AI demand drives Coherent’s data center revenue higher

Coherent Corp.. (NYSE: COHR) is seeing accelerated growth in its data center division as rising demand for optical connectivity in AI data centers reshapes its revenue mix.
Based on Visible Alpha consensus, data center revenues is expected to rise 88.6% year-on-year to $1.4 billion in the first quarter of fiscal 2027 and 81% to $6.5 billion for the full fiscal year. That would lift the division to account for 62% of the company’s total revenue in fiscal 2027, up from 51% in fiscal 2026 and just 23% in 2023.

The growth is being accompanied by greater visibility into demand. In March, NVIDIA Corp. expanded its longstanding relationship with Coherent through a multi-year strategic agreement that includes a multibillion-dollar purchase commitment, future capacity rights and a $2 billion investment in the company. The deal is intended to support Coherent's expansion of manufacturing capacity and R&D for advanced optical technologies used in next-generation AI infrastructure.

Coherent is also positioning its broader photonics portfolio for the transition to higher-speed optical architecture. At the European Conference on Optical Communication in September, the company launched PhotonLink, an integrated platform spanning the optical signal chain and supporting co-packaged optics, near-packaged optics and emerging chip-to-chip connectivity. The offering combines Coherent’s lasers, silicon photonics, optical components and assembly capabilities as data center architectures move optical connectivity closer to compute and switching silicon.

The demand outlook is prompting a substantial capacity build-out. Coherent plans to expand its indium phosphide manufacturing capacity through 2027 to meet demand for optical networking technologies used in AI datacenters.

Visible Alpha consensus reflects the investment cycle, with first-quarter fiscal 2027 capital expenditure forecast at $377 million, up 262% year-on-year, and full-year spending expected to rise 28% to $1.4 billion.

This article was published by Visible Alpha, part of S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.