Earnings

Coherent Burned $93 Million In Operating Cash While Revenue Jumped 50%

Capital spending of $776 million and a swelling inventory pile were paid for with $773 million of new credit-line borrowings.

Matteo Parrino Jonathan Ponciano

Matteo Parrino, Jonathan Ponciano

— 3 min read
Share
Coherent Burned $93 Million In Operating Cash While Revenue Jumped 50%

Coherent, which makes lasers, optical transceivers and engineered materials for datacenter, communications and industrial customers, used $93 million of cash in operations in the quarter ended September 30, after generating $46 million a year earlier. Revenue rose 50% to $2,370 million in the same quarter, and the cash gap was covered with borrowing, according to its 10-Q filed Wednesday.

Growth that costs more than it earns

Revenue in the quarter was $2,370 million against $1,581 million a year earlier. Datacenter & Communications revenue climbed $862 million, or 79%, which the company attributed to strong AI datacenter demand, while Industrial revenue fell 15% to $419 million on divestitures. Net earnings attributable to Coherent were $385 million, or $1.90 per diluted share.

The cash flow statement tells a different story. Management blamed a big inventory build for the heavier cash drain, saying stock was being stocked up ahead of sales. Inventories rose to $3,341 million from $2,581 million at June 30, and accounts receivable to $1,604 million from $1,343 million.

Capital spending reached $776 million, versus $104 million a year earlier. Another $528 million of equipment purchases was sitting unpaid in accounts payable. Contract liabilities, which are customer payments received in advance, reached $333 million, against $63 million at June 30 ($48 million current plus $15 million non-current).

Local credit lines fill the gap

Financing supplied the difference. Proceeds from borrowings under other credit facilities were $773 million, and total debt rose to $4,001 million from $3,222 million at June 30.

The borrowing came through foreign subsidiaries. Between June and August 2026, subsidiaries opened local-currency credit lines of up to $475 million, with $205 million outstanding at September 30. A separate facility signed August 12, worth about $950 million, had $598 million drawn. It matures 36 months from first use on August 17, 2026. The company is not a party to or guarantor of either arrangement.

The company's cash and equivalents stood at $1,553 million, up from $1,162 million, while short-term investments dropped to $200 million from $825 million. The weighted average interest rate on total borrowings was 5%, versus 6% a year earlier.

The NVIDIA commitment and the road to $3 billion

Coherent said NVIDIA's $2 billion equity investment in March came with a multi-year capacity agreement that may require incremental investments in equipment, labor and working capital through 2030. The 10-Q adds that the arrangement may result in material future cash requirements. The NVIDIA deal's share-price safeguard lapsed in September untriggered, leaving the share count unchanged.

In its earnings release, the company guided second-quarter revenue to between $2.55 billion and $2.75 billion and said it expects its first $3 billion revenue quarter by the end of fiscal 2027. Management says existing cash, operating cash flow and borrowing capacity will cover its needs for at least the next twelve months.

In the prior 10-Q, operating cash flow for nine months was only $10 million.

The company's guidance for the December quarter is revenue of $2.55 billion to $2.75 billion, the next test of whether sales growth starts converting into cash.

Sources

More on Coherent

All Coherent (COHR) coverage →

Read more