Materials and photonics company Coherent (NYSE: COHR) reported Q1 CY2026 results exceeding the market’s revenue expectations, with sales up 20.5% year on year to $1.81 billion. On top of that, next quarter’s revenue guidance ($1.98 billion at the midpoint) was surprisingly good and 3.4% above what analysts were expecting. Its non-GAAP profit of $1.41 per share was 1.1% above analysts’ consensus estimates.

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“We delivered another quarter of strong financial performance, with accelerating revenue growth, expanding margins, and improving profitability, driven by exceptionally strong demand across our datacenter and communications businesses,” said Jim Anderson, CEO.

Company Overview

Created through the 2022 rebranding of II-VI Incorporated, a company with roots dating back to 1971, Coherent (NYSE: COHR) develops and manufactures advanced materials, lasers, and optical components for applications ranging from telecommunications to industrial manufacturing.

Revenue Growth

A company’s long-term performance is an indicator of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years.

With $6.60 billion in revenue over the past 12 months, Coherent is one of the larger companies in the business services industry and benefits from a well-known brand that influences purchasing decisions.

As you can see below, Coherent’s 16.7% annualized revenue growth over the last five years was incredible. This is an encouraging starting point for our analysis because it shows Coherent’s demand was higher than many business services companies.

We at StockStory place the most emphasis on long-term growth, but within business services, a half-decade historical view may miss recent innovations or disruptive industry trends. Coherent’s annualized revenue growth of 19.8% over the last two years is above its five-year trend, suggesting its demand was strong and recently accelerated.

This quarter, Coherent reported robust year-on-year revenue growth of 20.5%, and its $1.81 billion of revenue topped Wall Street estimates by 1.5%. Company management is currently guiding for a 29.5% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 28.3% over the next 12 months, an improvement versus the last two years. This projection is eye-popping and indicates its newer products and services will spur better top-line performance.

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Adjusted Operating Margin

Adjusted operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies because it excludes non-recurring expenses, interest on debt, and taxes.

Coherent’s adjusted operating margin has risen over the last 12 months and averaged 18% over the last five years. On top of that, its profitability was top-notch for a business services business, showing it’s an well-run company that manages its expenses efficiently and benefits from immense operating leverage as it scales.

Analyzing the trend in its profitability, Coherent’s adjusted operating margin might fluctuated slightly but has generally stayed the same over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

In Q1, Coherent generated an adjusted operating margin profit margin of 20.3%, up 1.6 percentage points year on year. This increase was a welcome development and shows it was more efficient.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Coherent’s EPS grew at an unimpressive 3.9% compounded annual growth rate over the last five years, lower than its 16.7% annualized revenue growth. However, its adjusted operating margin actually improved during this time, telling us that non-fundamental factors such as interest expenses and taxes affected its ultimate earnings.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Coherent, its two-year annual EPS growth of 82.4% was higher than its five-year trend. This acceleration made it one of the faster-growing business services companies in recent history.

In Q1, Coherent reported adjusted EPS of $1.41, up from $0.91 in the same quarter last year. This print beat analysts’ estimates by 1.1%. Over the next 12 months, Wall Street expects Coherent’s full-year EPS of $4.86 to grow 44.5%.

Key Takeaways from Coherent’s Q1 Results

We were impressed by how significantly Coherent blew past analysts’ EPS guidance for next quarter expectations this quarter. We were also glad its revenue guidance for next quarter trumped Wall Street’s estimates. Zooming out, we think this quarter featured some important positives. Investors were likely hoping for more, and shares traded down 6.5% to $321.66 immediately following the results.

Big picture, is Coherent a buy here and now? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here (it’s free).