Coherent's the name in the AI trade nobody outside the industry has heard of, but it's basically the connective tissue holding the whole optical layer together. They make optical transceivers, the parts that convert electrical signals into light and back so data can move fast between GPUs and switches inside AI data centers. The bigger the clusters get, the more of this stuff is needed, and Coherent's one of the main suppliers.
NVIDIA took a $2B equity stake in Coherent and signed a multi-year supply deal on top of it, so NVIDIA's now both a customer and a shareholder here. That's not a small signal, that's NVIDIA locking down guaranteed access to manufacturing capacity because they clearly don't want to risk a shortage.
Numbers back it up. On the Q3 call management said AI data center demand has filled optical transceiver capacity through at least 2028, some contracts running to 2030. Q3 fiscal 2026 revenue was $1.81B, up 21% YoY, Datacenter and Communications making up 75% of sales. Non-GAAP EPS up 55% to $1.41. Q4 guide came in at $1.91-2.05B revenue, EPS $1.52-1.72, both above consensus. They're doubling indium phosphide capacity by end of this quarter and more than quadrupling it by end of 2027, funded directly off the NVIDIA deal and the backlog it locked in.
Stock's up over 300% in the past year, trading near 52-week highs around $440. Jefferies and Rosenblatt both raised targets after Q3, Rosenblatt bumped its FY27 revenue forecast by roughly $1B on stronger transceiver and optical switch demand than they'd modeled.
I keep going back and forth on how much of this is already in the price versus how much room is actually left. A lot of the future demand feels priced in already, and they still have to execute a rapid capacity buildout without a yield stumble or supply chain hiccup, on top of real competition from Lumentum and Applied Optoelectronics.
Genuinely curious what people who've followed this longer than me think. How have their yield ramps gone historically when they've scaled capacity this fast? Is the NVIDIA stake actually a moat here or does that kind of customer concentration cut both ways if the relationship ever sours? And is anyone actually in [Coherent](https://www.stoxcraft.com/stocks/coher) at these levels, or waiting for a pullback before touching it?