Coherent reported on 12 August 2026, after the market closed, on its fourth quarter and fiscal year 2026, ended 30 June.
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The Quarter
| $ millions | The quarter | Last quarter | A year ago |
|---|---|---|---|
| Revenue | 2,046 | 1,806 | 1,529 |
| Change | +13.3% Q/Q | +33.8% Y/Y | |
| GAAP gross margin | 38.5% | 37.7% | 35.7% |
| R&D expense, % of revenue | 10.6% | 10.3% | 10.2% |
| SG&A expense, % of revenue | 13.0% | 14.8% | 16.0% |
| Operating income | 254 | 201 | 6 |
| GAAP operating margin | 12.4% | 11.1% | 0.4% |
| Net earnings | 241 | 191 | (96) |
| GAAP diluted EPS | $1.19 | 0.97 | (0.83) |
And on a non-GAAP basis: gross margin of 40.2% against 38.1%, operating margin of 21.8% against 18.0%, and earnings per share of $1.74 against $1.00.
The Full Year, and This Is the Real Test
| $ millions | 2026 | 2025 | Change |
|---|---|---|---|
| Revenue | 7,118 | 5,810 | +22.5% |
| GAAP gross margin | 37.5% | 35.2% | +233 bps |
| Operating income | 898 | 290 | +209.7% |
| GAAP operating margin | 12.6% | 5.0% | +762 bps |
| Net earnings | 805 | 49 | |
| GAAP diluted EPS | $4.12 | (0.52) | |
| Non-GAAP operating margin | 20.5% | 17.8% | +262 bps |
| Non-GAAP EPS | $5.61 | $3.53 |
And this is the substantive point: the margin improved on both measures, not only the quarterly one.
That distinction is not technical. A single quarter can improve for reasons of timing, mix, or a large order landing inside it. A full year improving by 762 basis points in operating margin describes a structural change.
And the composition shows where it came from: annual gross margin rose 233 basis points, and selling and administrative expenses fell from 15.9% of revenue to 14.7%.
Meaning two sources in parallel - the product earns more, and the expense base grows more slowly than revenue. That is real operating leverage, not an event.
And the company puts it precisely itself: non-GAAP earnings per share grew at more than twice the rate of revenue growth.
What the Company Says About the Cause
CEO Jim Anderson explicitly cites the engine: as AI data centre architectures increasingly transition from copper to optical connectivity, the company believes the breadth of its photonic technology portfolio and its manufacturing scale position it for accelerating growth.
And that is not a general statement - it describes a physical constraint. As data rate and distance rise, copper loses: the signal weakens, heat rises, and the power required to move a bit grows. Light does not suffer the same way.
And CFO Sherri Luther adds the operational side: the company is prioritising investment in expanding manufacturing capacity, in order to meet the acceleration in demand.
And that has a practical implication: when a company says its constraint is production capacity rather than demand, it is describing a market in which price is set by supply.
The Wider Context
This is the second report this week from the same industry. Lumentum reported on 11 August a GAAP operating margin that swung from minus 1.7% to plus 27.8% in the quarter, and an improvement on the annual measure too.
And both point to the same engine: the move to optics inside the data centre.
And against them stands Ceragon, which reported this week a 14.2% rise in revenue and a gross margin that fell from 34.6% to 31.7% - along with a cut to its full-year margin guidance.
The difference between the three is not demand. It is position in the chain - and whoever sells a component that is hard to replace expands margin, while whoever sells capacity into a competitive market does not.
The Market Reaction
The report was published after the market closed, so the market's response will emerge in Thursday's session.
