Coherent Corp.’s COHR Silicon Carbide (SiC) substrates, a key material for power electronics, are crucial for the energy efficiency of electric vehicles (EVs), and its high-power laser technology is vital for manufacturing EV batteries. The global EV market, which is expected to see a CAGR of 32.5% through 2030 (per Grand View Research), indicates rapid EV adoption to act as a major growth vector for COHR’s business.
COHR had anticipated the growth opportunities in the EV market and secured the necessary investment of $1 billion in late 2023 from Denso Corporation and Mitsubishi Electric Corporation. Both companies acquired a minority stake in the SiC business and entered supply agreements for 150mm and 200mm substrates and epitaxial wafers. These equity investments raised Coherent’s free cash flow, providing financial and operational agility to fund SiC expansion. Moreover, it positions COHR as the leading supplier in the expanding EV market while reducing investment risk on its balance sheet.
On the financial front, the company registered 17% year-over-year growth in its top line in the first quarter of fiscal 2026 and witnessed gross margin expansion of 249 basis points (bps). This robust performance was preceded by revenues rising 23% year over year and the gross margin increasing 400 bps in fiscal 2025. Notable growth in these metrics was facilitated by continued demand from AI-related datacenters and communications.
Amid sales growth and profitability enhancements, heightened investment prowess positions COHR to fund its SiC research and development (R&D) efficiently, drawing in benefits in the long haul.
Despite these obvious indicators supporting Coherent’s grip on the EV wave, competitive pressure from Cognex CGNX and Applied Materials AMAT is upsetting. These companies have a stronghold in battery process equipment, raising pricing pressure and reducing market share. To gain a competitive edge, Coherent must make sound investments in R&D while ensuring that it does not ruin its growth and profitability balance.
Over the past year, Coherent’s stock has gained 58.5%, beating the 11.8% rally of its industry. COHR also exceeds Cognex’s 4.7% dip and Applied Materials’ 39% growth in the same period.
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From a valuation perspective, COHR trades at a 12-month forward price-to-earnings ratio of 29.58X, lower than the industry’s 25.22X. Applied Materials appears cheaper than COHR, trading at 26.19, while Cognex is trading at 34.13.