Coherent Leads 13% Optical Rally as AI Demand Returns

By Grace Kim

On November 9, Coherent shares rose 13% to $217.80 in early trading, extending an AI-linked rebound across optical-networking stocks as investors returned to infrastructure names after last week’s technology selloff. Major indexes rose while oil prices fell. The prior selloff reflected fears that Democrats’ midterm wins would bring tighter data-center rules.

What drove the optical rally?

On November 4, Coherent reported fiscal Q1 2027 revenue of $2.37 billion, up 50% from a year earlier, and guided Q2 revenue to a range of $2.55 billion to $2.75 billion. Management tied growth to AI data centers shifting connectivity from copper to optical links.

The September quarter produced negative operating cash flow of $92.7 million against capital expenditures of $775.5 million. J.P. Morgan maintained its $385 price target on November 5. BofA cut its target to $240 from $400 after the report.

The analyst split framed the stock rally as investors weighed strong revenue growth against heavy cash consumption.

Why did the peer gains diverge?

The early share moves covered component suppliers, networking-system vendors and a contract manufacturer:

• Coherent (NYSE: COHR): $217.80, up 13%.
• Lumentum (NASDAQ: LITE): $596.36, up 11%.
• Marvell (NASDAQ: MRVL): $153.40, up 9%.
• Applied Optoelectronics (NASDAQ: AAOI): $52.03, up 4%.
• Ciena (NYSE: CIEN): $264.82, up 9%.
• Fabrinet: $354.69, up 8%.

Marvell expects its all-stock agreement to buy Lumentum to close in the first half of 2028. Lumentum shares therefore largely track Marvell. Marvell traded at $153.40, up 9%, leaving Lumentum slightly ahead of its buyer.

On November 5, Applied Optoelectronics reported record Q3 2026 revenue of $269.9 million. Management guided Q4 revenue to $385 million to $420 million, a range it said fell below consensus.

A shortage of digital signal processor chips limited shipments of Applied Optoelectronics’ next-generation 1.6-terabit transceivers. Power delays at its Texas plant separately restricted production and deliveries.

Applied Optoelectronics lowered its end-2026 capacity goal to more than 500,000 units per month from 650,000. The reduction converts its earlier target into a revised goal rather than confirmed capacity.

Raymond James cut its price target to $165 from $178 while retaining an Outperform rating. B. Riley reduced its target to $45 from $92. The company’s smaller 4% gain indicated that investors continued to consider its supply and power constraints.

Ciena rose 9% to $264.82, while contract manufacturer Fabrinet gained 8% to $354.69. Their moves alongside component suppliers pointed to a sector-wide rally, although the magnitude differed sharply.

How do the business models differ?

Coherent operates vertically from materials and crystal growth through optics and lasers. Its industrial segment serves semiconductor equipment, AI server circuit-board drilling and fusion applications. This gives the company exposure beyond datacenter transceivers.

Lumentum focuses on high-speed transceivers, optical components and optical circuit switching. Marvell plans to place that portfolio within its own chip business after the acquisition closes.

Applied Optoelectronics operates at a smaller scale and relies heavily on transceivers, a cable television broadband business and a short list of large customers. That concentration makes component shortages and factory power more consequential for near-term shipments.

Coherent CEO Jim Anderson said on the November 4 earnings call: “I think for a lot of our customers, I think it’s really important that they have an independent photonic optical supplier and partner.” Anderson presented the pending Marvell combination as an opening for Coherent to retain that role.

Which constraints matter next?

Coherent now faces a test: turning heavy capital spending into positive cash flow while delivering its Q2 revenue outlook. The bullish case rests on multi-year customer agreements, expanding margins and management’s statement that calendar 2027 was “basically booked out.”

The bearish case centers on cash drain, rising debt and BofA’s reduced target. Those factors leave the stock’s recovery dependent on financial execution rather than demand alone.

For Applied Optoelectronics, component supply remains the near-term constraint. Management expects the digital signal processor shortage to improve in Q1 2027, while the Texas power issue remains a separate threat to shipments and monthly capacity.

Fresh policy headlines on data-center rules could revive the sector selloff. That risk supports a cautious investor stance while Coherent’s cash burn plays out and Applied Optoelectronics works through its supply constraints.

The next commercial test is whether Coherent turns heavy spending into positive cash flow while Applied Optoelectronics moves back toward its monthly capacity goal as chip supply improves in early 2027.