Coherent's Q3 FY2026: Revenue and EPS Beat, Strong Guidance, and AI-Driven Growth

Coherent reported a record revenue of $1.The company's non-GAAP earnings per diluted share was $1.

Coherent's gross margin improved to 39.This improvement is a result of strong revenue growth and continued gross margin expansion. Operating expenses also increased to $348 million, compared to $321 million in the prior quarter and $297 million in the year ago quarter, reflecting the company's investment in growth initiatives.

The company expects 800 gig revenue to grow year-over-year in calendar 2026, while 1.6T transceivers ramp rapidly through the balance of this calendar year and into next year, as stated by CEO James Anderson: "In particular, we expect 800 gig revenue to grow year-over-year in calendar '26, while 1.6T transceivers ramp rapidly through the balance of this calendar year and into next year as a broad range of customers adopt 1.6T."

Coherent's cash balance increased to $3 billion from $1.The company also made $162 million in debt payments during the quarter, reducing its debt leverage ratio to 0.5x, down from 1.7x in Q2 and 2.

For the June quarter, Coherent expects revenue to be between $1.91 billion and $2.05 billion, non-GAAP gross margin to be between 39% and 41%, total operating expenses of between $360 million and $380 million on a non-GAAP basis, and EPS of between $1.52 and $1.The company continues to expect fiscal 2027 growth rate to exceed its fiscal 2026 growth rate, as noted by CEO James Anderson: "We expect strong sequential revenue growth in our June quarter, and we continue to expect fiscal '27 growth rate to exceed our fiscal '26 growth rate."

The tone of Coherent's Q3 FY2026 earnings call was positive and confident, with a sentiment score of 0.42, a guidance tone of 0.59, and a tone confidence of 0.25, as per the tone history. The prepared sentiment score was 0.64, and the QA sentiment score was 0.34, indicating a balanced and optimistic outlook. The company's AI optimism score was 0.70, and the uncertainty index was 45.9, reflecting a clear and forward-looking message. The QA evasiveness score was 6.4, the lowest in recent quarters, suggesting a transparent and direct approach to answering analyst questions.

Coherent's strong performance in Q3 FY2026 has positive implications for its key customers and suppliers. For NVIDIA, Coherent's growth in optical and SiPho components for CPO (Co-Packaged Optics) is a significant driver, as noted by CEO James Anderson: "We see that market size as over $15 billion, and that's probably a conservative estimate over the coming years." For Broadcom, the demand for optical components for CPO is also expected to rise, driven by the growing adoption of 1.6T transceivers. On the supplier side, AXT Inc will benefit from the increased demand for InP substrates and compound semi wafers, while Fabrinet will see higher contract manufacturing volumes for optical transceivers.

Compared to its peers in the Photonics and Optoelectronics subsector, Coherent's Q3 FY2026 performance stands out. Coherent's revenue of $1.8 billion and gross margin of 37.7% are among the highest in the group. Lumentum (LITE) reported a revenue of $808.4 million with a gross margin of 42.4%, while II-VI (IIVI) reported a revenue of $52.26 billion with a gross margin of 36.2%. Coherent's year-over-year revenue growth of 20.5% is also strong, outpacing many of its peers, including Lumentum (90.1%) and Applied Optoelectronics (AAOI) (51.4%).

In conclusion, Coherent's Q3 FY2026 results demonstrate the company's strong execution and market leadership in AI data centers and communications. The company's guidance for the June quarter and fiscal 2027 indicates continued growth and margin expansion, supported by a positive tone and transparent communication. The supply chain and peer comparisons further reinforce Coherent's position as a key player in the photonics and optoelectronics industry.