InP Advantage: COHR's Means to Solid Financials & Scalability

Coherent Corp. COHR has sprouted as a vital element in the global supply chain of AI infrastructure as the market pivots to networking. COHR’s core objective is the transition to 6-inch Indium Phosphide (InP) wafer manufacturing. This strategic pivot signals the transition of the company’s cost structure and production scalability for its transceivers.

During the second-quarter fiscal 2026 earnings call, the company announced the successful boost in its 6-inch InP wafer line at Sherman, TX, and Jarfalla, Sweden. This InP wafer lowered the die cost by 60% while providing 4 times the production capacity per wafer. This reduced the per-unit cost of lasers that power optical transceivers.

The shift from 3-inch and 4-inch InP wafers to the 6-inch ones provided a massive upside to the company’s financial performance. The CEO stated that this vertical integration enabled Coherent to capture a significant portion of the bill of materials. In the second quarter of fiscal 2026, more than 70% of the top line was generated from the Datacenter & Communication segment, with the data center business rising 36% year over year.

The gross margin widened by 77 basis points from the year-ago quarter. This improvement can be attributed to the shift toward higher-speed transceiver products and an efficiency surge from laser production internally.

The company reported a book-to-bill ratio of more than 4 times in the data center business, with orders till 2027. With hyperscalers accelerating their builds, COHR is utilizing a combination of a massive $899-million cash chest and lower current debt of $106 million to fund and essentially ramp up its 6-inch InP wafer production capacity. The company is at the sweet spot to control the price and availability of components in the AI networking space, as it owns the substrate and the laser technology.

COHR’s Price Performance, Valuation & Estimates

Over the past year, Coherent’s stock has skyrocketed 287.1%, beating the 24.4% rally of its industry. COHR has outperformed GigaCloud Technology Inc.’s GCT 195.8% upsurge and TeleTech’s TTEC 13.1% decline in the same period.

1-Year Share Price Performance

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From a valuation standpoint, Coherent trades at a 12-month forward price-to-earnings ratio of 39.29, exceeding the industry’s 23.75. The stock appears expensive compared with GigaCloud Technology’s and TeleTech’s 11.18 and 2.48, respectively.

P/E F12M

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Coherent Corp has a Value Score of D. GigaCloud Technology and TeleTech carry a Value Score of A.

The Zacks Consensus Estimate for COHR’s earnings for fiscal 2026 and 2027 has increased 5.5% and 13.1%, respectively, over the past 60 days.

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COHR currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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TeleTech Holdings, Inc. (TTEC): Free Stock Analysis Report

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This article originally published on Zacks Investment Research (zacks.com).

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