Coherent Corp. (NYSE:COHR) delivered stronger-than-expected fourth-quarter results and issued an ambitious outlook for fiscal 2027, supported by robust customer demand and expanding production capacity. Despite beating Wall Street forecasts on both earnings and revenue, shares fell around 5% in Thursday premarket trading, reversing an earlier 8% advance that followed strong results from industry peer Lumentum.
Coherent beats earnings and revenue expectations
The photonics company reported adjusted earnings of $1.74 per share for the fourth quarter, exceeding the analyst consensus of $1.62 by $0.12.
Revenue reached $2.05 billion, ahead of Wall Street’s $1.98 billion forecast and representing year-over-year growth of 34%.
The results capped a strong fiscal year for Coherent, with improvements in profitability accompanying the company’s rapid revenue expansion.
“Fiscal 2026 was an outstanding year for Coherent, with record revenue, significant margin expansion, and non-GAAP EPS growth that was more than twice the rate of revenue growth,” said Jim Anderson, CEO. “We enter fiscal 2027 with exceptional customer demand, expanding production capacity, and multiple new growth platforms beginning to ramp.”
Fiscal 2027 guidance comes in ahead of forecasts
Coherent also provided a stronger-than-expected outlook for the first quarter of fiscal 2027.
The company expects revenue of between $2.2 billion and $2.4 billion, comfortably above the analyst consensus of $2.13 billion. At $2.3 billion, the midpoint of the range stands approximately 8% above Wall Street expectations.
Adjusted earnings are forecast at $1.85 to $2.05 per share, compared with the consensus estimate of $1.77. The midpoint of $1.95 is around 10% higher than analysts had anticipated.
The guidance points to continued momentum as demand remains strong across Coherent’s markets and additional manufacturing capacity comes online.
Margins expand sharply year over year
Coherent also delivered substantial improvement in fourth-quarter profitability.
Adjusted gross margin increased to 40.2%, representing an expansion of 215 basis points compared with the same quarter a year earlier. GAAP gross margin climbed to 38.5%, improving by 277 basis points year over year.
GAAP earnings reached $1.19 per share, representing an improvement of $2.02 from the loss of -$0.83 per share recorded in the prior-year quarter.
CFO Sherri Luther said strong operational execution had driven meaningful gross margin expansion while allowing the company to translate revenue growth into substantial earnings growth.
For the first quarter of fiscal 2027, Coherent expects adjusted gross margin of between 39.5% and 41.5%, implying a midpoint of 40.5%.
The company also anticipates adjusted operating expenses of between $400 million and $420 million, alongside an expected tax rate of 18% to 20%.
Barclays sees revenue exceeding $3 billion by end of FY27
Despite the positive earnings and guidance, investors appeared to focus closely on the company’s margin outlook.
“Outlook remains upbeat as revenue is expected to eclipse the $3B mark by the end of FY27,” Barclays analyst Tom O’Malley said in a note.
However, O’Malley suggested that gross margins remained the critical issue for shareholders as demand for lower-margin transceivers accelerates.
“While broad demand trends remain robust, GMs have been the main investor focus as lower margin transceiver demand ramps significantly and we suspect the marginal beat in both the qtr. and the guide for GMs left investors wanting more,” he wrote.
That concern may help explain why Coherent shares moved lower despite results and forward guidance that comfortably exceeded consensus forecasts.
With demand remaining strong and management expecting new growth platforms to ramp during fiscal 2027, attention is likely to remain focused on whether Coherent can sustain its revenue momentum while protecting margins as its product mix evolves.
Coherent stock price
