Coherent's (COHR) topline strength for fiscal Q3 was largely driven by the outperformance of its networking segment, Morgan Stanley said in a note Thursday.

The outperformance of the segment, whose revenue of $897 million beat Morgan Stanley's $841 million forecast, was driven by "strong" artificial intelligence data center demand and sequential growth in telecom, the firm said.

On tariffs, Morgan Stanley said the risk remains material but it will wait for the company's analyst day on May 28 for more details.

The firm took note of the company's diversified production footprint, with about half of its production sites within the US, but added that it "would like to gain more clarity on potential impacts before turning more positive."

Morgan Stanley raised its price target on Coherent to $70 from $47 and maintained its equalweight rating.

Price: 70.01, Change: +0.38, Percent Change: +0.55