Photonics company Coherent (COHR -19.52%) wasn't a bright light on the stock exchange Thursday. Despite delivering a second quarter that (slightly) beat analyst estimates, factors such as growth deceleration in a key business segment raised some concern.
With that, more than a few market players assertively sold out of the stock to leave it with a loss of almost 20% on the day. That compared quite unfavorably to the more or less flat trajectory of the S&P 500 index.
A double beat wasn't good enough
For its fiscal Q4 of 2025, Coherent's revenue was $1.53 billion, notching a new record for the company. That figure was also 16% higher year over year. The company's non-GAAP (adjusted) net income grew more modestly, advancing by nearly 9% to $192 million or an even $1.00 per share.
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Both headline figures came in slightly higher than the consensus analyst estimates of $1.51 billion for revenue and $0.92 for adjusted earnings per share (EPS).
Coherent attributed the improvements to the liveliness of certain revenue drivers, such as artificial intelligence (AI) data centers.
However, in a new research note on the company, analyst Vivek Arya from Bank of America Securities pointed out that the company's revenue growth in the data center space was slowing. According to reports he wrote, this was 24% in Q4, but 39%, 46%, and 58% in the three preceding frames.
This was one of the factors that inspired Arya to downgrade his recommendation on the stock to neutral from his previous buy.
Modeling a better first quarter
Coherent management proffered guidance for its current (first) quarter. It believes revenue will fall between $1.46 billion and $1.6 billion, and adjusted EPS will come in at $0.93 to $1.13. Both ranges start well above Q4 of fiscal 2024's $1.31 billion on the top line and adjusted EPS of $0.61.
The average analyst estimates of, respectively, $1.55 billion and $1.03 per share for the present quarter are within the two guidance ranges.
