Analyst(s): Futurum Research
Publication Date: November 10, 2025
Coherent’s Q1 FY 2026 results highlight AI data center transceiver adoption, indium phosphide capacity expansion, and early traction in optical circuit switching. We also assess how the product roadmap and footprint optimization set up sustained growth into FY 2026.
What is Covered in this Article:
- Coherent’s Q1 FY 2026 financial results
- AI datacenter transceiver ramp and mix shift
- Six‑inch indium phosphide capacity expansion
- OCS, CPO/NPO, and DCI product momentum
- Guidance and Final Thoughts
The News: Coherent (NYSE: COHR) reported Q1 FY 2026 revenue of $1.6 billion (+17% year over year or YoY) versus the Wall Street consensus of $1.5 billion. Non‑GAAP gross margin was 38.7% (up 200 bps YoY). Segment performance included Data Center and Communications revenue up 26% YoY, and Industrial up 4% YoY on a pro‑forma basis (excluding the divested Aerospace & Defense business). Non‑GAAP operating income was $309.0 million (+42% YoY) with a 19.5% operating margin (up 340 bps YoY). Non‑GAAP net earnings were $221.0 million (+60% YoY) and non‑GAAP diluted EPS were $1.16 (up 73% YoY).
“In the September quarter, revenue growth on a pro forma basis was driven by strong demand from AI‑related datacenters and communications, and we expect continued strong growth as we expand production capacity,” said Jim Anderson, CEO. “We paid down $400 million of debt and refinanced our facilities to reduce interest expense and further strengthen the balance sheet,” added Sherri Luther, CFO.
Coherent Q1 FY 2026 Shows Strong Datacenter & Comms Momentum
Analyst Take: Coherent’s Q1 FY 2026 underscored durable AI network demand, with broad adoption of 800 Gigabits per second (G) and accelerating 1.6 Terabits per second (T) transceivers supporting growth across hyperscale and DCI. The company’s vertical integration and rapid conversion to six‑inch indium phosphide (InP) wafers are unlocking cost and yield benefits while alleviating key laser component constraints. Early optical circuit switch (OCS) traction and expanding CPO/NPO engagements broaden Coherent’s AI data center opportunity set beyond pluggables. Portfolio streamlining and deleveraging add operating leverage and margin tailwinds into FY 2026.
AI Datacenter Transceiver Ramp and Mix Shift
Coherent cited record bookings in Q1 with orders extending more than a year out, signaling robust, sustained AI networking demand. Adoption of 1.6T transceivers is accelerating alongside broad 800G deployments, with silicon photonics and EML‑based 1.6T ramping now, and 200G VCSEL‑based 1.6T slated to ramp next calendar year. Datacenter revenue grew 23% YoY in Q1 but was supply‑constrained by InP lasers; the company expects approximately 10% sequential growth in Q2 and strong sequential growth through FY 2026. On the communications side, ZR/ZR+ transceivers at 100G/400G/800G continue to scale with five consecutive quarters of sequential segment growth and 55% YoY growth in Q1. This mix shift toward higher‑speed optics, coupled with bookings visibility, provides a solid base for continued revenue expansion. The takeaway: AI network buildouts are broadening, and Coherent’s 800G/1.6T portfolio is well-positioned to benefit.
Six‑Inch InP Capacity Expansion and Vertical Integration
To address laser supply bottlenecks, Coherent began six‑inch InP production in Sherman, Texas, and added a second ramp in Tarfala, Sweden, targeting roughly a 2x internal InP capacity increase over the next year. Initial six‑inch yields are already higher than mature three‑inch lines, leveraging experience from shipping nearly 2 billion VCSEL devices on six‑inch GaAs. The company is in production on EMLs, CW lasers, and photodiodes on six‑inch wafers, with both internal and external EML supply expected to increase sequentially through FY 2026. Parallel capacity adds in module assembly—expanding Ipoh and Penang, Malaysia, and adding Vietnam—to support faster transceiver output ramp. These dynamics should support gross margin improvement as six‑inch cost efficiencies scale. The takeaway: accelerated six‑inch InP conversion improves cost, yield, and supply resiliency for AI optics.
OCS, CPO/NPO, and DCI Product Momentum
Coherent shipped OCS systems to seven customers, including 64×64 and 320×320, with both revenue and backlog growing in fiscal Q1 and a revenue ramp expected throughout calendar 2026. The OCS platform’s non‑mechanical liquid crystal switching technology offers reliability advantages and is seeing a broader‑than‑expected set of customers and applications. In CPO/NPO, Coherent is sampling 400 mW CW lasers for silicon photonics, demonstrated 1.6T direct‑detect links to 6 km using EMLs, and showcased next‑gen 2D VCSEL arrays for near‑packaged optics. In DCI, ZR/ZR+ demand remains strong, aligning with hyperscale interconnect buildouts and providing another vector for growth. Together, these products expand Coherent’s addressable market beyond pluggables into scale‑up fabrics. The takeaway: OCS and integrated optics broaden growth avenues as AI architectures diversify.
Guidance and Final Thoughts
For Q2 FY 2026, Coherent guided revenue to $1.56 billion–$1.70 billion and non‑GAAP EPS to $1.10–$1.30, with non‑GAAP gross margin of 38%–40% and operating expenses of $300 million–$320 million. Management expects sequential growth across Data Center and Communications, supported by improving InP laser supply and expanded module assembly capacity. Portfolio optimization continues—closing the Aerospace & Defense sale, announcing a Munich tools divestiture, exiting 23 sites since FY 2025—supporting deleveraging and margin expansion toward the >42% target model. Industrial remains stable to slightly up near‑term, with longer‑term catalysts in OLED display equipment, semiconductor capex exposure, and thermal materials for AI data center cooling. Execution on six‑inch InP ramp, OCS scaling, and 1.6T transitions will be pivotal to sustaining growth through FY 2026.
See the full press release on Coherent’s Q1 FY 2026 financial results on the company website.
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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.
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