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Performance was driven by an exceptional demand environment in AI data centers, where optical connectivity is essential for scaling compute power.

Revenue growth acceleration in Q4 was enabled by the rapid expansion of internal production capacity, specifically the transition to 6-inch Indium Phosphide manufacturing.

Gross margin expansion of 152 basis points for the full year resulted from lower product input costs, improved manufacturing yields, and pricing optimization efforts.

Management attributes their competitive advantage to a vertically integrated model and a significant US manufacturing footprint, which provides supply chain resiliency.

The Data Center and Communications segment now accounts for 79% of total revenue, reflecting a strategic pivot toward high-growth AI infrastructure.

Operational efficiency gains from a regional shared services structure allowed EPS to grow at more than twice the rate of revenue growth.

Management expects to achieve the company's first $3 billion revenue quarter by the end of fiscal 2027, driven by 800G and 1.6T transceiver ramps.

Capacity for internal Indium Phosphide is on track to double year-over-year by the end of the current quarter, one quarter ahead of the original plan.

The company anticipates multiple new revenue streams to ramp in fiscal 2027, including Optical Circuit Switching (OCS), co-packaged optics (CPO), and multi-rail systems.

Order visibility is described as exceptional, with customer orders extending into calendar 2028 and long-term agreements (LTAs) reaching the end of the decade.

Capital expenditures are expected to increase sequentially in Q1 to support advanced tooling for volume manufacturing, with a projected 18-month payback period for data center investments.

The company successfully reduced its debt leverage ratio from 2x to 0.7x during fiscal 2026, significantly strengthening the balance sheet.

Industrial segment weakness persists in broader markets, though management expects a return to growth led by semiconductor capital equipment bookings.

Management addressed speculative reports on potential US import restrictions, noting that while speculative, Coherent's 20+ US facilities position them as a primary domestic beneficiary.

The transition from 3-inch to 6-inch Indium Phosphide production is a critical dependency for meeting margin targets, with yields currently exceeding legacy lines.

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Laser production for 800G and 1.6T transceivers grew 80% year-over-year in the June quarter.

The 6-inch wafers provide four times the output at half the cost compared to 3-inch wafers, which is the primary driver for reaching the 42% gross margin target.

Internal capacity is currently fully absorbed by transceiver demand, precluding external merchant sales of Indium Phosphide lasers in the near term.

Management refuted rumors of CPO delays, stating they have seen demand increase and requests for pull-ins from customers.

The company will launch 'PhotonLink' in September, a platform designed to be a one-stop shop for integrated optics spanning the full signal chain.

CPO and NPO offer comparable content value to Coherent; the choice depends on specific customer data center architectures.

LTAs include volume commitments, pricing visibility, and 'take-or-pay' minimum demand guarantees extending through the end of the decade.

Fiscal 2027 is described as basically completely booked out, with customers now placing orders for calendar 2028 to secure supply.