Coherent (COHR) is a $29 billion global leader in laser technologies and photonics serving industrial, communications, electronics and instrumentation markets. The explosive growth in the AI/datacenter buildout has seen demand surge for Coherent optical solutions.
Correspondingly, revenues are on a path to double from a 12-month trailing $3.3 billion in June of 2022 to a projected $6.7 billion for the fiscal year which ends in June of 2026. In the same period, the stock has appreciated 290%.
Founded in 1971 and operating in more than 20 countries, Coherent describes their mission thus:
"The photon is the fundamental building block of our universe. See how we use it to generate, modulate, amplify, direct, and detect for the datacenter, communications, and industrial markets."
While revenues grow at a steady 15% clip, profits are expected to launch 42% this fiscal year to cross $5 EPS. After the company reported a strong beat-and-raise for the September quarter, analysts lifted the current year EPS consensus 9.6%.
NVIDIA Silicon Photonics Partner
One big driver of investor enthusiasm that helped drive COHR shares from below $70 to over $190 this year was their collaboration with NVIDIA announced at GTC (GPU Tech Conference) in March.
Coherent and NVIDIA will develop silicon photonics networking switches using co-packaged optics (CPO). This ecosystem will allow AI factories to connect millions of GPUs.
NVIDIA (NVDA) still uses copper wiring within Blackwell NVL72 rack-scale systems to connect GPUs to each other, but to "scale out" across the datacenter Jensen Huang recognized the power and speed of optical solutions to connect many racks together for the lowest latency.
Thus NVIDIA has several connectivity and networking systems that use optical and photonics solutions and they can be categorized into two main areas: Interconnect Products, including Infiniband and Ethernet protocols, and the upcoming Co-Packaged Optics, like Spectrum-X Photonics Switches.
As this relationship grows, it will be exciting to see how embedded Coherent becomes in the NVIDIA ecosystem.
Apple iPhone Face ID
Last December, I knew I needed to upgrade my 3-year old iPhone but I put it off for another year. Why? Because I was afraid of losing all my passwords and settings for banking, brokerage, and two-factor authentication apps I use.
Oh, and I learned that all the new models operate with Face ID. That sounded to me like a new tech solution looking for a problem to happen.
But once again, the folks at my AT&T store made it all nearly seamless. And I'm pretty happy with the Face ID feature vs. the thumb-print button that I was sure was going to break one day.
Turns out, Coherent supplies that core technology for Apple (AAPL). Here was the opening paragraph from an August press release...
Coherent Corp. announced that it has entered a new multiyear strategic supply agreement with Apple, expanding their long-standing partnership. Under the new agreement, Coherent will continue to produce vertical-cavity surface-emitting lasers (VCSELs) that enable key features such as Face ID on iPhone and iPad devices shipped around the world. This critical work is conducted at Coherent’s state-of-the-art manufacturing facility in Sherman, Texas.
Innovation at the Speed of Light
It sounds like this facility will be home to a lot more innovative products over the coming decade. Again from the PR...
"Coherent’s Sherman site in Texas hosts state-of-the-art 6-inch wafer compound semiconductor epitaxy, fabrication, and device manufacturing platforms for next-generation optoelectronic applications."
Coherent also built an expertise in providing optical components and high-energy laser modules for platforms such as military aircraft, satellites, and missiles. In August the company announced they were selling their Aerospace and Defense business to Advent, a leading global private equity investor, for $400 million.
To learn more about Coherent technology platforms, I highly recommend this interview with their CMO Dr. Sanjai Parthasarathi...
Powering Innovation with Photons: A Q&A on AI, Datacenters & Laser Leadership
The interview also contains a link to the company's most recent investor presentation.
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Coherent Corp. (COHR): Free Stock Analysis Report Apple Inc. (AAPL): Free Stock Analysis Report NVIDIA Corporation (NVDA): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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