Coherent 2025 Q3 Earnings Remarkable Turnaround with 111% Net Income Surge

Coherent (COHR) reported its fiscal 2025 Q3 earnings on May 07th, 2025. Coherent surpassed expectations with a quarterly earnings of $0.91 per share, exceeding the Zacks Consensus Estimate of $0.86. The company also revised guidance for Q4, anticipating revenues between $1.425 billion and $1.575 billion and non-GAAP EPS between $0.81 and $1.01. Coherent's performance reflects strong execution and robust demand in AI data centers, positioning the company for sustained growth.

Revenue

Coherent's total revenue for fiscal 2025 Q3 increased by 23.9% to $1.50 billion, up from $1.21 billion in the same quarter of 2024. The increase was driven by a surge in demand related to AI data centers, marking a record revenue for the company.

Earnings/Net Income

Coherent narrowed its losses significantly, reporting a loss of $0.11 per share in 2025 Q3, compared to a loss of $0.29 per share in 2024 Q3, reflecting a 62.1% improvement. The company achieved a net income of $1.76 million in 2025 Q3, showcasing a remarkable 111.2% positive swing from a net loss of $-15.73 million in 2024 Q3. This indicates a strong EPS performance.

Price Action

The stock price of Coherent has edged down 0.68% during the latest trading day, increased by 8.24% during the most recent full trading week, and surged 37.64% month-to-date.

Post-Earnings Price Action Review

Over the past five years, the strategy of buying COHR shares following a revenue increase and holding for 30 days has performed poorly, yielding a -21.30% return and significantly underperforming the benchmark return of 35.25%. The excess return was -56.55%, and the compound annual growth rate (CAGR) was -10.36%, indicating substantial losses. This strategy also experienced a high maximum drawdown of -25.36% and a Sharpe ratio of -0.81, reflecting significant risk and negative returns. Investors should note the historical underperformance and substantial risks associated with this strategy when considering similar approaches in the future.

CEO Commentary

Jim Anderson, CEO of Coherent, emphasized strong execution in Q3 2025, with revenue reaching a record $1.5 billion, driven by a 24% year-over-year increase and sustained AI data center demand. He highlighted the introduction of innovative products that bolster long-term growth, stating, "we showcased three different 1.6T transceiver designs" and expressed optimism about ongoing customer engagement. Anderson noted a cautious outlook regarding industrial demand due to macroeconomic uncertainty but affirmed confidence in the data center and communications sectors, believing the company is "well positioned for continued long-term growth."

Guidance

For Q4 2025, Coherent expects revenue between $1.425 billion and $1.575 billion, with non-GAAP gross margins anticipated to range from 37% to 39%. The company projects total operating expenses between $290 million and $310 million on a non-GAAP basis and a non-GAAP tax rate of 21% to 24%. Non-GAAP EPS is forecasted to be between $0.81 and $1.01, reflecting the current tariff environment, which is not expected to have a significant impact.

Additional News

In recent developments, Coherent has been recognized as an NVIDIA Ecosystem Innovation Partner, collaborating on using silicon photonics and co-packaged optics in networking switches, which are pivotal for next-generation AI infrastructure. Additionally, Coherent received six Product Innovation Awards at the Optical Fiber Communication Conference 2025 for its innovations in datacenter and communications markets. The company also showcased groundbreaking technologies, including a demonstration of its 400G EML technology, which is set to enable future industry adoption of 3.2T optical interconnects. These strategic initiatives underscore Coherent's commitment to innovation and leadership in optical networking.