COHRCoherent, Inc.

“In March, we announced a strategic partnership with NVIDIA focused on multiple CPO-related products and solutions. This partnership includes both NVIDIA's $2 billion equity investment in Coherent and a multiyear supply agreement extending through the end of the decade. The agreement covers multiple CPO-related products, including our high-power CW laser and provides meaningful long-term visibility into future demand.”

“Our capital expenditures increased to $290 million compared to $154 million in the prior quarter and $112 million in the year ago quarter. These investments were focused on expanding our internal capacity to support the exceptional demand in data center and communications. Due to our strong bookings and the rapidly growing demand, we expect capital expenditures will increase sequentially in Q4.”

“In our data center business, revenue increased 13% sequentially and 37% year-over-year, representing a second consecutive quarter of double-digit sequential growth. We expect data center growth to further accelerate in the current quarter, supported by exceptionally strong demand, improving supply and continued progress in our capacity ramp.”

“we have a public announcement that we did with NVIDIA on our partnership with NVIDIA. That's all around CPO. That's a multibillion-dollar agreement that extends out through the end of the decade. And importantly, is it's multiple different CPO solutions.”

“Our Datacenter & Communications segment continues to be the primary driver of our growth and accounted for 75% of total company revenue in Q3. Growth in this segment accelerated again this quarter with revenue increasing more than 40% year-over-year.”

“Third quarter revenue was a record $1.8 billion, up 7% sequentially from the second quarter, and up 21% year-over-year, driven by growth in AI data center and communications demand.”

“We also continue to make strong progress in co-packaged optics, which we believe represents one of the most important long-term growth opportunities for Coherent. As we have discussed previously, CPO expands our role in AI data center architectures, particularly in the scale-up portion of the network, where optics is expected to increasingly complement and over time, displace copper. We believe CPO represents more than $15 billion of incremental addressable market opportunity.”

“Thermadite is a material that it's a proprietary material that only Coherent provides. And if you look at Thermadite applied to the cooling of, say, a switch chip or an XPU or an ASIC chip relative to the current thermal solutions, which are usually copper-based solutions, a Thermadite or other type of material that we could provide can provide heat transfer that's either 2x better than copper, sometimes up to 5x better than a copper solution.”

“CPO is -- I think it's a transformational growth opportunity for the company. We see that market size as over $15 billion, and that's probably a conservative estimate over the coming years. We've -- CPO revenue for us will start in second half of this calendar year, and that will be initially scale-out CPO revenue. And then we expect to see the beginning of scale-up CPO revenue in the second half of calendar '27.”

“we remain on track to achieve our goal of doubling internal indium phosphide output capacity by the end of this calendar year. And based on current execution, we now expect to reach that milestone 1 quarter earlier than originally planned. We also expect to more than double our internal indium phosphide capacity again by the end of calendar 2027.”

“We have increased our view of the OCS market opportunity to over $4 billion, reflecting expanding use cases across data center interconnect, scale-out and scale-up networks and continued broadening customer engagement. We believe OCS also expands our role into higher-value layers of AI networking infrastructure.”

“we sized the market for multi-rail at least $2 billion over the coming years, and it could be larger than that.”

“Over the longer term, we see important incremental growth opportunities for our industrial technologies and AI data center applications. At OFC, we highlighted our data center XPU cooling solutions and thermoelectric generators, which address the growing thermal and power challenges created by larger AI data centers. Our proprietary Thermadite material can improve thermal performance and help enable higher XPU efficiency, while our advanced materials for thermoelectric generation can improve data center power efficiency through waste heat recovery.”

“definitely, NVIDIA would be kind of the lead customer for us. And then on the second question on multi-rail, yes, definitely higher gross margin structure in that part of the business. You're absolutely right that there's some specific components that go into multi-rail solutions that are quite high margin that also rely on indium phosphide capacity. In general, the way we look at capacity allocation is we allocate indium phosphide capacity to whatever drives the most -- the highest margin dollars.”

“One additional growth driver that we are particularly excited about is multi-rail. These solutions address the increasing need for greater bandwidth and connectivity between AI data centers as workloads become more distributed across multiple locations. We believe multi-rail represents a significant expansion of our communications addressable market opportunity, and we expect initial revenue to begin ramping in the first half of calendar 2027.”

“we have a very broad portfolio of CPO technology that we can bring to the customers. I think that's a real advantage for us. And we -- at OFC, we laid out all the different types of technology that we can bring to a CPO solution. Lasers, the high-power CW lasers is certainly one important component, but it's not the only. We can also bring 200 gig and in the future, 400-gig VCSELs as well.”

“certainly, now that the NVIDIA partnership is public, yes, they're -- clearly, they're probably our lead customer on CPO -- and -- but we do expect other customers to follow as well. And we're engaged with multiple different customers. It's actually a pretty wide set of customers, and we expect to have CPO solutions across multiple customers.”

“The initial 6-inch production contribution came from our Sherman, Texas facility, which is the world's most advanced indium phosphide production site and will play an important role in ramping CW laser production for our CPO solutions, including those supporting our NVIDIA partnership.”

“we really believe the current June quarter kind of represents a new inflection point in our revenue growth rate moving forward, so faster growth this quarter. And as we look forward into fiscal '27, which starts in July, we expect our fiscal '27 growth rate to be above fiscal '26.”

“Customer demand remains exceptionally strong with no signs of attenuation, and our visibility continues to extend further into the future with orders now reaching into calendar 2028 and customer LTAs extending to the end of the decade.”

“at OFC, we demonstrated 400-gig silicon photonics that would enable 3.2T. That -- we demonstrated that, but it could be used in either transceiver or could be used in CPO. So we demonstrated just the capability to do that.”

“we expect 800 gig revenue to grow year-over-year in calendar '26, while 1.6T transceivers ramp rapidly through the balance of this calendar year and into next year as a broad range of customers adopt 1.6T.”

“We expect initial scale-out CPO revenue to begin ramping in the second half of this calendar year with scale-up CPO revenue expected to begin ramping in the second half of calendar 2027.”

“We expect revenue from these products to begin ramping in the second half of calendar 2027.”

“Coherent is a global leader in photonic technology, which is foundational to the performance and scalability of AI data centers and critical to many important industrial applications. We are at the center of an extraordinary expansion in optical networking infrastructure, driven by the rapid growth of AI and the increasing need for bandwidth and energy efficiency.”