Coherent Looks to Root Recovery in AI, Datacom, and Display Tech

JOEL WILLIAMS, NEWS EDITOR
joel.williams@photonics.com

Coherent posted its first-quarter financial results for fiscal year 2024, posting $1.05 billion in revenue, representing a decrease of 13% sequentially and 22% year-over-year. The results, Coherent said in a letter to shareholders, extended the recent downward trend in non-GAAP gross and operating margin, though the company said it expects that the quarter will mark the low point for both metrics.

The overall figures represented a GAAP net loss of $67.5 million for the quarter, as the company cited near-term margin challenges continuing in the quarter. Coherent, which breaks out its earnings into constituent business segments (materials, networking, and lasers), reported revenue declines that spanned all three units.

“While we believe we are well positioned to benefit from any improvement in the macroeconomic environment, we are not assuming we ill see signs of a meaningful rebound across all market verticals in fiscal 2024,” the company said in its shareholder letter. “We are prosecuting a reset year with these external challenges that will persist in the second quarter of fiscal 2024 as our customers continue to take proactive measures to manage inventory and cash to address limited visibility and to reduce their orders to us as the lead times in the market continue to contract.”

The materials segment suffered from a weak consumer electronics market, with demand for tablets and smartphones at an all-time low. Orders were flat on a sequential basis, the company said, but year-over-year orders fell by approximately 40%. The company expects weak demand going into the second half of 2024, though it said that demand for silicon carbide remains strong. The investment from DENSO and Mitsubishi Electric, announced in October, will allow Coherent to better meet demand, which is driving revenue growth constrained by its current production, the company said. The October supply agreements support demand for 150- and 200-mm silicon carbide (SiC) substrates and epitaxial wafers, and Coherent said it anticipates ongoing strength in its wide-bandgap (electronics)/SiC business.

Networking saw a 19% sequential decrease in revenue, though orders related to AI and datacom bode well for the company’s full-year outlook. According to the company, overall orders came in almost 80% above internal forecasts.

In the laser segment, orders came in below expectations, but the company saw a slight sequential increase in revenue. Coherent attributed this to increasing OLED fab utilization and depleted inventory in the display capital equipment market segment. The company added in its letter to shareholders that laser applications in therapeutics continue, while regulatory agencies globally continue to expand approvals. Coherent noted its variety of and expanse of laser offerings in this area, ranging from semiconductor lasers for dermatology applications to excimer lasers for LASIK procedures. Coherent added that its excimer laser annealing market remains strong, supporting its growth in displays.

Lower revenue was partially offset by lower operating expenses driven by its consolidation and restructuring plans. The company plans to continue consolidating sites involved in compound semiconductor fabrication and manufacturing, as well as sites in China and the rest of Asia.

The company expects numbers to trend up in the next quarter, with a more significant boost coming in the second half of its 2024 fiscal year. The expected recovery will be driven by demand trends in AI, datacom, and the capital equipment needs of new display technologies. Second-quarter revenue is projected to come in between roughly $1.08 billion and $1.18 billion.