Coherent Lands A $20 Billion Five-Year AI Supply Deal And Lifts Its Gross Margin Goal Above 45%
The laser maker's CEO says the customer is a name "you would definitely recognize," with revenue from the deal due to start in early calendar 2028.
Coherent, which makes lasers, optical transceivers and engineered materials, signed a long-term supply agreement worth approximately $20 billion over five years with a major AI company, CEO Jim Anderson said on the company's first-quarter fiscal 2027 earnings call Wednesday. Revenue from the PhotonLink deal is due to begin in early calendar 2028, on top of the previously announced agreement with Nvidia.
A customer 'you would definitely recognize'
Pressed by a Barclays analyst on who the buyer is, Anderson said it is "a leading AI data center customer name you would definitely recognize." He said the whole $20 billion concerns PhotonLink, Coherent's integrated optics platform, and is anchored by its 400 milliwatt CW laser, though the company sells more than that laser, a higher-level solution.
Anderson said he expects Coherent to sign more PhotonLink agreements in coming quarters. He said almost every long-term agreement it has signed includes an upfront payment, either a prepayment or engineering payment, which helps fund the capacity built for that customer.
The 400 milliwatt laser is covered by Coherent's Nvidia partnership and is expected to begin generating revenue this quarter, Anderson said.
PhotonLink's ramp
Anderson said PhotonLink revenue should exceed $100 million in the March quarter and $250 million per quarter before the end of calendar 2027. Beyond its two anchor customers, Coherent has more than 10 CPO engagements, more than 10 NPO engagements and more than five chip-to-chip engagements, he said. He expects PhotonLink to become a multi-billion dollar product line.
Asked by a Citi analyst about the estimate of about $15,000 of content per chip, Anderson said customers may use all or part of the portfolio. He called the business "Greenfield Growth," because most adoption comes from copper links converting to optical.
A higher margin bar
CFO Sherri Luther said Coherent now expects its first quarter with gross margin above 45% before the end of calendar 2028. That is 300 basis points above the long-term target set 18 months ago, she said. First-quarter adjusted gross margin was 40.6%.
The company reported record first-quarter revenue of $2.37 billion, up 16% from the prior quarter and 50% from a year earlier. Adjusted earnings were $2.09 a share. For the second quarter it guided to revenue of $2.55 billion to $2.75 billion and adjusted earnings of $2.28 to $2.48 a share.
The company's market value was $40.9 billion as of Wednesday.
Anderson said Coherent expects to ship a small amount of PhotonLink revenue this quarter, then more than $100 million in the March quarter.
Sources
- Coherent Earnings Prediction Market Preview: What Will Jim Anderson Say? — Yahoo Finance
- Coherent: Fiscal Q1 Earnings Snapshot — Associated Press
- COHR Stock Draws Upgrade As Marvell’s $115B Lumentum Deal Highlights ‘Value Of Scarce AI Optics’ — Yahoo Finance
- Coherent's Q1 revenue surges 50% as it takes advantage of optical connectivity in data centers | Seeking Alpha — seekingalpha.com
- Coherent (COHR) Stock Sees Modest Fair Value Cut As Analysts Weigh AI Demand Risks — Yahoo Finance
