% year-on-year (YoY) and 1.4% above consensus estimates. By segment, revenue growth was led by strength in Networking (+39% YoY), which offset weakness in Materials (-15.4% YoY) and Lasers (-2.1% YoY). Non-GAAP gross margin was 38.1%, an improvement of 220 basis points (bps) YoY. Non-GAAP operating income rose 35.8% YoY to $275 million (+0.8% above consensus), with an operating margin of 18% (Q4 FY 2025: 15.4%). Non-GAAP net income increased 73.6% YoY to $192 million. For FY 2025, revenue reached a record $5.81 billion, up 23% YoY. Non-GAAP gross margin expanded 358 bps YoY to 37.9%, while non-GAAP operating income surged 67.8% to $1.04 billion, with an operating margin of 17.8% (FY 2024: 13.1%).
“We believe 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,” said Jim Anderson, CEO of Coherent. “We also continue to optimize and focus our portfolio with the recently announced agreement to sell our Aerospace and Defense business. As we enter a new fiscal year, we are excited about the growth opportunities ahead of us.”
Coherent Q4 FY 2025 Earnings Rise on AI Datacenter and Networking Demand
Analyst Take: Coherent wrapped up FY 2025 on a high note, hitting record annual revenue and expanding margins thanks to strong demand in AI datacenter and communications markets. The company remains committed to its strategy – leaning on its strength in photonics, boosting manufacturing capacity, and sharpening its focus on high-growth areas. Key product rollouts in optical networking and datacenter interconnects, along with smart investments in critical components and a cleaner portfolio after the planned Aerospace and Defense exit, set Coherent up well for continued momentum.
AI Datacenter and Networking Momentum
AI datacenter demand remained a top growth engine, with full-year revenue in this space seeing a solid jump (+61% YoY) and Q4 FY 2025 showing strong YoY growth of 38% YoY. Coherent began shipping early batches of its 1.6T transceivers during the quarter and expects those shipments to ramp up through the rest of the year, with more impact in FY 2026. It also made progress on its 3.2T transceiver line, powered by its own 400G per lane EML tech – something it sees as a key market differentiator. Alongside these transceivers, Coherent scaled up CW laser output, which plays a big role in co-packaged optics. Its vertically integrated indium phosphide manufacturing – now tripled compared to last year – helps cut costs and strengthen supply chain reliability, keeping it well positioned in the high-speed interconnect market.
Expansion of Optical Circuit Switching
This quarter marked the first revenue from Coherent’s optical circuit switch (OCS) platform, which uses a non-mechanical, digital liquid crystal approach instead of the usual MEMS-based systems. This makes it more reliable – something already proven in demanding telecom settings – and gives Coherent a solid edge in AI datacenter switching. The company believes OCS could add more than $2 billion to its data center market potential by 2030. OCS revenue should continue to grow through the rest of the year and play a bigger role in 2026.
Communications Segment Growth
Coherent’s communications business – which includes traditional telecom and datacenter interconnect – picked up speed in Q4 FY 2025, growing double digits sequentially and YoY. Demand for its ZR/ZR+ pluggable modules at 100G, 400G, and 800G kept climbing, with the 100G ZR family quickly gaining traction across multiple versions and use cases. Thanks to its broad lineup and solid performance, Coherent stands to benefit from ongoing rollouts in both telecom and AI datacenter interconnects. While the market under 400G still matters for now, the broader industry is clearly moving toward 800G and higher, which fits right into Coherent’s roadmap.
Guidance and Final Thoughts
Looking to Q1 FY 2026, Coherent is forecasting revenue between $1.46 billion and $1.60 billion, non-GAAP gross margin between 37.5% and 39.5%, and EPS of $0.93 to $1.13, excluding the Aerospace and Defense unit. That $400 million sale is expected to close this quarter, with the proceeds going toward debt reduction – helping boost EPS and tighten the company’s focus. With AI networking taking off, OCS gaining traction, and new transceiver cycles ramping, Coherent heads into FY 2026 with solid growth drivers and a clear strategy.
See the complete press release on Coherent’s Q4 FY 2025 results on the Coherent website.
Disclosure: Futurum is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.
Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of Futurum as a whole.
Other insights from Futurum:
Coherent Q3 FY 2025 Delivers Record Revenue Led by Strength in AI Infrastructure
Will Coherent’s Air-Cooled Laser Raise the Bar in Polymer Welding?
Coherent Introduces 793nm Pump Laser Diode Solidifies Company’s Integration Strategy
Author Information
Ray Wang is the Research Director for Semiconductors, Supply Chain, and Emerging Technology at Futurum. His coverage focuses on the global semiconductor industry and frontier technologies. He also advises clients on global compute distribution, deployment, and supply chain. In addition to his main coverage and expertise, Wang also specializes in global technology policy, supply chain dynamics, and U.S.-China relations.
He has been quoted or interviewed regularly by leading media outlets across the globe, including CNBC, CNN, MarketWatch, Nikkei Asia, South China Morning Post, Business Insider, Science, Al Jazeera, Fast Company, and TaiwanPlus.
Prior to joining Futurum, Wang worked as an independent semiconductor and technology analyst, advising technology firms and institutional investors on industry development, regulations, and geopolitics. He also held positions at leading consulting firms and think tanks in Washington, D.C., including DGA–Albright Stonebridge Group, the Center for Strategic and International Studies (CSIS), and the Carnegie Endowment for International Peace.
