Coherent Corp. (COHR) reported revenue of $2,370 million for the three months ended September 30, 2026, up 50% from $1,581 million a year earlier.

The vertically integrated maker of lasers, transceivers and other optical devices said revenue growth was concentrated in Datacenter & Communications, where sales rose 79% to $1,952 million from $1,090 million. The company attributed the $862 million increase to continued strong AI datacenter demand in its Datacenter business and higher Communications volumes from datacenter interconnect, scale-across and traditional telecom applications.

Net earnings attributable to Coherent were $385 million, or $1.90 a share, compared with $226 million, or $1.19 a share, a year earlier. Gross margin was $928 million, or 39% of revenues, up 254 basis points from 37% a year earlier. The company said the increase was driven primarily by lower product input costs, manufacturing efficiencies and yield improvements in Datacenter & Communications, with additional benefit from pricing optimization and lower amortization.

Datacenter & Communications segment profit increased 89% to $509 million from $269 million. The company said the rise was driven by higher revenues, partially offset by increased research and development investment to expand the product portfolio.

Industrial revenue decreased 15% to $419 million from $491 million, after a 16% decline in the prior quarter, primarily because of the September 2, 2025 sale of the aerospace and defense business and the January 30, 2026 sale of the Munich, Germany product division. Industrial segment profit increased 4% to $122 million from $117 million, which the company tied to those divestitures, pricing optimization and lower manufacturing costs.

Research and development expense was $237 million, or 10% of revenues, compared with $155 million, or 10% of revenues, a year earlier. The company said the increase reflected continued investment in product portfolios, particularly in Datacenter & Communications, including transceivers, PhotonLink, optical circuit switches and multi-rail solutions. Selling, general and administrative expense was $305 million, or 13% of revenues, compared with $252 million, or 16% of revenues. Restructuring charges were $9 million.

Interest and other, net expense fell to $19 million from $42 million a year earlier. The company said the $23 million decrease was driven by $13 million of higher foreign-exchange net gains and $12 million of lower interest expense. The year-to-date effective income tax rate at September 30, 2026 was a 6% benefit.

The company said it is investing in manufacturing capacity for Datacenter and Communications, including expanding indium phosphide capacity in Sherman, Texas, and Sweden, to address increased customer demand and an industry-wide shortage. On March 2, 2026, it entered a multi-year strategic agreement with NVIDIA that includes a multi-billion-dollar purchase commitment and future access and capacity rights for advanced laser and optical networking products, and NVIDIA made a $2 billion investment in common stock in a private placement.

Net cash used in operating activities was $93 million, compared with net cash provided of $46 million a year earlier. The company said the shift was driven primarily by a significant increase in inventory levels to support higher revenue growth, partially offset by higher accounts payable and higher net earnings. Additions to property, plant and equipment were $776 million, compared with $104 million a year earlier. Net cash provided by financing activities was $665 million, compared with net cash used of $421 million a year earlier, including $785 million in proceeds from long-term borrowings and revolving credit facilities.

Following U.S. Court of International Trade orders directing refunds of IEEPA duties, the company recorded tariff refunds received and a net receivable for additional refunds it concluded were probable; it said the amounts recorded were not material.