Accelerating debt reduction, Coherent sells its aerospace and defense business!
Latest news: Coherent has agreed to sell its aerospace and defense business to private equity group Advent International for $400 million (approximately 2.873 billion RMB).
The transaction was announced on the same day Coherent released its latest full-year financial results. The deal involves approximately 550 employees and 10 operational sites. According to company executives, the business unit generated approximately $200 million in sales over the past 12 months, but its profit margin was below the company's average.
Coherent's Chief Financial Officer Sherri Luther explained the significance of the sale during the latest investor conference call: divesting this business will significantly simplify the company's portfolio, accelerate debt repayment, enhance overall profitability, and refocus investments on areas that can enhance shareholder value.
Coherent's latest balance sheet shows long-term debt nearing $3.5 billion, primarily stemming from the financing arrangements related to the 2022 acquisition of the laser business from the former Coherent company by II-VI.
According to filings with the U.S. Securities and Exchange Commission, Coherent's aerospace and defense business encompasses technologies ranging from high-energy lasers, spectral beam combiners, to large-scale optics, advanced ceramics, and fully engineered universal joint subsystems.
Advent believes the business holds significant potential as an independent entity, and this transaction complements existing investments in the field. Future plans include substantial R&D investments to further solidify the company's leadership position in advanced laser and optical solutions.
In fact, as early as two months ago, Coherent CEO Jim Anderson announced at an investor day that the company would shut down five non-core product lines, exit nine factories, and focus its core business on AI data centers and industrial lasers. In early August this year, Coherent's new factory in Vietnam, which cost US$127 million to build, officially began production, further strengthening its production capacity for silicon carbide and photonic components and enhancing the resilience of its Asian supply chain.
Notably, Coherent recently announced a multi-year supply agreement with Apple, which will continue to use GaAs-based vertical-cavity surface-emitting lasers (VCSELs) produced at the Sherman factory for "Face ID" security and other 3D sensing applications in iPhones and iPads.
According to reports, the factory is a large-scale compound semiconductor wafer manufacturing facility primarily dedicated to producing indium phosphide (InP) and gallium arsenide (GaAs) components. Its new 6-inch InP production line is set to begin operations this month, marking the world's first 6-inch InP production platform.
Looking specifically at Coherent's financial report for the 2025 fiscal year (July 1, 2024, to June 30, 2025). According to the financial report, Coherent achieved revenue of US$5.81 billion in the 2025 fiscal year, representing a year-over-year increase of 23%. The GAAP gross margin was 35.2%, up 424 basis points year-over-year; the non-GAAP gross margin was 37.9%, up 358 basis points year-over-year; and the pre-tax profit for the year was US$94 million, compared to a pre-tax loss of US$148 million in the same period last year.
In the fourth quarter of fiscal year 2025 (April 1, 2025, to June 30, 2025), Coherent achieved revenue of $1.53 billion, a 2% increase from the previous quarter and a 16% increase year-over-year, setting a new record for quarterly revenue. By market segment, Coherent's data center and communications market revenue was $942 million, up 38.94% from $678 million in the same period last year; industrial market revenue was $587 million, down 7.7% year-over-year.
Coherent stated that the significant revenue growth in the fourth quarter was primarily driven by increased demand for AI data centers and the ongoing recovery in the telecommunications industry. Sales of products used in data centers and other communications deployments grew by 51% year-over-year, accounting for 59% of total revenue.
Additionally, Coherent provided guidance for its next quarter's performance. The company stated that the sale of its aerospace and defense business is expected to be completed in the first quarter of fiscal year 2026 (July 1, 2025, to September 30, 2025), and excluding the approximately $20 million in revenue expected from the sale, the company's next quarter's revenue is projected to be between $1.46 billion and $1.6 billion.
Following the announcement, Coherent's stock price on the New York Stock Exchange fell by nearly 20% in after-hours trading. While this decline erased the gains that had driven the stock to a record high over the past month, the stock has still seen strong growth over the past 12 months. As of the time of this report, the stock is trading at approximately $93, with a total market capitalization of approximately $14.55 billion.
Notably, industry insiders believe that one key driver of Coherent's future growth could be its potential role as a supplier for NVIDIA's new optical network switches.
