Coherent reported Q2 FY2026 revenue of $1.69 billion, a 17 percent increase year-over-year, driven by sustained strength in its core photonics businesses. On a GAAP basis, diluted EPS rose 71 percent to $0.76, while non-GAAP diluted EPS advanced 35 percent to $1.29. This performance outpaced both the company’s internal targets and consensus estimates, reflecting improved operational leverage and higher volumes across key end markets.

Gross margin improved by 145 basis points on a GAAP basis to 36.9 percent and by 77 basis points on a non-GAAP basis to 39.0 percent. SG&A expense ratio narrowed by 4 basis points year-over-year, while R&D investment held steady at roughly 9.8 percent of revenue. Management attributed margin expansion to ongoing productivity programs, tighter cost controls and the benefits of recent capacity investments coming online.

Demand in Coherent’s Data Center & Communications segment accelerated, contributing double-digit revenue growth in the quarter. The company cited increased deployment of photonic transceivers for AI-optimized servers and heightened purchases from leading cloud providers. Industrial applications also showed early signs of recovery, with laser tools for materials processing rising low-double digits year-over-year, even after adjusting for the recent sale of its Munich-based tools division.

For Q3 FY2026, Coherent projects revenue between $1.70 billion and $1.84 billion and non-GAAP EPS of $1.28 to $1.48. The outlook incorporates $5 million of revenue from the Munich tools business prior to its January divestiture. Management plans to increase capital expenditures to expand production capacity, particularly in Asia, to meet persistent data center demand and support anticipated growth in its industrial photonics segment.