Bank of America Securities has raised its price target on Coherent Corp. to $400 from $365, while maintaining a Neutral rating. The move reflects strong demand for high-speed optical transceivers used in artificial intelligence data centers, particularly the 800G and 1.6T modules that are becoming critical infrastructure for cloud operators scaling up AI clusters.
Financial Performance
Coherent reported fiscal third-quarter revenue of $1.81 billion, a 21% year-over-year increase. GAAP gross margin stood at 37.7%, with adjusted earnings of $1.41 per share. The Datacenter & Communications segment, the company's primary growth driver, surged 41% to $1.36 billion, fueled by AI-related demand and data-center interconnect needs. In contrast, the Industrial segment fell 16% to $444 million.
Market Context and AI Infrastructure Play
Coherent is increasingly viewed as an AI infrastructure play rather than a traditional industrial laser maker. Analyst Vivek Arya noted the company is "best positioned to benefit" from the growing need for faster optical connections. In March, Nvidia committed $2 billion each to Coherent and Lumentum, including multibillion-dollar purchase commitments and access to advanced laser and optical-networking technology. Nvidia CEO Jensen Huang highlighted collaboration on "next-generation silicon photonics" to enhance data movement efficiency.
Coherent shares traded near $374, just below their 52-week high of $385. The stock's rerating hinges on whether AI data-center spending continues to shift from chips to interconnect hardware.
Geopolitical and Trade Risks
Trade tensions between the U.S. and China remain a concern. Coherent CEO Jim Anderson is reportedly part of a U.S. business delegation to China from May 13-15, alongside executives from Micron, Qualcomm, Apple, and Meta. President Donald Trump's visit to Beijing includes discussions on trade and technology restrictions. Polymarket odds suggest a 62% chance of a tariff deal by May 31, but uncertainty persists.
Coherent noted that tariffs and export controls did not materially impact its third-quarter results, but flagged potential risks from global trade disruptions that could reduce revenue, increase costs, or halt production. Supply-chain strains are evident: Chinese exports of certain heavy rare earths have dropped nearly 50% since April 2025 restrictions.
Outlook
Wall Street is watching whether Coherent can expand capacity, defend margins, and maintain market share as clients transition to higher-speed links. BofA's target increase suggests potential, but the Neutral rating indicates that much of the expected progress may already be priced in. The company's ability to navigate geopolitical headwinds while capitalizing on AI-driven demand will be key.
