Is There Longevity in Coherent's AI-Backed Growth Strategy?

COHR rides AI-driven datacenter demand with surging segment growth, margin gains and rising transceiver adoption. Can this momentum last?

Coherent Corp.’s COHR focus on AI and Datacom is yielding tangible results, positioning the company to benefit from the expanding AI and high-performance computing markets. In the second quarter of fiscal 2026, the company recorded 33.5% year-over-year growth in its data center & communications segment’s revenues. This segment generated a whopping 72% of the top line, a significant increase from the year-ago quarter’s 63%.

COHR’s adjusted operating margin expanded by 140 basis points (bps) year over year in the second quarter of fiscal 2026, highlighting its success within the high-margin AI market. This highly promising performance is backed by the company’s future product pipeline. The company reported a surge in its product demand due to growing direct bookings. The steep adoption of 800G and 1.6T transceivers was a prominent factor boosting the top line.

Coherent was successful on the Indium Phosphide (InP) front as well, ramping up 6-inch InP production in Sherman and Jarfalla to address the rising transceiver demand. The company witnessed growing opportunities as the Optical Circuit Switch Systems market added more than $2 billion in addressable market opportunity in the long haul.

Banking on these positives, management hiked the top and bottom-line guidance continually over the past few quarters, signaling the anticipated strong support of AI-fueled datacenter demand. Therefore, it is certain that growth is not a mere coincidence, but a direct influence of COHR’s business blossoming in an environment where datacenters are shouldering immense AI workload.

COHR’s Price Performance, Valuation & Estimates

The stock skyrocketed 448.5% in a year, outperforming the industry’s 29.6% growth and the 31.5% rise of the Zacks S&P 500 Composite. COHR’s industry peer Dave DAVE and GDS Holdings GDS have surged 134.5% and 104.7%, respectively.

1-Year Share Price Performance

Image Source: Zacks Investment Research

From a valuation perspective, COHR trades at a 12-month forward price-to-earnings ratio of 44.46X, higher than the industry’s 21.26X. Dave and GDS Holdings appear more affordable, with forward 12-month price-to-earnings ratios of 12.53X and 27.53X, respectively.

P/E - F12M

Image Source: Zacks Investment Research

Coherent and GDS Holdings carry a Value Score of D, while Dave has a Value Score of C.

The Zacks Consensus Estimate for COHR’s earnings for fiscal 2026 and 2027 has increased marginally and 2.2%, respectively, over the past 60 days.

Image Source: Zacks Investment Research

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

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