AI optical interconnects "selling out": Coherent (COHR.US) Q1 revenue surges 50% to a record high; data center business jumps 79%, aiming for $3 billion revenue in a single quarter

According to Jinse Finance APP, in the early hours of November 5 Beijing time, Coherent (COHR.US), a leader in photonics technology, released its fiscal year 2027 first quarter results (ending September 30, 2026) after the US market close on Wednesday. Driven by strong demand for AI data centers transitioning from copper to optical interconnects, the company achieved record single-quarter revenue with significantly improved profitability. The guidance for the next quarter continues to project high growth, and the company also presented an ambitious medium- and long-term roadmap.

Core Results: Revenue up 50% to a record high, Earnings beat expectations by about 20%

The financial report shows that Coherent achieved revenue of $2.37 billion in the first quarter, a year-on-year increase of 49.9% (up 56% on a pro forma basis excluding business divestitures), and a quarter-on-quarter increase of 15.9%, setting a new record for single-quarter revenue. According to market data, this figure exceeded the consensus analyst estimate by about 3%.

Earnings performance was even more impressive: GAAP gross margin was 39.1%, up 254 basis points year-on-year; non-GAAP gross margin was 40.6%, up 184 basis points year-on-year. GAAP net income attributable to shareholders reached $385 million, a year-on-year increase of 70.2% and a quarter-on-quarter increase of 59.9%. GAAP diluted earnings per share were $1.90, up $0.71 year-on-year. Non-GAAP diluted EPS were $2.09, surging by about 80% year-on-year and approximately 20% above market expectations.

By business segment, data center and communications was the absolute growth engine: revenue soared 79% year-on-year, accounting for about 82% of total revenue; industrial segment revenue was basically flat year-on-year and quarter-on-quarter.

The only flaw: Operating cash flow turns negative

The only notable shortcoming this quarter came from cash flow: net cash flow from operating activities was -$92.7 million, mainly due to seasonal working capital usage and sharply increased capital expenditures—this quarter’s capex reached as high as $775.5 million for capacity expansion. As of the end of the quarter, the company held about $1.7 billion in cash and short-term investments, and its debt-to-asset ratio was 42.4%, a slight quarter-on-quarter increase. For a company experiencing explosive AI demand, this is a typical “cash flow for growth” financial statement.

Next quarter guidance and medium/long-term roadmap: Targeting $3 billion and $4 billion single-quarter revenue

The company’s guidance for the fiscal year 2027 second quarter indicates accelerating growth: expected revenue is $2.55 billion to $2.75 billion (midpoint about $2.65 billion, up 12% from last quarter’s midpoint); non-GAAP gross margin is projected at 40% to 42%, continuing to rise from this quarter; non-GAAP EPS is expected to be $2.28 to $2.48, with the midpoint up about 14% from this quarter’s $2.09.

Even more remarkable are the medium- and long-term targets: the company expects pro forma revenue to grow by more than 60% in fiscal 2027, and to achieve its first $3 billion revenue quarter in fiscal 2027, as well as its first $4 billion quarter in fiscal 2028. The company also expects to achieve its first non-GAAP gross margin over 45% in a single quarter 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 $100 million in revenue in the March 2027 fiscal quarter, and reach $250 million per quarter by year-end 2027. Data center interconnect (Scale-across/DCI) business revenue exceeded $200 million this quarter with an annualized run rate close to $1 billion, and is projected to double by the end of 2027 compared to this quarter. On the supply side, InP (indium phosphide) capacity has doubled year-on-year and met the target a quarter ahead of schedule, and LTA (Long-Term Agreement) order visibility now extends beyond 2028.