• Revenue: $1.43 billion, up 6% sequentially and 27% year over year.
• Non-GAAP Gross Margin: 38.2%, an increase of 146 basis points sequentially and 363 basis points year over year.
• Non-GAAP Operating Expenses: $283 million, up from $278 million in the prior quarter and $239 million year over year.
• Non-GAAP Operating Margin: 18.5%, compared to 16.1% in the prior quarter and 13.5% year over year.
• Non-GAAP EPS: $0.95, compared to $0.67 in the prior quarter and $0.27 year over year.
• Debt Reduction: Paid down $132 million in debt during the quarter.
• Networking Revenue: Increased 7% sequentially and 56% year over year.
• Laser Segment Revenue: Increased 8% sequentially and 6% year over year.
• Material Segment Revenue: Increased 3% sequentially and decreased 4% year over year.

• Warning! GuruFocus has detected 6 Warning Signs with COHR.

Release Date: February 05, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Coherent Corp (NYSE:COHR) reported a record revenue of $1.43 billion for the second quarter, marking a 6% sequential increase and a 27% year-over-year growth.
• The company achieved a significant improvement in non-GAAP gross margin, reaching 38.2%, which is a 146 basis point increase from the previous quarter.
• Coherent Corp (NYSE:COHR) saw strong growth in its datacom revenue, driven by AI data center demand, with a 79% year-over-year increase.
• The company successfully tripled its indium phosphide production output year-over-year, supporting the growth of its 800 gig transceiver products.
• Coherent Corp (NYSE:COHR) received its first customer order for its new data center optical circuit switch platform, indicating expansion in its data center addressable market.

Negative Points

• The company remains cautious about the near-term outlook for its industrial-related markets, despite some growth in specific segments.
• Coherent Corp (NYSE:COHR) experienced a year-over-year decrease in its materials segment revenue, primarily due to weak automotive market demand.
• The company is still working towards achieving its long-term gross margin target of over 40%, indicating ongoing challenges in cost optimization.
• There is a cautious outlook on the telecom market, despite recent sequential growth, reflecting uncertainty in the pace of recovery.
• Coherent Corp (NYSE:COHR) is facing ongoing headwinds in the automotive sector, impacting its materials business.

Q & A Highlights

Q: Can you provide an update on the telecom market and your outlook for its sustainability? A: Jim Anderson, CEO: We've moved from cautious to cautiously optimistic. We saw 16% sequential growth and 11% year-over-year growth in telecom for fiscal Q2. We expect telecom revenue to be up again in fiscal Q3, driven by data center interconnect growth and improvements in the traditional telecom transport market.

Q: Could you elaborate on the Optical Circuit Switch (OCS) platform and its market potential? A: Jim Anderson, CEO: The OCS platform uses digital liquid crystal technology, offering advantages in latency and power efficiency. We received our first customer order in fiscal Q2 and expect initial revenue in calendar 2025. We'll provide more details on the market opportunity at our investor day in May.

Q: How does Coherent view the impact of co-packaged optics (CPO) on its business? A: Jim Anderson, CEO: We see CPO as a net accelerator for the optical networking market, primarily in scale-up applications. Coherent is well-positioned to grow in both pluggable transceivers and new form factors like CPO, leveraging our broad portfolio of photonic technologies.

Q: What are the key drivers for gross margin improvements, and what can we expect going forward? A: Sherri Luther, CFO: Q2 saw a 150 basis point sequential improvement in gross margin, driven by volume, cost reductions, and yield improvements, particularly in Datacom. We continue to focus on pricing optimization and cost reductions to achieve our long-term gross margin target of over 40%.

Q: How is Coherent addressing potential impacts from tariffs and supply chain resiliency? A: Jim Anderson, CEO: We don't expect significant tariff impacts in fiscal Q3. Coherent has built a resilient supply chain with geographic diversity and vertical integration, providing flexibility and adaptability. We haven't seen any pull-forward in demand due to tariffs.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.