Coherent Slashes Debt to $3.2B, Achieves 1.7× Leverage for AI Growth
Coherent has cut long-term debt from $4.2 billion to $3.2 billion by selling its aerospace and defense business for $400 million and offloading its materials-processing tools division to Bystronic. A reduced leverage ratio of 1.7× (down from 2.3×) and $899 million cash position fund its Indium Phosphide capacity expansion for AI infrastructure.
1. Deleveraging Through Asset Sales
Coherent cut long-term debt from $4.2 billion in 2023 to $3.2 billion by divesting its aerospace and defense business for $400 million in late 2025 and selling its materials-processing tools division to Bystronic. These moves shed non-core, lower-margin assets and redirected proceeds toward debt reduction.
2. Improved Leverage and Liquidity
After these transactions, the company reduced its debt leverage ratio to 1.7× in Q2 fiscal 2026 from 2.3× a year earlier and held $899 million in cash as of December 2025. The improved balance sheet lowers interest expense and enhances financial flexibility.
3. Focus on AI Infrastructure Growth
Management plans to scale Indium Phosphide production to support 1.6 teratransceiver output, aiming to maintain a book-to-bill ratio above 4× in the datacenter segment. This expansion, funded by strengthened liquidity, aligns with demand growth in AI infrastructure and optical networking.
4. Valuation and Stock Performance
Over the past 12 months, the stock has risen 281.5% and trades at a 12-month forward P/E of 38.4×, above the industry average of 29.8×. Analysts have raised fiscal 2026 and 2027 earnings estimates by 5.5% and 13.1%, and the company holds a Buy ranking.