Coherent Shines at Q2 Earnings: Should Investors Buy the Stock Now?

Coherent Corp. COHR hit a new peak, delivering $1.7 billion in revenues during the second quarter of fiscal 2026, topping the Zacks Consensus Estimate by 3%. The top line appreciated 17.5% from the year-ago fiscal quarter. This growth was not a one-time spike but rather a momentum the company maintained in achieving new highs since the second quarter of fiscal 2024.

On the EPS front, COHR registered 35.8% year-over-year growth to $1.29. It managed to beat the consensus mark by 5.7%, a recurring feat over the past quarters rather than an episodic one.

COHR’s Growth Catalyst: Datacenter & Communications Segment

During the second quarter of fiscal 2026, Coherent registered a remarkable 33.5% year-over-year upsurge in its datacenter & communications segment revenues. This segment accounted for 72% of the top line, which is a hike from the year-ago quarter’s 63%. COHR has achieved extraordinary growth in this segment on the back of the rising demand for 800 gig and 1.6T transceivers.

While the datacenter & communication segment was the primary growth lever, we must acknowledge the industrial business recovery. Coherent witnessed demand signals that suggest a pickup in the growth of its industrial business over the course of this year, driven by strong orders from semi-cap equipment customers. Revenues in this segment moved up by 4% sequentially and were flat year over year on a pro forma basis, fueled by industrial lasers and engineered materials product lines.

Coherent’s Margins Expand, Balance Sheet Solid

The company delivered an operationally sound performance, having registered an 8.8% sequential and 26.8% year-over-year increase in its operating income. This translated into its margin expanding by 40 basis points (bps) from the preceding fiscal quarter and 147 bps from the year-ago fiscal quarter.

Coherent maintained a resilient cash position with $863.7 million at the close of December 2025, up from $852.8 million in the previous quarter. Long-term debt was at $3.2 billion, flat with the preceding quarter. The company maintained a debt leverage ratio of 1.7X, a substantial dip from the year-ago quarter’s 2.3X.

Fiscal discipline fueled significant shareholder value. Over the past year, Coherent stock soared 110%, outperforming the industry’s 3.8% growth. In contrast, competitors like Wolfspeed WOLF plummeted 39.9%, while ON Semiconductor ON gained 18.3% during the same timeframe.

1-Year Share Price Performance

COHR’s deleveraged balance sheet offers a better balance and a higher growth opportunity than Wolfspeed and ON Semiconductor. While Coherent made a pivot to AI connectivity, Wolfspeed and ON Semiconductor locked horns in a capital-intensive battle for the EV powertrain.

COHR’s Product Portfolio: An Economic Moat

The strength of COHR’s product suite, combined with vertical integration and U.S. manufacturing expansion, provides a competitive edge. The recent earnings call disclosed that management anticipates growth led by a blend of 1.6T and 800 gig transceivers and Optical Circuit Switch systems. A significant growth in transceiver demand is expected to be observed. To address this demand, COHR is investing in the swift expansion of its production capacity. The company is scaling its Indium Phosphide capacity actively, underpinned by the ramp-up of 6-inch wafer production across Sherman and Jarfalla.

Conclusion: Buy Coherent Stock Now

COHR has demonstrated impressive fiscal discipline, evidenced by its deleveraged balance sheet and widening operating margins. The company has a substantial economic moat supported by its diverse product pipeline, which is seeing strong demand from customers. With the industrial business rebound, Coherentoffers a compelling combination of momentum, robust fundamentals and a leading position in next-gen high-speed data transmission, prompting us to recommend a buy to investors.

COHR currently has a Zacks Rank #2 (Buy). 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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