Shares of Coherent Corp (COHR) plummeted 19.52% in after-hours trading on Wednesday following the company's fourth-quarter earnings report and announcement of a significant business divestiture.

While Coherent reported better-than-expected Q4 results, with adjusted earnings per share of $1.00 beating the $0.91 consensus estimate, investors were spooked by the company's weak guidance for the first quarter of fiscal 2026. Coherent projected Q1 revenue between $1.46 billion and $1.60 billion, with the midpoint falling short of analysts' expectations of $1.54 billion.

Adding to the negative sentiment, Coherent announced an agreement to sell its Aerospace and Defense (A&D) business to private equity firm Advent for $400 million. While the company plans to use the proceeds to reduce debt, some investors may view the divestiture as sacrificing a potentially lucrative division. The A&D business generated approximately $50 million in quarterly revenue over the past year.

Furthermore, management's cautious outlook on the industrial segment due to macroeconomic uncertainties and potential tariff impacts raised concerns about near-term growth prospects. Coherent expects its industrial-related markets to be down sequentially in the coming quarter.

The substantial after-hours decline suggests that market participants are recalibrating their expectations for Coherent's future performance in light of these developments. While the company remains optimistic about long-term growth drivers such as AI data centers, the combination of soft guidance, business divestiture, and industrial segment headwinds has prompted a significant selloff in the stock.