Photonics company Coherent Corporation (COHR) is on track to gap sharply lower at the opening bell today, despite beating analysts’ forecasts in its quarterly report last night. Coherent reported impressive fiscal fourth-quarter results, with revenue increasing 16.4% year-over-year to $1.53 billion and non-GAAP earnings per share (EPS) of $1.00. By comparison, Wall Street’s estimates called for revenue of $1.51 billion on EPS of $0.92.
However, the Q4 beat has been overshadowed by light revenue guidance for the first quarter of fiscal year 2026. Management projected revenue in the range of $1.46-$1.60 billion, falling short of the consensus $1.55 billion at the midpoint. Coherent guided for Q1 EPS of $0.93-$1.13, on an adjusted basis, which matched estimates.
Chart Levels to Watch for COHR Stock
COHR has collapsed more than 19% in premarket trading, putting the stock on pace to open below both its 20-day and 50-day moving averages. Potential round-number support at the $90 level could come into play if selling intensifies. The gamma flip point is $88.47, which means a drop below here could trigger additional selling.
If today’s decline holds, it will be Coherent’s worst daily price drop since April 3, when the shares fell by 20.1% in a single session on tariff anxieties. Notably, the options market was pricing in just an 8.77% move for Coherent stock after earnings.
What’s Behind the Weak Forecast?
Alongside earnings, Coherent announced the sale of its Aerospace and Defense business to Advent for $400 million, with proceeds earmarked for debt reduction and EPS improvement. The company's debt reduction strategy through the A&D business sale proceeds aims to strengthen its financial position, supporting long-term value creation for stakeholders.
As a result, the Q1 guide excludes about $20 million A&D revenue, which accounts for the miss on Coherent’s revenue forecast.
Inside Coherent’s Q4 Earnings Report
The photonics company’s networking segment emerged as a primary growth driver during Q4, experiencing a remarkable 39% year-over-year surge and contributing approximately 62% of total revenue. Non-GAAP gross margins also showed improvement, reaching 37.9%, reflecting successful operational execution.
Per the earnings call, management notes that the company's vertical integration strategy has proven successful, with over half of transceiver revenue generated from EML-based transceivers using internally manufactured components. Innovation continues to drive growth, as evidenced by the commencement of revenue shipments for 1.6T Datacom Transceivers and optical circuit switches in Q4, positioning Coherent advantageously in next-generation data centers and AI computing.
Looking ahead, Coherent’s expanded partnership with Apple (AAPL) for VCSEL production at its Sherman, Texas facility demonstrates its commitment to strategic growth initiatives. Management maintains its focus on achieving gross margins exceeding 40% through ongoing cost reduction and pricing optimization strategies.
What’s Next for Coherent Stock?
Today’s guidance shock aside, Coherent’s transformation positions it well in high-growth segments, particularly in photonics applications for artificial intelligence (AI) data centers and communications infrastructure. While near-term industrial demand presents some challenges, the company’s solid positioning and strategic portfolio optimization suggest that there’s potential for sustained growth over the long term.
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