Coherent (COHR) shares surged 5.13% during intraday trading on Wednesday, extending a powerful rally that saw the stock jump nearly 12% in the prior session. The optical communications leader continues to benefit from a wave of policy-driven optimism and strong earnings expectations.

The rally was sparked by reports that the U.S. Federal Communications Commission is drafting measures to ban imports of new-model Chinese optical transceiver modules used in high-speed data center fiber communications. The proposed policy aims to protect critical AI data center infrastructure and has fueled a domestic substitution thesis for U.S.-based optical manufacturers. Coherent, which holds the second-largest global market share in optical transceivers at approximately 17%, is viewed as a primary beneficiary of any such restrictions. The company derives over 70% of its revenue from data center and communications businesses, positioning it squarely at the center of this geopolitical tailwind.

Adding to the bullish sentiment, Coherent is set to report its fiscal fourth-quarter earnings on August 12, with consensus estimates projecting revenue of approximately $19.86 billion—a 31.65% year-over-year increase—and adjusted EPS of approximately $1.62, reflecting a 76.71% surge. The combination of a favorable policy backdrop and robust expected earnings growth has sustained strong buying interest in the stock.