Coherent Corp. — First Quarter Fiscal 2027 Earnings Summary

Financial Performance:

• Q1 FY27 revenue was $2.37 billion, representing a 49.9% year-over-year increase and a 56% increase on a pro forma basis compared to Q1 FY26.
• GAAP gross margin was 39.1%, an increase of 254 basis points year-over-year; non-GAAP gross margin was 40.6%, an increase of 184 basis points year-over-year.
• GAAP diluted earnings per share (EPS) were $1.90, an increase of $0.71 year-over-year; non-GAAP diluted EPS were $2.09, an increase of $0.93 year-over-year.
• GAAP net earnings attributable to Coherent Corp. were $385 million, up 70.2% year-over-year; non-GAAP net earnings were $422 million, up 91.0% year-over-year.
• GAAP operating income was $378 million with an operating margin of 15.9%; non-GAAP operating income was $550 million with an operating margin of 23.2%.
• Total operating expenses were $550 million on a GAAP basis and $412 million on a non-GAAP basis.
• Cash and cash equivalents at period end were $1.55 billion, up from $1.16 billion at the end of Q4 FY26.
• Total debt increased to $3.98 billion in long-term debt plus $19.9 million in current portion, compared to $3.21 billion long-term and $7.9 million current at Q4 FY26.
• Net cash used in operating activities was $92.7 million, compared to $46.0 million provided in Q1 FY26.
• Net cash used in investing activities was $200.9 million, primarily driven by $775.5 million in additions to property, plant, and equipment.
• Net cash provided by financing activities was $664.6 million, driven by proceeds from borrowings of other credit facilities ($773.4 million).

Guidance and Future Outlook:

• Q2 FY27 revenue is expected to be between $2.55 billion and $2.75 billion.
• Q2 FY27 non-GAAP gross margin is expected to be between 40% and 42%.
• Q2 FY27 non-GAAP total operating expenses are expected to be between $430 million and $450 million.
• Q2 FY27 non-GAAP tax rate is expected to be between 18% and 20%.
• Q2 FY27 non-GAAP EPS is expected to be between $2.28 and $2.48.
• The company expects to achieve its first $3 billion revenue quarter by the end of fiscal 2027.
• The company expects fiscal 2027 pro forma revenue growth to exceed 60%, more than double the fiscal 2026 pro forma growth rate.
• The company expects to achieve its first $4 billion revenue quarter in fiscal 2028.
• The company expects to achieve its first quarter with non-GAAP gross margin above 45% before the end of calendar 2028.

Business Segments and Product Lines:

• Datacenter & Communications segment revenue was $1.95 billion.
• Industrial segment revenue was $418.6 million.
• Management noted that established businesses delivered strong growth while new growth areas are beginning to ramp.
• The company highlighted the transition of AI datacenters from copper to optical connectivity as a key market driver.

Market and Competitive Landscape:

• Coherent positions its broad photonics platform and manufacturing scale to help customers meet rising needs for bandwidth and energy efficiency in AI datacenters.
• The company operates in more than 20 countries and brings an industry-leading technology stack and supply chain resilience.

Risks and Challenges:

• Forward-looking statements are subject to risks including failure of assumptions, changes in end-market demand, inability to accurately estimate customer demand, and fluctuations in purchasing patterns.
• Risks include the ability to retain and hire key employees, terms of indebtedness, and the ability to service debt.
• Potential risks involve the timely release and market acceptance of new products, competitive responses, and risks associated with R&D investments.
• Risks include international conflict, economic volatility, trade protection measures such as import tariffs, and retaliatory actions by other countries.
• Actual results may differ from projections due to variability in restructuring charges, integration expenses, foreign exchange gains/losses, and share-based compensation.

Management Commentary and Tone:

• CEO Jim Anderson described Q1 as a "strong start to fiscal 2027," citing pro forma revenue up 56% and non-GAAP EPS up 80%.
• CFO Sherri Luther stated that results delivered "substantial operating leverage and durable gross margin expansion," driven by pricing optimization and cost improvements.
• Management expressed confidence in raising the longer-term gross margin target based on the current margin strength.

Other Key Points:

• The company sold its aerospace and defense business, resulting in a gain on sale of business in Q1 FY26 but not in Q1 FY27.
• The company adopted a full-year, normalized non-GAAP tax rate of 19% for fiscal years 2026 and 2027.
• The company filed an investor presentation as an exhibit to a Form 8-K and posted it on its website.
• No dividends were paid on common stock in Q1 FY27; Series B preferred dividends were paid in Q1 FY26 ($33.5 million).
• The company incurred $8.6 million in restructuring charges on a GAAP basis in Q1 FY27.
• The company recognized $73.2 million in share-based compensation expense on a GAAP basis in Q1 FY27.