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14 Aug 2025
Photonics giant will use proceeds of sale to private equity group Advent to reduce debt; stock drops despite record sales.
Coherent has agreed to sell its aerospace and defense business to the private equity group Advent International, for $400 million.
The deal, announced on the same day that the photonics giant revealed its latest full-year financial results, will affect around 550 employees and see Coherent exit ten locations.
According to company officials, the business unit had delivered sales of around $200 million over the past 12 months, but with lower profit margins than Coherent’s average.
Commenting on the sale during the firm’s latest investor conference call, Coherent CFO Sherri Luther said: “Exiting this business will meaningfully streamline our portfolio, allow us to accelerate the paydown of our debt, increase our profitability, and focus our investments in the areas that enhance shareholder value.”
Coherent’s latest balance sheet shows long-term debt standing at close to $3.5 billion, largely used to finance the 2022 acquisition of the legacy Coherent laser business by II-VI.
Lasers, gimbals, and domes
According to US Securities & Exchange Commission (SEC) filings, Coherent’s aerospace and defense business covers technologies ranging from high-energy lasers and spectral beam combining to large-scale optics, advanced ceramics, and completely engineered gimbal subsystems.
“Our advanced missile warning, electro-optical targeting, and imaging systems are deployed on virtually every US fixed-wing and rotary platform,” notes the firm.
“Our advanced sapphire, germanium, and multispectral domes provide unique protection to our advanced imaging, seeker, and laser solutions that are packaged behind them. The domes provide hemispherical coverage for airborne, naval, and ground-based systems.”
Other high-profile applications include optics for the Lunar Reconnaissance Orbiter (LRO) that provided the first images proving that astronauts’ footprints on the moon remain visible after 50 years, and a telescope for the Geostationary Lightning Mapper that helps to track tornado development and provide faster storm warnings.
Advent managing partner Shonnel Malani said of the deal: “This acquisition is complementary to our existing investments in the sector and underscores our commitment to investing in mission-critical national security technologies.
“We are excited to partner with the talented management team, and we plan to invest significantly in research and development to further solidify the business’s leadership in advanced laser and optical solutions.”
UK-based Advent VP Rory McMahon added: “We see tremendous potential in this business as a standalone entity. Our goal is to build upon its impressive legacy and culture of innovation by providing the resources needed to accelerate production capacity, pursue next-generation opportunities, and meet the evolving strategic needs of its customers.”
InP fab’s 6-inch switch
Meanwhile, Coherent’s CEO Jim Anderson described the firm’s latest fiscal-year performance as “outstanding”, with annual sales revenues up 23 per cent year-on-year to a record-breaking $5.81 billion - driven largely by a 50 per cent jump in sales of products destined for data center and other communications deployments.
Critical to that part of Coherent’s business is the large compound semiconductor wafer fabrication facility in Sherman, Texas, which is used to produce both indium phosphide (InP) and gallium arsenide (GaAs) components.
Last week Coherent announced an expansion of its key supply deal with Apple, which will see GaAs-based vertical cavity surface-emitting lasers (VCSELs) made at the Sherman facility continue to be used for “Face ID” security and other 3D sensing applications in iPhones and iPads.
That deal forms part of Apple’s wider “American Manufacturing Program” announcement, although perhaps more significant for Coherent is an imminent switch to manufacturing InP components on a larger wafer platform.
“I’m pleased to announce that we will begin production this month on our new six-inch InP line [at] the Sherman facility,” Anderson told investors. “This is the world’s first six-inch InP production platform, and is expected to provide us [with] significant advantages in terms of both lower cost and higher volume production.”
Outlook disappoints
The CEO characterized that switch as part of a broader strategy to invest in US manufacturing, which currently extends to 20 sites across 13 states.
Anderson also highlighted that InP is used across a number of different products, including externally modulated lasers (EMLs) for optical transceivers, and continuous-wave emitters crucial to both silicon photonics and co-packaged optics (CPO) applications for data center links.
For the latest financial quarter, Coherent posted sales of $1.53 billion - up 16 per cent year-on-year, and another record-breaking figure.
And while restructuring charges and other one-off costs pushed the firm to a pre-tax loss of $63 million for the June quarter, the full-year figures showed annual pre-tax earnings of $94 million, compared with a pre-tax loss of $148 million this time last year.
Looking ahead, Luther and Anderson said that sales in the September quarter should land somewhere between $1.46 billion and $1.60 billion.
• That outlook appeared to disappoint financial markets, with Coherent’s NYSE-listed stock price dropping in value by close to 20 per cent in after-hours trading following the update.
Although that wiped out gains made over the past month that had sent the stock to an all-time high, it remains strongly up over the past 12 months, and, trading at around $92, equivalent to a market capitalization in the region of $14 billion.
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