Coherent Corp. Advances Optical Interconnects for AI Datacenters

Technology Sector Sees Advances with Coherent Optical Interconnects

Coherent Corp. (NASDAQ: COHR) today announced a significant technological development in optical interconnects, unveiling next-generation 2D Vertical Cavity Surface Emitting Laser (VCSEL) and photodiode arrays. This innovation, optimized for Artificial Intelligence (AI) networks and hyperscale datacenters, aims to address escalating data traffic demands and enhance power efficiency in advanced computing infrastructures. The announcement comes as Coherent's stock has seen substantial appreciation over the past six months, reflecting investor confidence in its strategic direction.

Details of the Advancement in Optical Interconnects

Coherent's new arrays leverage its established 100G PAM4 multimode platform to create a high-density 2D architecture (1.6T, 850 nm, 32x50G NRZ). These components are engineered for short-reach optical interconnects, providing a viable alternative to traditional copper links within datacenters where energy efficiency and compact design are paramount. The company highlighted that this technology is crucial for facilitating the industry's transition toward Near-Packaged Optics (NPO) and Co-Packaged Optics (CPO), which are essential for accelerating AI and machine learning (ML) workloads.

As part of its product roadmap, Coherent plans to introduce 1060 nm backside-emitting (BSE) flip-chip VCSEL/PD array variants in 2026, further expanding its portfolio for future optical networking requirements. This technology is scheduled for demonstration at the ECOC 2025 exhibition in Copenhagen, Denmark, from September 29 to October 1, 2025.

Market Response and Financial Implications

The introduction of these advanced arrays has drawn positive attention within the technology sector, particularly among investors monitoring AI infrastructure developments. Coherent Corp. has demonstrated robust financial performance, with its stock surging over 40% in the past six months, reaching a current trading value around $103.41. Over the last twelve months, the company reported revenue growth of 23.42% and maintains a healthy current ratio of 2.19, indicating strong financial flexibility.

Analyst sentiment remains largely bullish, with ten analysts having recently revised earnings estimates upward, contributing to a consensus rating of 1.6, suggesting a positive outlook. Several leading financial firms, including Needham, Barclays, Stifel, Rosenblatt, and Susquehanna, have issued "Buy," "Overweight," or "Positive" ratings on COHR stock.

Broader Context and Industry Impact

This technological step by Coherent underscores the increasing importance of high-performance optical interconnects in supporting the burgeoning AI/ML sector. The capability to provide power-efficient, compact, and low-latency solutions positions Coherent to capture significant market share in the rapidly expanding datacenter interconnect market. The global VCSEL market, where Coherent holds a substantial share, was valued at $1.3 billion in 2024 and is projected to grow to $1.9 billion by 2029, with some estimates suggesting a rise to $11.47 billion by 2032.

Coherent's strategy aligns with broader industry trends, as datacenters increasingly require solutions that can handle massive data traffic while minimizing power consumption. The company's established market share of approximately 25% in optical communications and its 32% revenue exposure to AI-related products further solidify its leadership in this critical area.

Expert Perspectives

Karlheinz Gulden, Senior Vice President of Laser and Subsystems at Coherent, emphasized the significance of these advancements:

"These arrays represent an important step forward in enabling parallelism, power-efficient design, and flexible architectures that will shape the future of AI and machine learning networks."

This sentiment is echoed by analysts who view Coherent's leading-edge product portfolio, including its anticipated role as one of the first to ship 1.6T transceivers in volume, as a key competitive advantage.

Outlook and Future Considerations

Looking ahead, Coherent's continued innovation in optical interconnects positions it favorably within the evolving AI and datacenter landscape. The upcoming introduction of 1060 nm variants and the showcase at ECOC 2025 will be key events for market observation. Investors will closely monitor the adoption rate of NPO and CPO technologies and Coherent's ability to convert its technological lead into sustained revenue growth and market share expansion in this high-growth sector. The demand for advanced optical solutions is expected to remain robust as AI infrastructure scales, making Coherent a pivotal player in enabling next-generation computing capabilities.