Why Coherent Is Powering the Next Wave of Tech Innovation

Coherent Corp. (COHR) has quietly become indispensable to two of technology’s biggest growth stories: artificial intelligence infrastructure and consumer electronics. With a market cap of $29 billion, this photonics powerhouse is benefiting from synchronized tailwinds across multiple sectors.

The AI Datacenter Boom Is Just Getting Started

The AI/datacenter revolution has fundamentally reshaped demand for optical connectivity. Coherent’s revenue trajectory tells the story: the company is projected to grow from $3.3 billion in trailing twelve-month revenues (as of June 2022) to $6.7 billion by fiscal year 2026—essentially doubling in less than four years. This isn’t speculation; it’s already reflected in the stock’s 290% appreciation.

Founded in 1971 and operating across more than 20 countries, Coherent specializes in generating, modulating, amplifying, and detecting photons for datacenter, communications, and industrial applications. While the company maintains a steady 15% revenue growth rate, profit expansion is accelerating. Management projects earnings per share will surge 42% in the current fiscal year to surpass $5 EPS. Following a strong beat-and-raise in the September quarter, Wall Street analysts bumped full-year EPS expectations upward by 9.6%.

Silicon Photonics Partnership With NVIDIA Opens New Frontiers

A major inflection point arrived in March when NVIDIA (NVDA) announced a strategic collaboration with Coherent at GTC (GPU Tech Conference). The partnership centers on developing silicon photonics networking switches using co-packaged optics (CPO)—technology that will enable AI factories to interconnect millions of GPUs with unprecedented efficiency.

Currently, NVIDIA’s Blackwell NVL72 rack-scale systems rely on copper interconnects within individual racks. However, as deployments scale across entire datacenters, optical solutions become essential. NVIDIA recognizes that photonics deliver both the speed and latency advantages required to connect multiple racks seamlessly. This relationship spans two categories: Interconnect Products (Infiniband and Ethernet protocols) and the emerging Co-Packaged Optics segment, exemplified by Spectrum-X Photonics Switches.

As Coherent becomes more embedded in NVIDIA’s ecosystem, the commercial opportunities could prove substantial. COHR shares surged from below $70 to over $190 during 2024, with this partnership serving as a primary catalyst.

Powering Apple’s Biometric Future

Beyond datacenters, Coherent supplies the optical technology that makes Apple’s Face ID possible. In August, the company announced a multiyear strategic supply agreement with Apple (AAPL) to continue manufacturing vertical-cavity surface-emitting lasers (VCSELs)—the core components enabling Face ID on iPhones and iPads globally.

This production happens at Coherent’s state-of-the-art facility in Sherman, Texas, which houses compound semiconductor epitaxy and fabrication platforms for next-generation optoelectronic applications. The facility represents a springboard for Coherent to expand its optical component portfolio across consumer devices over the coming decade.

Diversified Revenue Streams and Operational Optimization

In August 2024, Coherent made a strategic decision to divest its Aerospace and Defense business to Advent Private Equity for $400 million. This transaction allows the company to sharpen focus on higher-growth markets—AI infrastructure and consumer electronics—where demand for photonic solutions is accelerating most rapidly.

The company’s optical expertise now concentrates on the sectors driving the next phase of technological innovation, positioning Coherent as a critical enabler rather than a diversified conglomerate.

The Broader Significance

Coherent’s positioning reflects a fundamental shift in how technology companies are architected. As AI workloads scale, photonics are transitioning from niche components to core infrastructure. The company’s 290% stock performance isn’t simply about revenue doubling—it reflects market recognition that Coherent holds essential intellectual property and manufacturing capabilities for decades of tech advancement ahead.