• Earlier in May 2026, Coherent reported strong quarterly results, with revenue and earnings surpassing analysts’ expectations on the back of robust datacenter and communications demand.
• At the same time, NVIDIA entered a multiyear agreement involving a US$2.00 billion investment in Coherent to expand AI-focused optics supply, R&D, and U.S. manufacturing, underscoring Coherent’s importance in the AI data center supply chain.
• Now we’ll examine how NVIDIA’s multiyear US$2.00 billion optics and manufacturing partnership may reshape Coherent’s existing AI-focused investment narrative.

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Coherent Investment Narrative Recap

To own Coherent today, you have to believe AI data centers and high speed communications remain the primary engine for growth, while margin pressure and capital intensity stay manageable. NVIDIA’s US$2.00 billion partnership directly supports this AI optics thesis and reinforces the near term catalyst around datacenter demand, but it also amplifies exposure to customer concentration and the risk that large capex bets on new capacity might not be fully absorbed.

The NVIDIA agreement, which includes a multiyear optics supply commitment, joint R&D, and expanded U.S. manufacturing, is the clearest link between Coherent’s recent earnings strength and its AI-focused catalyst. It ties directly into Coherent’s plans to ramp indium phosphide capacity and deepen its role in AI data center interconnects, while potentially heightening the stakes if competitive pricing or a shift in hyperscaler spending weakens utilization and margins.

However, investors should also be aware that if hyperscaler orders slow or competitive pricing intensifies, Coherent’s enlarged AI optics footprint could...

Coherent’s narrative projects $18.3 billion revenue and $2.3 billion earnings by 2029.

Uncover how Coherent's forecasts yield a $371.16 fair value, in line with its current price.

Exploring Other Perspectives

Some of the most pessimistic analysts were only modeling about 11.6 percent annual revenue growth and US$735.0 million in earnings by 2028, so compared with the current AI optics rush and the NVIDIA deal, their caution highlights how differently you might weigh capacity build out and utilization risk, and why it is worth examining several viewpoints before you decide what this new information means for you.

Explore 6 other fair value estimates on Coherent - why the stock might be worth as much as $380.62!

Decide For Yourself

Don't just follow the ticker - dig into the data and build a conviction that's truly your own.

• A great starting point for your Coherent research is our analysis highlighting 2 key rewards and 3 important warning signs that could impact your investment decision.
• Our free Coherent research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate Coherent's overall financial health at a glance.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.