Understand How Coherent and Lumentum Bypass an AI Bottleneck With Optics

AI clusters have a wiring problem. Copper cables cannot move enough data between GPU racks, so the industry is switching to light. That shift is why Coherent (NYSE:COHR | COHR Price Prediction) and Lumentum (NASDAQ:LITE) just posted the kind of quarters optical suppliers rarely see. Coherent reported Q4 FY2026 on August 12, 2026, and Lumentum reported a day earlier. Both beat. Their paths diverged.

One Owns the Module. The Other Owns the Laser Inside It.

Coherent booked $2.045 billion in revenue, up 33.7% year over year, with the Datacenter & Communications segment producing $1.615 billion, or 79% of sales, growing 59% on a pro forma basis. Non-GAAP EPS came in at $1.74, a 7.60% beat. CEO Jim Anderson framed the setup plainly: “As AI datacenter architectures increasingly transition from copper to optical connectivity, we believe Coherent’s broad photonic technology portfolio and manufacturing scale uniquely position us to deliver accelerating growth.” Translation: own the whole module stack, from indium phosphide wafers up.

Lumentum went the other direction. Revenue hit $1.006 billion, up 109.3% year over year, non-GAAP gross margin reached 50.4%, a 1,260 basis point jump, and operating margin expanded 2,160 basis points to 36.6%. CEO Michael Hurlston said the company is “reaching our target model more than a quarter ahead of schedule.” That is the “pick and shovel” laser engine playing out in real time.

Full Stack vs. Rare Ingredient

Coherent is doubling internal InP output by year-end and doubling again by 2027, plus up to $50M in CHIPS Act funding. Vertical integration is the moat to capture massive top-line revenue at scale. Lumentum retreats up the value chain to own the rarest, most indispensable material-science bottleneck, and that shows in a P/S of 25.66 versus Coherent’s 9.74.

What I Am Watching Into FY27

Coherent guided Q1 FY27 revenue to $2.20B to $2.40B. Lumentum guided to $1.225B to $1.275B with operating margin of 39.5% to 40.5%. I want to see whether Coherent’s 205% one-year rally converts into CPO revenue on schedule, and whether Lumentum sustains margin now that the target model arrived early.

Where I Come Out on the Two

If I want breadth, US manufacturing, and the NVIDIA (NASDAQ:NVDA) relationship anchoring my thesis, I lean Coherent. If I want the steepest margin ramp and the most concentrated exposure to the laser bottleneck itself, Lumentum fits better, even at a 43 forward P/E. Both look expensive after a 679% one-year run on LITE, so the next two quarters of CPO and OCS revenue will be the key checkpoints to watch before the story is proven.

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