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Key Takeaways
- Coherent's AI datacenter business grew 23% year-over-year in the first quarter of fiscal 2026.
- Coherent saw strong direct bookings as 800G adoption broadened and 1.6T transceivers were adopted rapidly.
- Coherent began 6-inch InP production in Jarfalla, citing higher yields critical for next-gen AI infrastructure.
Coherent Corp.’s (COHR - Free Report) ability to capture the growing AI markets is at the apex of its growth strategy. The company’s keen interest in AI and datacom is yielding results, as evidenced by a 23% year-over-year increase in its AI datacenter business in the first quarter of fiscal 2026.
Coherent registered a high demand for its products, which grew sharply due to direct bookings. Per James Anderson, CEO, the company witnessed the broad adoption of 800G, whereas 1.6T transceivers were adopted rapidly. Banking on this heightened demand, Anderson anticipates the demand for these products to grow exponentially in 2026.
On the Indium Phosphide (InP) production front, which is crucial in next-gen AI infrastructure, Coherent registered a higher yield of the 6-inch InP than the 3-inch ones. It highlights the robust experience gained by the production team over the past five years in manufacturing 2 billion VSCEL devices on its 6-inch gallium arsenide technology. The company has started the production of 6-inch InP in Jarfalla, Sweden, to cater to its rising demand, which we anticipate will grow with increasing AI demand.
Optical Circuit Switch, another product in Coherent’s arsenal, is vital for the AI datacenter. Per management, this product adds more than $2 billion in addressable market opportunity in the long run. Coherent’s diverse product portfolio addresses the AI market directly.
Per Grand View Research, the global AI market size is expected to see a CAGR of 30.6% through 2033. With the rising adoption of this technology, we expect Coherent’s demand to climb further in the long run, making it an investor-favorite.
Coherent’s Price Performance, Valuation & Estimates
Coherent stock has surged 73.7% in a year against the industry’s 14% growth. Coherent’s industry peer LiveRamp (RAMP - Free Report) has lost 3.6%, while GigaCloud Technology (GCT - Free Report) has skyrocketed 100.5% in a year.
One-Year Share Price Performance
Image Source: Zacks Investment Research
From a valuation perspective, Coherent trades at a forward 12-month price-to-earnings ratio of 32.19X, higher than LiveRamp’s and GigaCloud Technology’s 11.22 and 12.16, respectively.
Price-to-Earnings Ration - Forward 12-Months
Image Source: Zacks Investment Research
Coherent has a Value Score of F. Meanwhile, LiveRamp and GigaCloud Technology carry a Value Score of C and A, respectively. The Zacks Consensus Estimate for Coherent’s earnings for 2026 and 2027 has increased 11.4% and 5.1%, respectively, over the past 60 days.
Image Source: Zacks Investment Research
Despite its low value score, Coherent stock currently sports a Zacks Rank #1 (Strong Buy) rating.
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