Why Coherent (COHR) Is Up 17.1% After Strong Q1 Results and New Focus on Photonics

• Coherent Corp. recently reported strong first-quarter fiscal 2026 results, posting US$1.58 billion in sales and US$226.35 million in net income, while providing revenue guidance of US$1.56 billion to US$1.70 billion for the next quarter.
• New product launches in photonics and the successful divestiture of the Aerospace and Defense unit are driving margin improvement and supporting the company's renewed focus on high-growth optoelectronics and communications markets.
• We'll consider how Coherent's rapid capacity expansion for indium phosphide lasers could influence its investment narrative going forward.

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Coherent Investment Narrative Recap

To be a shareholder in Coherent, you need to believe in the acceleration of AI-driven datacenter and communications growth, and the company's ability to scale its advanced photonics technology profitably amid tough global competition. The latest Q1 2026 results and guidance reaffirm strong demand for optical transceivers and indium phosphide lasers, supporting the most important short-term catalyst of datacom expansion. However, risks from intense pricing pressure in optical components and possible revenue lumpiness remain material and unchanged by this quarter's performance.

Among recent announcements, Coherent’s capacity doubling for indium phosphide lasers stands out. The company’s aggressive investment in 6-inch wafer production across two sites is directly tied to its efforts to meet escalating AI datacenter demand and secure a cost advantage. This production scale could help bolster margins and reduce supply constraints, key to sustaining the datacom growth story.

But even with robust earnings, contrasted against ongoing risks of margin compression from low-cost competitors, investors should be aware that...

Read the full narrative on Coherent (it's free!)

Coherent's outlook points to $7.7 billion in revenue and $732.0 million in earnings by 2028. This scenario assumes annual revenue growth of 9.8% and an increase in earnings of $812.6 million from the current level of -$80.6 million.

Uncover how Coherent's forecasts yield a $120.63 fair value, a 22% downside to its current price.

Exploring Other Perspectives

Six community fair value estimates for Coherent Corp. range from US$51.56 to US$133.51, revealing wide differences in opinion among Simply Wall St Community members. Given this diversity, keep in mind that accelerating factory investments could either strengthen the company's position or amplify risks if margin gains do not materialize as expected.

Explore 6 other fair value estimates on Coherent - why the stock might be worth less than half the current price!

Build Your Own Coherent Narrative

Disagree with existing narratives? Create your own in under 3 minutes - extraordinary investment returns rarely come from following the herd.

• A great starting point for your Coherent research is our analysis highlighting 2 key rewards and 1 important warning sign that could impact your investment decision.
• Our free Coherent research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate Coherent's overall financial health at a glance.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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