NEW YORK, August 14, 2026, 07:20 EDT
- Coherent shares ended Thursday at $327.33, declining 7.96%.
- Operating cash flow for fiscal 2026 dropped 87% to $79.5 million.
- AI-optics capacity growth drove capital expenditure to $1.10 billion.
Coherent Corp. NYSE:COHR dropped 7.96% on Thursday, even as it reported record-high quarterly revenue. The decline pointed to a deeper concern beyond surpassing earnings estimates: the cash burn from AI-optics expansion is outpacing cash generation. Shares were up 0.68%, at $329.57, in premarket trade on Friday at 06:45 EDT.
Operating cash flow at the company totalled $79.5 million in fiscal 2026, dropping from $633.6 million the previous year. Revenue increased 22.5% to reach $7.12 billion. Capital expenditures surged, coming in at $1.10 billion, more than twice the previous amount.
The company reported preliminary free cash flow of negative $1.02 billion, calculated by deducting capital expenditures from disclosed operating cash flow. In fiscal 2025, free cash flow was positive at $192.8 million.
| Cash-conversion measure | FY2026 | FY2025 | Change |
|---|---|---|---|
| Revenue | $7.12 billion | $5.81 billion | +22.5% |
| Operating cash flow | $79.5 million | $633.6 million | -87.5% |
| Capital spending | $1.10 billion | $440.8 million | +150.2% |
| Preliminary free cash flow | -$1.02 billion | $192.8 million | Shifted to negative |
| Operating cash-flow margin | 1.1% | 10.9% | -9.8 points |
Much of the growth was taken up by working capital. Inventory climbed 79.5% to $2.58 billion, while accounts receivable went up 39.3%. Coherent additionally secured close to $2.00 billion through issuing common shares over the year.
| Balance-sheet measure | June 2026 | June 2025 | Change |
|---|---|---|---|
| Inventory | $2.58 billion | $1.44 billion | up 79.5% |
| Accounts receivable | $1.34 billion | $964.1 million | up 39.3% |
| Cash and short-term investments | $1.99 billion | $909.2 million | up 118.5% |
| Long-term debt | $3.21 billion | $3.50 billion | down 8.1% |
| Q4 diluted shares | 202.2 million | 155.5 million | up 30.0% |
The company delivered a solid operating performance. Revenue for the fourth quarter increased by 33.8% to reach $2.05 billion. The non-GAAP gross margin expanded by 215 basis points to 40.2%. Adjusted earnings per diluted share grew 74% to $1.74.
| Q4 measure | FY2026 | FY2025 | Year-on-year |
|---|---|---|---|
| Revenue | $2.046 billion | $1.529 billion | +33.8% |
| GAAP gross margin | 38.5% | 35.7% | +277 bps |
| Non-GAAP operating margin | 21.8% | 18.0% | +381 bps |
| GAAP diluted EPS | $1.19 | -$0.83 | +$2.02 |
| Non-GAAP diluted EPS | $1.74 | $1.00 | +74.0% |
Datacenter and communications accounted for 79% of sales in the quarter. Revenue for this segment totaled $1.62 billion, marking a 58.6% increase compared to a year ago. Industrial segment revenue dropped 15.8% to $430.5 million. The composition is increasingly weighted.
| Segment | Q4 FY2026 | Q3 FY2026 | Q4 FY2025 | Q/Q | Y/Y |
|---|---|---|---|---|---|
| Datacenter & Communications | $1.615 billion | $1.362 billion | $1.018 billion | up 18.6% | up 58.6% |
| Industrial | $430.5 million | $444.0 million | $511.1 million | down 3.0% | down 15.8% |
| Total | $2.046 billion | $1.806 billion | $1.529 billion | up 13.3% | up 33.8% |
Management projects first-quarter revenue between $2.2 billion and $2.4 billion, with the midpoint suggesting sequential growth of 12.4%. The guidance for adjusted EPS is set between $1.85 and $2.05, also higher than the most recent quarter. These numbers are preliminary company estimates.
Chief Executive Jim Anderson described customer demand as “exceptional.” He noted that multiple new growth platforms were starting to scale. Coherent aims to double in-house indium-phosphide production by the end of the year, with plans to more than double this figure again in 2027.
Investors anticipated even stronger results. Lumentum Holdings NASDAQ:LITE posted revenue growth of 109% and an adjusted operating margin of 36.6%. By comparison, Coherent’s revenue growth of 33.8% and margin of 21.8% appeared less impressive, even with Coherent’s larger scale.
Most analysts reiterated support for the growth outlook following the report, though their price targets varied significantly. The divergence points to optimism about optical demand but differing views on valuation and cash flow generation.
| Firm | Analyst | Recommendation | New target | Prior target |
|---|---|---|---|---|
| Rosenblatt | Mike Genovese | Buy | $500 | $425 |
| Raymond James | Simon Leopold | Strong Buy | $448 | Reiterated |
| Needham | Ryan Koontz | Buy | $420 | $380 |
| Jefferies | George Notter | Buy | $420 | $375 |
| Morgan Stanley | Meta Marshall | Equal Weight | $375 | $330 |
| B. Riley | Dave Kang | Neutral | $345 | $309 |
Coherent holds sufficient financial resources, reporting $1.99 billion in cash and short-term investments. Long-term debt was reduced by 8.1%. However, the company’s ongoing growth remains dependent on working capital, fresh equity, and careful execution.
Risks: AI clients might postpone purchases following Coherent’s expansion of inventory and capacity. Accelerated optical growth could alternatively free up working capital and enhance cash conversion. Competition, dependence on a limited customer base, and the risk of further dilution persist as significant concerns.
Premarket trading showed only a slight recovery on Friday. Investors seek proof that deliveries will surpass the rise in inventories. The upcoming quarter is critical for translating growth into cash flow.
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