Snapshot
- Ticker: COHR (NYSE)
- Bucket: Optics & Networking
- Q4 2025 fund position: $88.6 M (0.48 M sh) — 1.61 % of 13F
- Fiscal year: ends late June
- HQ: Saxonburg, PA
- CEO: Jim Anderson (named mid-2024)
Business Overview
Coherent (formed by II-VI’s 2022 acquisition of Coherent Inc.) is a diversified photonics and lasers company. The portfolio spans:
- Networking (~50 % of revenue) — datacom transceivers, telecom transmission components, and the AI-datacom subset that is the fastest-growing piece.
- Materials (~20 %) — SiC (silicon carbide) substrates for power electronics, optical materials, and ceramics. The SiC business has been under strategic review given EV softness.
- Lasers (~30 %) — industrial lasers, instrumentation, and semiconductor capital equipment.
The 800G transceiver opportunity, datacenter-interconnect (DCI) coherent optics, and the shift to higher-power lasers for advanced chip packaging all favor Coherent in the AI cycle.
Financial Trajectory
| Metric (USD M) | FY22 | FY23 | FY24 | FY25 (Jun-25) |
|---|---|---|---|---|
| Revenue | 3,320 | 4,710 (+42 %, II-VI/Coherent merger comp) | 4,710 (flat) | 5,700–5,800 (+~22 %) |
| Non-GAAP gross margin | — | — | ~36 % (trough) | high-30s % (expanding) |
| GAAP operating margin | — | — | low | low single-digit positive |
| Non-GAAP operating margin | — | — | — | mid-teens |
| Adj. EBITDA | — | — | — | 1,100–1,200 |
| Net income | — | — | loss (amort/impairment) | near breakeven GAAP |
Quarterly Revenue Trajectory
| Quarter | Revenue (~$M) |
|---|---|
| F1Q’25 | 1,350 |
| F2Q’25 | 1,430 |
| F3Q’25 | 1,500 |
| F4Q’25 | 1,530 |
The sequential ramp through FY25 reflects the AI datacom inflection and stable telecom/laser businesses.
Cash Flow & Balance Sheet
| Item | $M |
|---|---|
| Cash | ~900 |
| Total debt (post-II-VI) | ~5,700 |
| Net debt | ~4,800 |
| Net debt / Adj. EBITDA | ~4× and falling |
| FY25 FCF | ~$300–400 M positive (improving) |
The leverage stack is the legacy of the II-VI / Coherent merger debt. EBITDA growth and FCF generation are now both compressing leverage — the deleveraging tailwind is part of the equity thesis.
Segment Detail
Networking (~50 % of revenue)
The most important segment for the AI thesis. Disclosed:
- AI datacom subset is ~30 %+ of Networking segment, growing 50 %+ YoY
- Datacom % of total company: ~25–30 % and rising
- 800G ramping through FY25
- 1.6T sampling FY25; volume in FY26
- Active development on CPO (co-packaged optics) and LPO (linear pluggable optics)
Major customers in datacom include NVIDIA (named indirectly in supply commentary) and the major hyperscalers.
Materials (~20 %)
The SiC substrate business was a major II-VI growth pillar built around EV semi demand. EV softness in 2024–2025 prompted a strategic review:
- 150mm and 200mm SiC substrate capacity in place
- Strategic review through 2025 explored partial divestiture or JV — outcome pending as of Q4 2025
- Optionality if AI / power-electronics demand absorbs SiC capacity
Lasers (~30 %)
Industrial laser, instrumentation, and semicap end markets. Mature, cyclical, mid-teens margin.
Major Strategic Events
| Event | Date |
|---|---|
| II-VI / Coherent merger completed | 2022 |
| New CEO Jim Anderson appointed | mid-2024 |
| Strategic review of SiC business | 2024–2025 |
| Investor day | September 2024 |
| AI datacom inflection visible in numbers | FY25 |
Why It Fits the Thesis
Coherent overlaps Lumentum on the cleanest “AI optics” line (datacenter transceivers and laser components) but is more diversified across industrial and telecom segments. The fund’s position is sized at roughly 1/5 of Lumentum — explicit signal that it prefers the purer optics pure-play but values Coherent for completeness and for its slightly different end-market mix.
The deleveraging story is also distinct: as EBITDA compounds, net debt / EBITDA drops fast, and the equity benefits from both numerator (EBITDA) and denominator (leverage compression).
Forward Outlook
Management targets:
- FY26 revenue: $6.5 B+ (rough, AI datacom led)
- Non-GAAP gross margin: 40 %+ exit FY26
Position History in the Fund
| Quarter | Position |
|---|---|
| Q3 2025 | New |
| Q4 2025 | 0.48 M sh |
Risks
- Diversification dilutes pure-play AI optics exposure — multiple segments dilute the AI signal vs. Lumentum.
- Industrial laser cyclicality in the broader business.
- SiC strategic review uncertainty — outcome could materially affect segment economics in FY26.
- Integration overhang from the II-VI / Coherent merger persists in some segments.
- CPO transition risk — same as Lumentum.
Sources
- Coherent FY24 10-K
- Coherent F1Q26 10-Q
- Investor day materials (September 2024)
- CEO transition press release (Jim Anderson, mid-2024)