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Call sheet · Q3'26

Coherent (COHR)

Q3'26 earnings call · held May 6, 2026 · compared with the Q2'26 call · management-credibility review
11/12
Disclosure score
1 medium, 5 low flags
Financial quality
Bottom line
The sleeper story is indium phosphide becoming an unassailable competitive moat - they're beating their own capacity timeline by a quarter, yields exceed legacy tech, and they're planning 4x capacity over two years while competitors struggle with supply. Everyone sees the AI revenue growth, but the real story is manufacturing scale creating pricing power. The binding constraint was indium phosphide supply, which they're systematically removing faster than expected. Anderson's most revealing quote: 'We expect more than double our internal indium phosphide capacity again by the end of calendar 2027' - that's a quadrupling in two years creating massive barriers to entry. My view changes if they start missing these aggressive capacity targets or if book-to-bill drops below 2x, suggesting demand normalization.

The 30-second version

  • SLEEPER STORY: Indium phosphide capacity becoming a massive moat via 6-inch production
  • Record backlog extends to 2028, but capacity constraints are masking true demand acceleration
  • CPO revenue timeline pulled forward from 'later this year' to 'second half' with scale-up now in H2 2027

What changed this quarter

MetricQ2'26Q3'26Change
Revenue$1.69B (+17% YoY)$1.8B (+27% YoY pro forma)Accelerated to 27% YoY vs 22% YoY
Non-GAAP EPS$1.29 (+35% YoY)$1.41 (+55% YoY)Massive acceleration to 55% YoY growth
Data Center Revenue14% sequential, 36% YoY13% sequential, 37% YoYMaintained double-digit sequential pace
Communications Revenue9% sequential, 44% YoY16% sequential, 60% YoYMassive acceleration across both metrics
Non-GAAP Gross Margin39.0% (+77 bps YoY)39.6% (+105 bps YoY)Continued expansion, now +105 bps YoY
Datacenter & Communications % of RevenueOver 70%75%Higher mix toward fastest growing segment
Operating Cash FlowNot disclosedNot disclosedStill no disclosure of OCF
Capex$154M$290MNearly doubled, ramping capacity aggressively
Debt Leverage Ratio1.7x0.5x (below 1x)Massive deleveraging from NVIDIA investment
Cash Balance$1.5B$3.0BDoubled from NVIDIA $2B equity investment

Accountability tracked

9 new promises made6 narrative shifts flagged7 prior promises scored
Inside the full report
The complete write-up covers the full promise ledger with kept/missed calls, disclosure-quality scoring, the metrics-vanished check, verification items, and the questions to ask next quarter.
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Scores, kept-promise rates, and flags on this site reflect the author's opinion, applying a stated methodology to statements management made on public earnings calls. Informational and educational purposes only - not investment advice, a recommendation, or an offer to buy or sell any security. Sources believed reliable but not guaranteed; the author may hold positions in the securities discussed.

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