Q1 FY2027 results
| Metric | Result | Change |
|---|---|---|
| Revenue | $2.37 billion | up 56% year-over-year pro forma |
| Non-GAAP EPS | $2.09 | up 80% year-over-year |
| Non-GAAP Gross Margin | 40.6% | up 184 basis points year-over-year |
| Non-GAAP Operating Margin | 23.2% | up from 19.5% year-over-year |
| Cash Balance | $2.34 billion | Not stated |
Guidance and outlook
- Revenue: $2.55 billion to $2.75 billion
- Non-GAAP gross margin: 40% to 42%
- Non-GAAP operating expenses: $430 million to $450 million
- Non-GAAP tax rate: 18% to 20%
- Non-GAAP diluted EPS: $2.28 to $2.48
How management sounded
Positive (+7 on our -10 to +10 scale). Management highlighted accelerating growth, record results, and improved long-term visibility backed by multiyear agreements. Management sounded more upbeat than on 48% of the 190 calls we cover; most companies sound positive on their own calls, so the comparison says more than the label.
Q&A summary
PhotonLink Ramp
Asked: How does the $20 billion agreement impact the revenue ramp?
Answer: Revenue from the agreement begins in early 2028, but PhotonLink revenue will ramp sooner, exceeding $100 million in the March quarter.
Scale Across/DCI
Asked: What is driving the growth in the scale across business?
Answer: Large AI workloads spanning multiple data centers require greater bandwidth and connectivity, with revenue expected to double by the end of calendar 2027.
OCS Progress
Asked: What is the status of the OCS product group?
Answer: Customer engagement is expanding across scale-out and scale-up networks, and the company is ramping production at two sites to meet demand.
Margin Targets
Asked: Why raise the gross margin target to 45%?
Answer: The increase is driven by new product ramps, the full operational leverage of 6-inch indium phosphide capacity, and pricing optimization.
Competitive Landscape
Asked: What is the impact of the Lumentum and Marlow consolidation?
Answer: Management believes it highlights the criticality of optics and positions Coherent well as an independent supplier to multiple customers.
What to watch before the next call
- Execution of the 6-inch indium phosphide capacity expansion in Zurich.
- Ramp of PhotonLink revenue and its transition from scale-out to scale-up applications.
- Progress on the $20 billion long-term agreement with the major AI customer.
