AI Optical Interconnects "Selling Like Crazy": Coherent (COHR.US) Q1 Revenue Surges 50% to a Record, Data Center Business Soars 79%, Targeting US$3 Billion in Quarterly Revenue

At 12:00 a.m. Beijing time on November 5, photonics technology leader Coherent (COHR.US) released results for the first quarter of fiscal 2027 (ended September 30, 2026) after the U.S. market close on Wednesday. Benefiting from strong demand driven by the AI data center transition from copper interconnects to optical interconnects, the company posted record quarterly revenue, with profitability rising sharply in tandem; guidance for the next fiscal quarter points to continued high growth, and the company also laid out an ambitious medium- and long-term roadmap. Core results: revenue up 50% to a record high, earnings beat expectations by about 20% The report showed that Coherent's first-quarter revenue was US$2.37 billion, up 49.9% year over year (up 56% on a pro forma basis excluding the impact of divestitures) and up 15.9% sequentially, setting a quarterly record; according to market consensus, the figure beat the analyst consensus by about 3%. Profitability was even more impressive: GAAP gross margin was 39.1%, up 254 basis points year over year; non-GAAP gross margin was 40.6%, up 184 basis points year over year. GAAP net income attributable to the company was US$385 million, up 70.2% year over year and up 59.9% sequentially; GAAP diluted earnings per share were US$1.90, up US$0.71 year over year; non-GAAP diluted earnings per share were US$2.09, up about 80% year over year and about 20% above market expectations. By business segment, data center and communications was the absolute growth engine: revenue surged 79% year over year and accounted for about 82% of total revenue; industrial revenue was essentially flat year over year and sequentially. The only blemish: operating cash flow turned negative The quarter's only obvious weak spot came from cash flow: net cash provided by operating activities was -US$92.7 million, mainly due to seasonal working capital absorption and sharply expanded capital expenditurecapex in the quarter reached US$775.5 million for capacity expansion. At quarter-end, the company held about US$1.7 billion in cash and short-term investments, with a debt-to-asset ratio of 42.4%, up slightly sequentially. For a company in the midst of an AI demand boom, this is a textbook "trading cash flow for growth" set of financials. Next-quarter guidance and medium- to long-term roadmap: targeting US$3 billion and US$4 billion in quarterly revenue The company's guidance for the second quarter of fiscal 2027 shows growth is still accelerating: revenue is expected at US$2.55 billion to US$2.75 billion (midpoint about US$2.65 billion, up about 12% sequentially at the midpoint); non-GAAP gross margin of 40% to 42%, continuing to rise from this quarter; non-GAAP earnings per share of US$2.28 to US$2.48, with the midpoint up about 14% from US$2.09 this quarter. Even more notable are the medium- and long-term targets: the company expects pro forma revenue growth of more than 60% in fiscal 2027 and will achieve its first US$3 billion quarterly revenue quarter within fiscal 2027, and its first US$4 billion quarterly revenue quarter in fiscal 2028; it also expects its first quarter with non-GAAP gross margin above 45% by the end of calendar 2028. Quantified targets for the new growth curve are also clear: the next-generation PhotonLink protocol optical interconnect platform is expected to generate more than US$100 million in revenue in the March 2027 fiscal quarter and reach US$250 million per quarter by the end of calendar 2027; the data center interconnect (scale-across/DCI) business already generated more than US$200 million in revenue this quarter, with an annualized run rate approaching US$1 billion, and quarterly revenue is expected to double from this quarter by the end of calendar 2027. On the supply side, the company's InP (indium phosphide) capacity has doubled year over year and was achieved one quarter ahead of plan, and long-term agreement (LTA) order visibility now extends beyond 2028.