Coherent (COHR): How Optical Technology Became the Hidden Engine of AI Infrastructure

Coherent Corporation stands as a critical enabler in the AI boom sweeping through datacenters worldwide. With a market capitalization of $29 billion, this photonics pioneer has positioned itself at the intersection of two unstoppable trends: explosive datacenter buildouts and the relentless demand for high-speed optical connectivity.

The Revenue Inflection Point

The numbers tell a compelling story. Twelve months trailing revenue of $3.3 billion in mid-2022 is projected to nearly double to $6.7 billion by fiscal 2026—a trajectory driven almost entirely by AI infrastructure acceleration. This growth narrative has manifested dramatically in the stock market, where COHR shares have climbed 290% as investors recognized the secular tailwinds behind optical photonics solutions.

What’s equally impressive is the profitability inflection. While revenues expand at a steady 15% annually, earnings per share are poised to accelerate, with profits projected to surge 42% this fiscal year toward $5 EPS. Recent quarterly results exceeded expectations with a beat-and-raise that prompted analysts to raise full-year EPS guidance by 9.6%—a sign of confidence in the company’s execution.

NVIDIA’s Silicon Photonics Choice

The catalyst that turbocharged COHR valuations arrived at NVIDIA’s March GPU Technology Conference: a strategic partnership to develop silicon photonics networking switches using co-packaged optics (CPO). This collaboration solves a fundamental scaling challenge in modern AI factories.

Within today’s Blackwell NVL72 rack-scale systems, copper wiring still connects GPUs locally. But to scale horizontally across an entire datacenter, traditional electrical interconnects hit physical limits. NVIDIA recognized that only optical solutions could deliver the bandwidth and latency required to link millions of GPUs efficiently.

Coherent is now positioned as a core supplier for this next-generation connectivity infrastructure. As NVIDIA continues embedding optical and photonics solutions across its interconnect products—including Infiniband, Ethernet protocols, and the emerging Co-Packaged Optics lineup like Spectrum-X Photonics Switches—the depth of the Coherent relationship will likely deepen significantly.

Apple’s Multiyear Supply Agreement

Beyond datacenter applications, Coherent’s technology permeates consumer electronics at massive scale. In August, the company announced a multiyear strategic supply agreement with Apple, solidifying a long-standing partnership. The core deliverable: vertical-cavity surface-emitting lasers (VCSELs) that power facial recognition systems in iPhones and iPads globally.

Manufacturing occurs at Coherent’s state-of-the-art facility in Sherman, Texas—a site equipped with 6-inch wafer compound semiconductor epitaxy, fabrication, and device assembly platforms. This infrastructure isn’t limited to consumer hardware; it’s designed as a launchpad for next-generation optoelectronic applications across multiple industries.

Aerospace Transition and Future Growth Vectors

Interestingly, Coherent recently divested its Aerospace and Defense business to Advent Capital for $400 million. This strategic move signals a deliberate capital reallocation toward higher-growth segments in datacenter connectivity and consumer optics—precisely where secular demand is accelerating most rapidly.

Founded in 1971 and now operating across 20+ countries, Coherent has transformed from a niche laser specialist into a foundational technology provider for AI infrastructure, consumer electronics, and industrial applications. As the company channels manufacturing capacity toward its highest-opportunity markets, the next decade promises significant expansion potential.

The convergence of AI buildouts, consumer demand for advanced optical features, and NVIDIA’s architectural choices places Coherent in a structurally favorable position within the semiconductor ecosystem.