Coherent Corp. (COHR) saw its stock price plummet 16.37% in after-hours trading on Wednesday, following a series of significant announcements that left investors reassessing the company's future prospects. The photonics leader revealed plans to sell its Aerospace and Defense (A&D) business while also reporting its fourth-quarter fiscal 2025 results.

In a strategic move, Coherent announced an agreement to sell its A&D business to private equity firm Advent for $400 million. The company plans to use the proceeds to reduce debt, a decision expected to be immediately accretive to earnings per share. However, this divestiture of a potentially lucrative division seems to have sparked concerns among investors about Coherent's long-term growth strategy.

Adding to the market's reaction, Coherent's Q4 financial results presented a mixed picture. While the company beat estimates with adjusted earnings per share of $1.00 compared to the expected $0.91, and revenue of $1.529 billion versus the anticipated $1.508 billion, its outlook for the first quarter of fiscal 2026 appeared cautious. Coherent projected Q1 2026 revenue between $1.46 billion and $1.60 billion, with adjusted EPS ranging from $0.93 to $1.13, figures that may have fallen short of some investors' expectations.

The substantial after-hours decline suggests that market participants are recalibrating their expectations for Coherent's future performance in light of these developments. The sale of the A&D business, while potentially streamlining operations and improving the balance sheet, also removes a segment that some investors may have viewed as a key growth driver. Meanwhile, the company's forward guidance, coupled with the broader implications of its strategic decisions, appears to have prompted a significant selloff in the stock.