Coherent Corp.'s 2025 Q2 Earnings Call: Unpacking Contradictions in Growth Outlook, Manufacturing Strategy, and Operating Expenses

Growth outlook for the data center segment, the role of the U.S. manufacturing footprint, operating expense expectations, indium phosphide wafer capacity, and demand in the data center segment are the key contradictions discussed in Coherent Corp.'s latest 2025Q2 earnings call.



Strong Financial Performance in Fiscal 2025:
- Coherent Corp reported record revenue of $5.81 billion for fiscal 2025, an approximate 23% year-over-year increase.
- This growth was driven by strong performance in the data center and communications business, resulting in a roughly threefold increase in non-GAAP EPS.

Data Center and Communications Growth:
- Data center and communications revenue grew by 51% for fiscal 2025, with Q4 revenue increasing 16% year-over-year.
- The growth was driven by AI datacenter and communications demand, with strong bookings and forecasts for capacity expansion.

Industrial Laser and Materials Business Performance:
- Industrial laser revenue showed year-over-year growth, primarily driven by display capital equipment and semi-cap equipment markets, despite a decline in the silicon carbide business.
- Growth was supported by a strong focus on recurring service revenue streams, which grew faster than product sales.

Manufacturing and Supply Chain Resiliency:
- Coherent expanded its manufacturing capabilities, including the launch of a new 6-inch indium phosphide production line, enhancing capacity and cost structure.
- The expansion of its production capabilities, particularly in the U.S., was highlighted by a new multiyear agreement with Apple for VCSEL products.

Portfolio Optimization and Strategic Partnerships:
- The company announced an agreement to sell its Aerospace and Defense business for $400 million, aiming to align with long-term strategic focus areas.
- This transaction was expected to be immediately accretive to EPS and allow Coherent to further reduce debt.