Coherent's Q2 2025: Navigating Contradictions in Telecom Outlook, Product Ramping, and Market Strategies

These are the key contradictions discussed in Coherent's latest 2025 Q2 earnings call, specifically including: Telecommunications Market Outlook, Product Ramping, and Laser and Materials Business Outlook:



Revenue Growth and Market Expansion:
- Coherent Corp. reported a record revenue of $1.43 billion for Q2 fiscal 2025, up 6% sequentially and 27% year-over-year.
- The growth was driven by strong AI-related datacom transceiver demand, a second quarter of sequential growth in telecom revenue, and sequential growth across multiple key industrial end markets.

Telecom Market Improvement:
- Coherent's telecom revenue increased by 16% sequentially and 11% year-over-year in Q2.
- The sequential improvement was driven by growth in data center interconnect and the ramp of new products like 100 gig, 400 gig, and 800 gig ZR transceivers, indicating a cautious optimism in the telecom market recovery.

Expansion in Data Center Market:
- Coherent's data center and communications market revenue increased 6% sequentially and 58% year-over-year in Q2.
- This growth was primarily driven by record Q2 datacom revenue, which grew 4% sequentially and 79% year-over-year, due to ongoing strong AI data center demand and the ramping of 800 gig transceivers.

Gross Margin Improvement and Profitability:
- Coherent achieved a non-GAAP gross margin of 38.2% in Q2, marking strong improvement on both a sequential and year-over-year basis.
- The expansion was driven by higher revenue volume, cost reductions, and improvements in manufacturing yields, contributing to significant profitability expansion with non-GAAP EPS growing over 40% sequentially and more than tripling year-over-year.