Coherent sets new revenue target as InP capacity ramp continues

Photonics giant Coherent has posted record-breaking quarterly sales of $2.05 billion in its latest financial quarter, with its CEO already pencilling in a rise to $3 billion within 12 months.

Riding the wave of the AI data center infrastructure boom, Coherent is investing heavily in the additional indium phosphide (InP) wafer fabrication capacity needed to keep up with relentless demand for lasers and photodiodes that are critical elements in optical interconnects.

InP device yields up

CEO Jim Anderson told an investor conference call that the InP capacity ramp was slightly ahead of schedule, with 6-inch material now in production at its fabs in Sherman, Texas, and in Sweden.

With those fabs now able to deliver both higher capacity and better device yields compared with the 3-inch lines replaced, InP output will have doubled year-on-year by the end of the current quarter - and is set to double again by the end of next year.

“Having achieved our first $2 billion revenue quarter, we now expect to achieve our first $3 billion quarter by [next June],” Anderson said. “AI scales on optical connectivity. And as AI data center architectures increasingly transition from copper to optical connectivity, we believe Coherent’s broad photonic technology portfolio and manufacturing scale uniquely position us to deliver accelerating growth and capitalize on this multi-year opportunity.”

While the bulk of current data center revenues currently come from sales of conventional high-speed transceivers, that is expected to change rapidly over the next few quarters as hyperscalers begin to deploy new technologies like co-packaged optics (CPO), near-packaged optics (NPO), and optical circuit switches (OCS) that are based around more integrated optical designs.

PhotonLink launch at ECOC

Anderson also revealed that Coherent would unveil a new platform known as “PhotonLink” at next month’s European Conference on Optical Communications (ECOC) exhibition taking place in Malaga, Spain.

The CEO indicated that Coherent’s hyperscaler customers would rather buy a fully integrated optical solution than individual photonic components, and described PhotonLink as a “one-stop-shop for integrated optics”, with a strong reaction from customers and initial sales revenues anticipated by the end of this year.

Looking ahead to the current September quarter, Anderson and his team expect to post sales of around $2.3 billion as demand remains strong and the internal InP ramp proceeds.

The June quarter also represented the end of Coherent’s latest fiscal year, with annual sales of $7.12 billion up 23 per cent and driven largely by the data center boom, with revenues from industrial applications flat.

The increased InP production and higher yields have helped deliver a significant improvement to profit margins, with Coherent able to post an operating income of $898 million for the full year, more than triple the fiscal 2025 result.

Following the latest results and outlook, Coherent’s stock price dropped in value by around 5 per cent, although at around $340 the NYSE-listed company’s valuation has tripled over the past year, with its market capitalization now standing at around $70 billion.