COHR Rides the AI-Wave: Can It Maintain Balance in the Long Haul?

Coherent Corp.’s COHR AI-play is helping it pay out dividends, as evidenced by notable growth in its top line over the past quarters. Looking at its fiscal 2025 performance, we are impressed by how the company managed to record a 51% year-over-year increase in the data center and communications market, with a 61% hike in the data center alone.

Coherent has held on to this growth and registered a 17.3% year-over-year rise in its top line in the first quarter of fiscal 2026, with its datacenter business revenues growing 23%. This lofty growth evidently signals the sustained demand for AI that the company is capitalizing on to grow financially. Moreover, a year-over-year expansion of 1,081 basis points in its operating margin hints at scalability, a trait vital to grow within the AI market.

Assessing whether the company can maintain its position requires an evaluation of its future product pipeline. COHR witnessed the swift adoption of the 1.6T transceiver and expects to grow further in 2026. During the recently reported quarter’s earnings call, management noted that the yield of the 6-inch Indium Phosphide was higher than that of the 3-inch version, prompting production in Jarfalla, Sweden.

In addition to this, management realized that the Optical Circuit Switch’s addressable market has a value of more than $2 billion, presenting a significant growth opportunity. Furthermore, the divestiture of the Aerospace and Defense business streamlines COHR’s product portfolio, allowing it to prioritize high-margin AI demand.

Per Grand View Research, the global AI datacenter market is anticipated to be worth $13.6 billion and is expected to see a CAGR of 28.3% through 2030. COHR’s diverse product portfolio, coupled with its ability to cater to the rising demand for AI, compels us to remain optimistic about long-term growth.

COHR’s Price Performance, Valuation & Estimates

The stock soared 99.4% in a year, outperforming the industry’s 13.9% growth. Meanwhile, COHR’s industry peer GigaCloud Technology Inc. GCT has skyrocketed 109.7% and AppLovin APP has surged 77.3%.

1-Year Share Price Performance

From a valuation perspective, COHR trades at a 12-month forward price-to-earnings ratio of 33.89X, a premium over GigaCloud Technology’s 11.79X while being cheaper than AppLovin’s 39.62X.

P/E - F12M

Coherent Corp and AppLovin carry a Value Score of D, while GigaCloud Technology has a Value Score of A.

The Zacks Consensus Estimate for COHR’s earnings for fiscal 2026 and 2027 has increased 1.2% and 1.1%, respectively, over the past 60 days.

COHR currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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