Segment revenue mix

Coherent’s reportable segment structure changed in FY2026: from Networking / Materials / Lasers (FY2024–FY2025) to Datacenter & Communications / Industrial (FY2026 onward). The structural rationale: as AI-datacenter demand became the dominant variable, the operating-business view simplified to two halves — the AI-cycle-driven Datacenter & Communications, and the cyclical-industrial Industrial. The translation is straightforward: Datacenter & Communications ≈ legacy Networking; Industrial ≈ legacy Materials + Lasers combined.

Translation table

FY2026 reportable segment	Constituent FY2025 segments	Approx. % of FY2025 revenue	FY2026 H1 % of revenue
Datacenter & Communications	Networking ($3,421M FY2025)	~59%	~71%
Industrial	Materials ($954M) + Lasers ($1,435M) = $2,389M FY2025	~41%	~29%

The mix shift is the structural margin story: the higher-margin segment is growing while the lower-margin segment is roughly flat-to-down.

FY2024 → FY2026 H1 segment trajectory

Period	Total ($M)	Networking / D&C ($M)	Materials ($M)	Lasers ($M)	Industrial ($M)	D&C share	Industrial share
Q3 FY2024	1,213	616	~245	~352	n/a	51%	49%
Q4 FY2024	1,314	685	~250	~379	n/a	52%	48%
FY2024	4,708	2,296	1,017	1,395	2,412	49%	51%
Q1 FY2025	1,348	766	230	352	582	57%	43%
Q2 FY2025	1,435	819	247	369	616	57%	43%
Q3 FY2025	1,498	897	237	364	601	60%	40%
Q4 FY2025	1,529	945	~240	~344	584	62%	38%
FY2025	5,810	3,421	954	1,435	2,389	59%	41%
Q1 FY2026	1,580	~1,097	combined	combined	~483	69%	31%
Q2 FY2026	1,686	1,208	n/a	n/a	478	72%	28%
FY2026 H1	3,266	~2,305	n/a	n/a	~961	71%	29%

Q1 FY2026 segment split is an estimate; actual disclosure not separately surfaced in this initial pass. Q2 FY2026 disclosure ($1,208M / $477.6M) is from the press release ✓.

YoY growth rates by segment

Segment	FY2024 → FY2025	FY2025 → FY2026 H1 ann.)
Datacenter & Communications (≈Networking)	+49%	+30%+
Industrial (≈Materials + Lasers)	–1%	–7% YoY
Total	+23%	+17%

The acceleration in Datacenter & Communications in FY2025 (+49%) is the AI-cycle inflection point. The deceleration in FY2026 (+30%+) reflects (a) tougher comp base and (b) ongoing supply-constraint capping the realized growth rate; demand growth would otherwise be higher. The Industrial decline reflects the August 2025 Aerospace & Defense divestiture (~$400M annualized revenue removed, closing approximately CY2025 H2) plus broader industrial-capex weakness.

AI vs non-AI revenue split

The “AI revenue” label is Coherent’s increasingly central narrative variable, but it is not a separately reported line item. Inferred decomposition for FY2026 H1:

Component	FY2026 H1 revenue est. ($M)	% of total
AI-datacenter optical (transceivers, EML chips, SiPh)	~1,400	~43%
Telecom transport (ROADM, wave-shaper, pluggable coherent, EDFA)	~700	~21%
Non-AI datacom (legacy)	~200	~6%
Industrial fiber lasers + ultrafast + life sciences	~700	~22%
Materials (compound semi, optics, SiC)	~250	~8%
Aerospace & Defense (sold; tail revenue in FY26 H1)	~50	~2%
Total	~3,266	100%

⚠ Analyst-allocation; these are not separately reported. The directional message is clear: roughly half of revenue is AI-cycle-pull-through, and that share is rising sequentially. Telecom transport is structurally stable but small; Industrial is the cyclical drag.

2024–2026 mix-shift outlook

Period	D&C share	Industrial share	Driver
FY2024	49%	51%	Pre-AI-cycle peak
FY2025	59%	41%	AI-cycle inflection
FY2026 (forecast)	~70%	~30%	Datacenter & Communications grows; Industrial flat-to-down + A&D divestiture
FY2027 (forecast)	~75%	~25%	Continued AI-cycle ramp; Industrial recovers modestly
FY2028 (forecast)	~75–80%	~20–25%	CPO ramp adds; Industrial steady

The structural shape: by FY2028, Datacenter & Communications is approximately 3-of-every-4 revenue dollars at Coherent. This concentrates the thesis on AI-photonics specifically and reduces the historical cyclical-ballast role of Industrial.

Margin contribution by segment

Segment-level margins are not disclosed at the gross-margin level but are inferable from non-GAAP composite expansion patterns:

Segment	Estimated GM range	Notes
Datacenter & Communications (D&C)	~38–42%	Mix of high-margin EML + lower-margin module assembly; richer than industrial
Industrial	~32–36%	Industrial laser systems; Materials/SiC mid-tier

⚠ Coherent does not disclose segment-level gross margins separately. The above ranges are inferred from total-company GM trajectory and segment-mix shifts.

The mix-shift toward D&C is margin-positive at the company level — every percentage point of mix moving from Industrial to D&C lifts blended GM by approximately 5–10 bps (rough estimate based on inferred segment GM differential).

Aerospace & Defense divestiture impact

The August 2025 announcement of the $400M sale of the Aerospace & Defense business to Advent (Coherent press release Aug 13, 2025) ✓ is partly responsible for the headline Industrial-segment decline in FY2026. The A&D business contributed approximately $400M annualized revenue. The transaction was expected to close in CY2025 Q3.

Pro-forma growth rates excluding A&D:

Q1 FY2026 revenue +19% YoY pro forma vs +17% reported
Q2 FY2026 revenue +22% YoY pro forma vs +17.5% reported
Industrial Q2 FY2026 –9.9% reported; closer to flat-to-modestly-positive ex-A&D

The pro-forma framing materially improves the headline narrative around Industrial weakness.

Cross-link

Quarterly trend — full quarter-by-quarter detail
Margins and pricing — segment-level ASP and margin economics
Capex cycle — capacity-build by segment
04_market datacenter optics TAM — D&C market context
04_market industrial laser market — Industrial cyclicality
04_market SiC market — Materials franchise (now inside Industrial)