COHR Q4 2026 - Post-Call Earnings Update
Verdict
- The call carried a number the release did not: management expects its first quarter above $3.0bn of revenue by the end of fiscal 2027, against the $2.05bn just delivered — roughly 50% higher in four quarters.
- Visibility was extended, not just asserted: fiscal 2027 is described as essentially fully booked, purchase orders now reach into calendar 2028, and long-term agreements run to the end of the decade with take-or-pay minimums and pricing fixed for their length.
- The >42% gross margin target was reaffirmed with no date attached, against a 40.2% quarter and a 40.5% Q1 midpoint.
- The one thing that matters: the ceiling is physical, not commercial. Indium phosphide is the sole named constraint — assembly and test have spare capacity — so revenue is now a function of how fast wafers ramp. That makes the $3bn target an execution question, and it is being bought with capital: capex was $556m in the quarter against $131m a year ago and is guided higher again.
- Tone flag: asked directly why incremental gross margin fall-through drops in September after a stronger first half, the CFO gave no quantified answer and redirected to operating expense leverage.
Consensus scorecard
| Metric / basis | Quartr actual | API Ninjas consensus | Beat/Miss | Beat/Miss % |
|---|---|---|---|---|
| Revenue (total revenue) | $2,046m | $1,985m | Beat +$61m | +3.1% |
| EPS (non-GAAP diluted) | $1.74 | $1.62 | Beat +$0.12 | +7.4% |
Guidance & KPIs
| Item | New on the call | Prior guide | Prior-year actual |
|---|---|---|---|
| Quarterly revenue milestone | First quarter above $3.0bn by end of FY2027 | Not previously given | $1.53bn (Q4 FY2025) |
| Non-GAAP gross margin target | Greater than 42%, no timeline | Greater than 42% (Investor Day) | 38.1% |
| Indium phosphide output | Doubles year over year by end of Q1, one quarter early; more than doubles again by end of CY2027 | Double by end of fiscal Q2 | +80% laser units year over year in Q4 |
| Order coverage | FY2027 essentially booked; orders into CY2028; LTAs to end of decade | Not quantified | — |
| Capital expenditure | Up sequentially again in Q1; ~18-month payback claimed | Not quantified | $131m (Q4 FY2025) |
| New revenue starts | CPO in December quarter; multi-rail H1 CY2027; Thermadite cooling H2 CY2027 | CPO in fiscal Q2 | — |
Management commentary
- CEO Jim Anderson placed the entire growth question on supply, not demand: indium phosphide is "our primary constraint," transceiver assembly and test capacity is available, and across data center and communications "we can sell as fast as we can ramp production."
- CFO Sherri Luther defended the margin record — gross margin up in eight of the past nine quarters, 660bp cumulative — but when pressed on why September's incremental fall-through is lower than the first half, she cited only differing timing of initiatives before pivoting to operating expense leverage.
- On the reported prospect of US import restrictions on transceivers, management called the report speculative while confirming that customers have since approached Coherent about manufacturing options, prompting new supply discussions. It has over 20 US production facilities.
- CPO demand was described as pulled in rather than pushed out, with production wafers already started for December-quarter shipments; scale-up CPO revenue remains a second-half calendar 2027 event, unchanged.
- Merchant sales of indium phosphide lasers were ruled out for the near term — internal transceiver demand absorbs every bit of capacity — which removes an optionality some had assumed.
Quality of earnings
- Cash went backwards while earnings compounded. Year-end cash of $2.59bn compares with $3.05bn a quarter earlier, as capital expenditure reached $556m against $290m in Q3 and $131m a year ago, with a further sequential increase guided. Debt leverage still fell to 0.7 times from 2.0 times on $513m of repayments.
- The operating leverage is genuine and already past its own target. Non-GAAP operating expense fell to 18.4% of revenue from 20.1% a year ago, and the Q1 guide of $400–420m on $2.2–2.4bn sits near 17.8% — below the 18% target model set last year, with SG&A down to 8.2% of revenue from 10.3%.
- The gap between reported and pro forma growth is disposals, not underlying momentum. Q4 revenue grew 33.8% reported and 42% pro forma because the pro forma basis excludes the aerospace and defense business sold in Q1 and the Munich product division sold in Q3.
Gotchas & watch items
- Q1 gross margin guidance of 39.5–41.5% still straddles the 40.2% just delivered, and the >42% target carries no date; the one direct question on decelerating incremental margin drew no number.
- Capital expenditure of $556m against $131m a year ago is guided higher again while cash fell $460m sequentially — the roughly 18-month payback is management's assertion, not yet demonstrated in returns.
- With indium phosphide the sole constraint and assembly capacity idle, any wafer-level yield or tooling slip translates straight into revenue shortfall, and the $3bn target has no disclosed cushion.
- Industrial was roughly flat on a pro forma basis for both the quarter and the year; the promised recovery led by semiconductor capital equipment came with no figure and no date.
Event: https://web.quartr.com/companies/3554/events/661756/overview Retrieved: 2026-08-12T22:10:00Z Comparison mode: maximal · Scorecard contract: v1