Coherent Corp. has announced exceptional financial outcomes for its fiscal year 2025, showcasing significant revenue growth and enhanced profitability. The company's strategic focus on photonic innovation, particularly in data centers and communication technologies, has yielded impressive results, positioning them for continued expansion in an evolving technological landscape. Their commitment to strengthening supply chain resilience and investing in advanced manufacturing capabilities, including a pioneering 6-inch Indium Phosphide production line in the U.S., underscores a forward-looking strategy aimed at capitalizing on emerging market opportunities in AI, communications, and industrial applications.
In their recent earnings call for the fourth quarter and full fiscal year 2025, Coherent's CEO, Jim Anderson, highlighted a remarkable year, with total revenue reaching an unprecedented $5.81 billion, marking a 23% increase year-over-year. Non-GAAP earnings per share saw an impressive threefold rise compared to the previous fiscal year. The data center and communications division was a primary catalyst for this growth, reporting a 51% surge in revenue for the fiscal year and a 39% increase in Q4 alone. This segment's success was largely attributed to burgeoning demand from AI data centers and a recovery in the telecom sector. The company successfully initiated revenue shipments of its 1.6 Tbps transceivers in Q4, with further ramp-up anticipated throughout calendar year 2026. Significant advancements are also underway for 3.2 Tbps transceivers, underpinned by Coherent's proprietary 400G per lane differential EML technology. Furthermore, Coherent is making strides in CPO (Co-Packaged Optics) technologies, increasing production of critical CW lasers, and bolstering its internal Indium Phosphide manufacturing, essential for both pluggable transceivers and CPO applications.
A pivotal development for Coherent is the inauguration of the world's first 6-inch Indium Phosphide production line at their Sherman, Texas facility. This initiative promises substantial benefits in terms of increased capacity and reduced production costs, reinforcing Coherent's industry-leading supply chain flexibility. Complementing this, the company announced an expanded multi-year agreement with Apple for a new generation of VCSEL products, reinforcing their strong U.S. manufacturing footprint and underscoring the strategic importance of domestic production for key customers. Revenue from this partnership is expected to commence in the latter half of calendar 2026. Coherent also unveiled initial revenue from its new optical circuit switch (OCS) in Q4, a non-mechanical solution based on digital liquid crystal technology, which is projected to further expand their addressable market and contribute significantly to revenue in 2026. Despite a slight dip in industrial segment revenue, primarily due to softness in silicon carbide demand, the company remains optimistic about long-term growth in industrial lasers and related services, particularly in OLED fabs and recurring service revenue streams.
Financially, Coherent's Q4 non-GAAP gross margin stood at 38.1%, with full-year gross margin improving by 358 basis points to 37.9%. CFO Sherri Luther noted that these improvements were driven by pricing optimization and cost reductions, despite some headwinds from unfavorable foreign exchange rates. The company successfully paid down $437 million in debt in fiscal 2025, reducing its debt leverage ratio to 2 times. The recently announced sale of its aerospace and defense business for $400 million is expected to further reduce debt and enhance EPS, allowing Coherent to streamline its portfolio and concentrate investments on core growth areas. Looking ahead to fiscal Q1 2026, Coherent projects revenue between $1.46 billion and $1.6 billion, with non-GAAP gross margin between 37.5% and 39.5%, and non-GAAP EPS between $0.93 and $1.13, signaling continued confidence in their strategic direction and operational execution.
The company's leadership expressed strong confidence in its ability to meet or exceed the long-term financial targets outlined at its Investor Day earlier in the year. The ongoing investments in research and development, particularly in data center and communications, are focused on high-return opportunities, supported by robust demand signals and a proactive approach to capacity expansion. Coherent's commitment to innovation and manufacturing excellence positions it favorably to capitalize on the increasing integration of photonics across various high-growth applications, ensuring sustained financial performance and shareholder value creation in the years to come.