Coherent delivered US$2.37 billion in fiscal first-quarter revenue and raised its fiscal 2027 pro forma growth outlook above 60%, helped by a sharp increase in datacentre and communications demand. The photonics company also flagged a five-year PhotonLink agreement valued at about US$20 billion, although meaningful revenue from that deal is not expected until early calendar 2028.
- US$2.37 billion Q1 revenue, up 49.9% year on year
- Non-GAAP diluted EPS rose 80% to US$2.09
- Datacentre and communications revenue jumped 79%
- Fiscal 2027 pro forma revenue growth expected to exceed 60%
- PhotonLink agreement valued at approximately US$20 billion over five years
Coherent Corp. (NYSE:COHR) has raised the stakes in the AI infrastructure trade, forecasting fiscal 2027 pro forma revenue growth above 60% after a first quarter in which datacentre and communications sales surged 79% year on year. Revenue reached US$2.37 billion, while non-GAAP diluted earnings per share rose 80% to US$2.09.
AI Connectivity Drives Revenue Acceleration
The Datacentre & Communications segment generated US$1.95 billion in the September quarter, accounting for 82% of total revenue. That was up from US$1.09 billion a year earlier, with datacentre revenue increasing 85% and communications revenue rising 84% according to the company’s investor presentation.
Coherent said its newer growth areas are beginning to add weight. Scale-across and DCI revenue exceeded US$200 million in the quarter, roughly quadrupling year on year, while the company expects quarterly revenue from that activity to approximately double again by the end of calendar 2027. PhotonLink revenue is expected to exceed US$100 million in the March 2027 quarter and reach more than US$250 million per quarter before the end of calendar 2027.
PhotonLink Agreement Extends the Revenue Horizon
The investor presentation highlighted a PhotonLink long-term agreement valued at approximately US$20 billion over five years, with revenue expected to begin ramping in early calendar 2028. The filing does not name the customer or specify the precise revenue-recognition schedule, so the headline value should be treated as a long-range commercial commitment rather than near-term sales.
Management expects Coherent to achieve its first US$3 billion revenue quarter by the end of fiscal 2027 and its first US$4 billion quarter in fiscal 2028. It also lifted its long-term margin ambition, targeting a first quarter with non-GAAP gross margin above 45% before the end of calendar 2028. In the latest quarter, GAAP gross margin was 39.1%, up 254 basis points year on year, while non-GAAP gross margin reached 40.6%.
Margins Improve as Capacity Investment Rises
GAAP operating income increased 45.9% year on year to US$377.9 million, while non-GAAP operating income rose 78.1% to US$550.3 million. GAAP diluted EPS was US$1.90, compared with US$1.19 in the same quarter last year. The non-GAAP figures exclude items including share-based compensation, acquired-intangible amortisation, restructuring and integration costs, and should be read alongside the GAAP results rather than as a replacement for them.
The expansion is arriving alongside a heavy investment cycle. Coherent spent US$775.5 million on property, plant and equipment in the quarter, compared with US$103.9 million a year earlier, while operating cash flow was negative US$92.7 million. The company said internal indium phosphide output capacity doubled year on year, one quarter ahead of plan, and is on track to more than double again by the end of calendar 2027.
Second-Quarter Guidance Sets a Higher Near-Term Bar
For the second quarter of fiscal 2027, Coherent expects revenue of US$2.55 billion to US$2.75 billion, non-GAAP gross margin of 40% to 42%, and non-GAAP diluted EPS of US$2.28 to US$2.48. These forward-looking non-GAAP targets are not reconciled to GAAP because the company says several items, including restructuring, foreign-exchange movements and share-based compensation, cannot be forecast without unreasonable effort.
Industrial revenue was broadly flat year on year at US$418.6 million, but Coherent said stronger semiconductor capital-equipment bookings support an expected return to growth in the second quarter. The more immediate question is whether the AI-related demand now flowing through the datacentre business can justify the scale of capital expenditure before the larger PhotonLink contribution arrives in 2028.
Bottom Line?
Coherent’s outlook now depends on converting exceptional AI connectivity demand into sustained, cash-generative growth while funding a substantial capacity build-out ahead of its largest longer-term agreements.
Questions in the middle?
- How much of the approximately US$20 billion PhotonLink agreement is committed, and how concentrated is the customer exposure?
- Can the company maintain gross-margin expansion as it accelerates indium phosphide and other capacity investments?
- Will negative operating cash flow and elevated capital expenditure persist as revenue scales toward the US$3 billion quarterly milestone?