Coherent's Q3 2025 Earnings Call: Contradictions in Telecom Outlook, Margins, and Industrial Market Dynamics

Telecom market outlook, gross margin expectations, industrial market outlook, EML capacity and demand are the key contradictions discussed in Coherent's latest 2025Q3 earnings call.



Record Revenue and Strong Growth:
- Coherent Corp. reported record revenue of $1.5 billion for Q3, up 4% sequentially and 24% year-on-year.
- The growth was primarily driven by strong AI data center demand and a third consecutive quarter of growth in the telecom revenue segment.

Data Center and Communications Segment Performance:
- The data center and communications segment revenue increased by 9% sequentially and 46% year-over-year.
- This growth was attributed to record performance in AI data center demand, resulting in a 54% year-over-year increase in AI data center revenue.

Telecom Revenue Expansion:
- The telecom revenue increased 2% sequentially and 21% year-over-year, marking the third consecutive quarter of sequential growth.
- Growth was driven by improvements in both traditional telecom markets and data center interconnect, with rising demand for new high-speed products such as 100G, 400G, and 800G ZR transceivers.

Gross Margin and Profitability Improvements:
- Coherent's Q3 non-GAAP gross margin improved to 38.5%, up 30 basis points sequentially and 490 basis points year-over-year.
- This improvement was due to increased revenue volume, pricing optimization, and cost reductions, which significantly contributed to the company's profitability.