Coherent Corp. COHR demonstrated over-reliance on AI in the third quarter of fiscal 2026. The company’s Datacenter & Communications segment’s revenues grew 41% year over year to $1.4 billion, contributing 75% to the top line. While this performance is noteworthy, the contraction in the industrial market raises concentration risks if macroeconomic tailwinds shift.
These elevated levels of concentration can be attributed to the rising demand for AI datacenter infrastructure, primarily 800G and 1.6T transceivers, along with Optical Switch Systems. This expansion masks cyclical corrections on the industrial front of the company. COHR’s industrial segment delivered $444 million in revenues, a major setback from the year-ago quarter’s $529.2 million. On a similar note, lasers and the optoelectronic sub-segment underperform, making them a drag on Coherent’s overall performance.
While we must acknowledge the fact that the surging datacenter gains currently offset the legacy declines, it affects the company’s risk profile. Corporate stability is highly tied to the CapEx budget of a concentrated group of cloud service providers and AI hardware collaborators, as evidenced by COHR’s partnership with NVIDIA. Management is certain about the multi-year customer visibility extending into 2028, and a sequential boost is anticipated for the fourth quarter of fiscal 2026, with the top line rising to $1.91-$2.05 billion.
