Optics solutions supplier Coherent continues to ride the AI data center wave as its latest earnings saw revenue soar to $1.81 billion, up 21% year over year.

Results for the company’s third quarter (Q3) of fiscal year 2026, ending March 31, were buoyed by revenues from its Data Center & Communications unit, which surged 41% from $968.7 million during Q3 of last year to $1.36 billion this year.

CEO James Anderson told investors that demand for the Saxonburg, Pennsylvania-based firm’s data center-focused optics accounted for 75% of the company’s total revenue in Q3, culminating in a second consecutive quarter of double-digit sequential growth and no signs of slowing.

“We expect the accelerated growth in the current quarter to be driven by both transceivers and optical circuit switch (OCS) systems,” Anderson said. “Within transceivers, we expect growth to be driven by both 800G (800 Gb/s) and 1.6T (1.6 Tb/s). In particular, we expect 800G revenue to grow year over year in calendar 2026, while 1.6T transceivers ramp rapidly through the balance of this calendar year and into next year as a broad range of customers adopt 1.6T.”

Coherent earlier this year debuted quad-channel transimpedance amplifiers (TIA) to power optical transceivers at 800G and 1.6T levels. The firm also makes its own transceivers, including its 1.6T-DR8 line, of which shipments began ramping last August.

To ensure continued demand for its optics is met with ample supply, Anderson told investors that Coherent was aggressively ramping the output capacity of indium phosphide (InP) production. Significant rumblings over potential InP substrate supply headaches, combined with increasing demand for high-speed optics, have seen the firm make moves to shore up its position. It recently received a grant from the Texas Semiconductor Innovation Fund to accelerate plans for a six-inch InP wafer fabrication plant at its site in Sherman – an effort also being backed by Nvidia following a $2 billion investment in early March as part of the chip giant’s ongoing optical spending spree.

Anderson labeled the Sherman facility “the world's most advanced indium phosphide production site and will play an important role in ramping CW laser production for our co-packaged optics (CPO) solutions, including those supporting our Nvidia partnership.”

In addition to the site in Texas, the CEO said a third six-inch production site in Zurich has also been announced, with the company aiming to double its InP capacity this year.

“Looking into next calendar year, we expect to more than double indium phosphide capacity again, a quadrupling over a two-year period,” Anderson told investors. “That unlocks an acceleration in our revenue growth moving forward. That is on existing business. Then you layer on top some new growth vectors coming online. OCS is ramping [and] we expect it to contribute to growth this quarter and grow sequentially.”

CFO Sherri Luther noted gross margin improvements in Q3 were already partly driven by the six-inch ramp, and indicated further margin tailwinds as six-inch output grows to represent half of total InP capacity by year-end.

Looking ahead, Coherent guided Q4 revenue of between $1.91 billion and $2.05 billion, with Anderson telling investors the company expects its fiscal 2027 growth rate to exceed that of fiscal 2026, describing the current June quarter as “a new inflection point in our revenue growth rate moving forward.”