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05 Feb 2026
Data center infrastructure boom continues to power revenue growth, as semiconductor industry momentum returns.
Diversified photonics and industrial laser vendor Coherent has posted sales revenues of $1.69 billion for the closing quarter of 2025, up nearly 18 per cent year-on-year despite the recent sale of the firm’s aerospace and defense business.
That increase is largely due to the continued boom in demand for optical transceivers and other photonic components that underpin data center infrastructure, with CEO Jim Anderson highlighting the firm’s rapid shift to critical device production on 6-inch indium phosphide (InP) wafers at facilities in Texas and Sweden.
Anderson also reported solid demand increases in the traditional optical telecommunications market, alongside a recent uptick in demand for industrial lasers and related equipment used in semiconductor production.
The CEO also confirmed that Coherent has just completed the previously announced sale of its former Rofin-Baasel laser systems business unit in Munich, Germany, to the Swiss industrial equipment firm Bystronic.
That deal sees around 400 employees transferring to the new owner, whose CEO Domenico Iacovelli said: “We are integrating Rofin's successful and pioneering technology into our Bystronic product portfolio, creating a wide range of applications for various sectors.
“We will continue to support our customers in optimizing and advancing their production to improve their performance so they can remain successful in increasingly competitive markets.”
InP capacity ramp
In a conference call with investors discussing the Pennsylvania-headquartered firm’s latest results, Anderson echoed the comments made by rival Lumentum 24 hours earlier as he described the ongoing boom in demand from AI data center hyperscalers that is currently driving both those businesses.
Pointing out that Coherent’s data center and communications segment now accounts for more than 70 per cent of company revenues - and jumped 34 per cent year-on-year - he described another “step function” increase in bookings for 800 Gb/s and newer 1.6 Tb/s optical transceivers.
“We expect 1.6 Tb/s to ramp significantly over the coming quarters, with the early phase of the ramp driven by our EML [externally/electro-absorption modulated laser] and silicon photonics-based transceivers, followed by our 200 Gb/s VCSEL-based 1.6 Tb/s ramping in the second half of this calendar year,” said the CEO. “Our production team is doing an outstanding job ramping our 6-inch InP [wafer] production.”
That ramp is taking place at the firm’s fabs in Sherman, Texas, and Järfälla in Sweden, with the aim of manufacturing EMLs, continuous-wave high-power laser diodes, and photodiodes on the much more productive wafer format.
As Anderson explained, Coherent’s shift from 3-inch to 6-inch InP wafers means that four times as many chips can be made per wafer at less than half the cost, while simultaneously improving device yields thanks to relatively fewer edge effects.
“We are very pleased with our ramp of the world's first 6-inch InP production lines and expect this production ramp to support significant revenue growth and margin expansion of our transceiver products over the coming quarters,” the CEO said, adding that the goal to double InP capacity by the end of 2026 was already around 80 per cent completed in terms of wafer starts.
CPO for scale-up emerging
However, even that dramatic increase in InP capacity could soon be eclipsed by additional demand for the next generation of photonics technologies wanted to improve data center compute speeds and power efficiency, namely co-packed optics (CPO) and optical circuit switches (OCS).
Anderson noted that Coherent had recently secured what he called “an exceptionally large purchase order” from a market-leading AI data center customer for a CPO solution that is based around a new high-power CW laser that began sampling last year and will be produced on 6-inch wafers at the Sherman fab.
Like Lumentum’s CEO Michael Hurlston, Anderson also sees an emerging shift to using optics for so-called “scale-up” applications in data centers, where optical links replace very short connections currently dominated by less efficient copper wires.
While Coherent’s initial CPO order relates to longer-reach “scale-out” applications, Anderson told the investor call that some customer forecasts for the scale-up applications are “very, very large”, and would require further ramps in capacity.
“As those networks convert to optical over the coming years, the amount of optical content that we gain in the scale-up part of the network is just tremendous,” he said. “We believe the scale-up CPO opportunity will dwarf the opportunity in scale-out. It will be orders of magnitude larger. And we're very well-positioned.”
Industrial uptick
With the communications sector providing most of the business momentum right now, Coherent’s industrial laser business has remained somewhat under the radar. However, Anderson pointed to an uptick in orders recently emerging from the key market for semiconductor capital equipment, telling the investor call:
“We expect [that] to translate into sequential growth for our industrial business in our June quarter and the remainder of this calendar year.”
The CEO also highlighted recent advances revealed by the company at last month’s SPIE Photonics West event, including excimer laser annealing systems for “Gen 8” OLED fabs producing larger-size displays, as well as high-power lasers for direct fusion energy generation, and excimer sources to make superconducting tape used in magnetic fusion applications.
While any significant upturn in the broader industrial laser sector remains to be seen, Anderson described the semiconductor-related pick-up as “very strong”.
On the bottom line, Anderson and his executive team were able to report pre-tax earnings of $168 million for the December quarter, up from $128 million a year earlier.
Looking ahead, they forecast that sales would rise to between $1.70 billion and $1.84 billion in the current quarter, with profit margins improving thanks to ongoing streamlining efforts and the move to 6-inch InP wafer production.
• Despite the broadly optimistic commentary, Coherent’s NYSE-listed stock price dropped in value by around 6 per cent in pre-market trading immediately following the latest update.
However, at just over $200 the stock continues to trade close to its all-time high, and is equivalent to a market capitalization in excess of $30 billion.
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