Coherent Corp.’s Paradox: Record Revenues, Sinking Shares—What’s Spooking the Bulls?
When a company posts record sales, lands a deal with Apple, and rides the AI data center gold rush, you expect fireworks—not a 19% selloff. So why did Coherent Corp. (NYSE: COHR) just lose nearly a fifth of its value in five days?
The Numbers That Should Have Sparked a Rally
On August 13, Coherent reported record quarterly revenue of $1.53 billion (up 16% year-over-year) and full-year sales of $5.81 billion, a 23% annual leap. Non-GAAP earnings per share soared 191% to $3.53, and gross margins swelled to 37.9%—all in the same year the company reduced debt by $437 million. AI and datacenter demand fueled a 61% jump in that segment’s revenue, and the company began shipping its next-gen 1.6T transceivers, with the promise of a $2 billion market expansion from optical circuit switches.
Analyst optimism was palpable: 15 brokers called it a “Strong Buy,” projecting a 17–20% upside with an average target of $109.4. Even the company’s sale of its Aerospace and Defense unit for $400 million—expected to be accretive to EPS—should have been a crowd pleaser.
From Euphoria to Ejection Seat: The Guidance Trap
Yet, as the confetti settled, the market pressed the eject button. Over the past five days, COHR dropped 19.3%, erasing much of its three-month gain (now just +16.3%). What triggered the rush for the exits? Guidance.
For fiscal Q1 2026, management guided revenue to $1.46–1.60 billion—a range that, while solid, undershot Wall Street’s loftier estimates. Non-GAAP EPS guidance of $0.93–$1.13 also deflated some of the AI exuberance. Investors, hypersensitized by recent tech blowups, pounced on any sign of a plateau. The market, it turns out, wants not just growth, but acceleration.
When Macro Meets Micro: The Semiconductor Whiplash
Coherent is in the eye of a multi-layered storm. The compound semiconductor industry is on fire, with the epiwafer market forecast to grow 19% annually through 2029. Yet, the sector is tethered to global cycles and geopolitical jousting. The US-China trade détente remains fragile; tariffs on Chinese imports are still at 55%, and China has countered with 33% tariffs on US goods. While a recent 90-day ceasefire soothed nerves, supply chains are still on edge. Coherent’s heavy US manufacturing footprint—20+ sites across 13 states—offers some insulation, but global customers remain wary.
Short Sellers Sharpen Their Knives
As the bull case met reality, the bear brigade moved in. Short interest ticked up 4.91% in early August, with 6.84% of float now betting against the stock. The “sell the news” crowd was emboldened by a Bank of America downgrade from “Buy” to “Neutral” (despite a price target hike), and a string of analyst price targets coalescing around the $110 mark—suggesting limited near-term upside.
Industry’s Shifting Center of Gravity
Coherent’s pivot away from defense to pure-play photonics is bold. The core thesis—riding the AI datacenter supercycle—remains intact. But markets are forward-looking machines, and the company’s own forecast hints at normalization after a period of breakneck growth. The industrial segment, pressured by the defense divestiture, is expected to contract sequentially, even as cloud and AI remain robust. Investors are now weighing whether the AI-fueled revenue surge can continue, or if the easy gains are behind us.
Beyond the Bottom Line
For now, Coherent’s 19.6% one-year gain is overshadowed by a five-day rout. The paradox is stark: fundamentals are strong, the secular story is alive, but the market is allergic to anything but perfect clarity. In the world of photonics and semiconductors, even a hint of deceleration can dim the brightest outlook.
As investors parse every data point, one thing is clear: in this market, good news isn’t good enough unless it’s better than yesterday’s dreams.