Coherent Cuts Debt to $3.2B, Leverage Falls to 1.7X After $400M Sale
Coherent reduced long-term debt to $3.2B and leverage ratio to 1.7X, financed by a $400M aerospace and defense divestiture and sale of its materials processing division. With $899M cash on hand and plans to expand InP capacity to support over 1.6T transceivers and a >4X datacenter book-to-bill, the company pivots to growth.
1. Strategic Divestitures and Debt Paydown
Coherent sold its aerospace and defense business for $400M in late 2025 and its materials processing product division to Bystronic, using proceeds to cut long-term debt from $4.2B to $3.2B. These moves reduced exposure to lower-margin assets and altered the company’s risk profile significantly.
2. Strengthened Liquidity and Improved Leverage
As of December 2025, Coherent held $899M in cash, supporting a debt leverage ratio of 1.7X down from 2.3X a year earlier. Management emphasizes a transition from debt servicing to balance-sheet strength ahead of planned capital expenditures.
3. Expansion into AI and Datacenter Markets
Coherent is scaling indium phosphide (InP) production to boost output to 1.6T transceivers, aiming to sustain a book-to-bill ratio above 4X in the datacenter segment. This capacity build-out is positioned to capture growth in AI infrastructure demand.
4. Strong Stock Rally and Premium Valuation
Over the past year, Coherent’s stock surged 281.5%, far outpacing industry peers. The shares trade at a 12-month forward P/E of 38.4, above the industry average of 29.8, reflecting investor confidence in the company’s growth trajectory and improved financial stability.