Coherent Corp (COHR) Stock Forecast & Price Target

Coherent is well positioned to benefit from AI infrastructure spending because its PhotonLink and optical interconnect portfolio directly addresses the fastest-growing need for lower-power, higher-density connectivity across data centers and communications, where revenue already reached $1.95bn in the quarter and grew 79% year over year. The fundamental bull case is reinforced by a ~$20bn, five-year PhotonLink LTA, management’s expectation for PhotonLink revenue to exceed $100mn in the March quarter and $250mn a quarter before the end of calendar 2027, plus exceptional visibility with calendar 2027 essentially booked out. Its six-inch indium phosphide ramp, internal capacity doubling year over year and again by the end of calendar 2027, and gross margin of 40.6% with a path toward 45%+ support operating leverage, while FY27 revenue growth is expected to exceed 60% and EPS is projected to rise meaningfully.

Coherent is facing a fundamental mismatch between optimistic AI-driven demand expectations and tangible execution risk, as management itself says all internally produced datacom laser capacity is already committed while merchant sales remain constrained. The balance sheet has also deteriorated, with net debt rising to about $1.66bn from $629mn in 4Q26 and total debt near $4.0bn, while FY26 operating cash flow fell to $79.5M and free cash flow was negative $1.023B amid $1.103B of capex. Heavy inventory buildup to $2.581B, $11.8B of future purchase commitments, customer concentration at 20% and 12% of revenue, and pressure from competition, ASP declines, tariff risk and supply uncertainty all make margins, cash conversion and earnings quality fragile.