Coherent Corp. (NYSE: COHR) shares dropped 5.98% to $195.09 in regular trading, even as the photonics and materials company reported steep revenue and earnings growth for its fiscal first quarter ended September 30, 2026. The stock recovered 2.76% to $200.56 in premarket trading. The sell-off stood in sharp contrast to the underlying results, which included a 50% year-over-year revenue increase and an 80% jump in adjusted earnings per share.

Revenue Jumps 50% as AI Demand Supports Growth

Coherent reported $2.37 billion in revenue for the quarter, a 49.9% increase from the $1.58 billion recorded in the same period last year. Revenue also climbed 15.9% from the previous quarter's $2.05 billion, marking sequential as well as annual gains.

On a pro forma basis, the company recorded 56% year-over-year revenue growth. Its established businesses drove much of the expansion, while newer growth segments began increasing their contributions to the top line. Strong demand for optical connectivity supported the company's performance across its photonics operations. How much these newer segments add to the top line in coming quarters will be a figure to follow as the fiscal year progresses.

Coherent supplies optical technology and materials for communications, industrial applications, and advanced computing infrastructure. The continued buildout of artificial intelligence data centers keeps raising demand for faster data transmission. As a result, the industry-wide transition from copper-based connections to optical technology is creating additional opportunities for the company's products.

Earnings Rise 80% as Profit Margins Expand

Coherent posted non-GAAP diluted earnings per share of $2.09, up from $1.16 a year earlier, an increase of approximately 80% that reflected stronger operating performance across the business. GAAP diluted earnings reached $1.90, compared with $1.19 in the prior-year quarter.

Profitability improved on both accounting bases. The company's GAAP gross margin rose to 39.1%, an increase of 254 basis points year over year, while non-GAAP gross margin reached 40.6%, compared with 38.7% in the corresponding quarter. Pricing improvements and cost reductions helped strengthen margins even as operating expenses climbed.

GAAP operating income increased 45.9% to $378 million, while non-GAAP operating income came in at $550 million. Non-GAAP operating margin expanded to 23.2% from 19.5% a year earlier. The gains reflected stronger operating leverage, as revenue growth outpaced several underlying cost increases.

Coherent Maintains Strong Fiscal 2027 Growth Outlook

Looking ahead, Coherent expects fiscal 2027 pro forma revenue growth to exceed 60%, supported by expanding demand for optical connectivity. Chief Executive Jim Anderson identified AI infrastructure and manufacturing capacity as important growth drivers. The company also anticipates that newer business segments will contribute a growing share of revenue as production scales.

Chief Financial Officer Sherri Luther outlined plans for further gross margin improvement. Coherent aims to surpass a 45% non-GAAP gross margin in a single quarter before the end of 2028. Management linked the target to continued pricing improvements, tighter cost controls, and gains in operating efficiency.

Those stated benchmarks provide concrete signposts for the quarters ahead: pro forma revenue growth measured against the 60% full-year threshold, quarterly gross margins tracked toward the 45% non-GAAP target, and the revenue share contributed by newer segments as production ramps up.

Despite the strong results, the stock faced selling pressure during the regular session before premarket activity showed a partial recovery. The mixed trading performance stood in contrast to the company's revenue expansion, stronger profitability, and ambitious fiscal 2027 growth outlook.