Shares of Coherent (NYSE: COHR | COHR Price Prediction) are stabilizing Tuesday after a brutal Monday selloff erased a large chunk of the stock’s gains from the end of last week.
Coherent had surged 13% on Friday as optical-networking stocks caught fire, helped by strong industry earnings and reports that U.S. regulators are considering restrictions on Chinese-made optical transceivers. That rally reversed sharply on Monday, with COHR finishing the session down roughly 14%. The selloff was not isolated to Coherent. The Roundhill Photonics & Optics ETF fell 7.4% during Monday’s session as investors pulled back from one of the market’s hottest AI infrastructure trades.
Now, with Coherent scheduled to report earnings Wednesday after the closing bell, investors are trying to decide whether Monday’s plunge was simply an aggressive reset after a huge run or the beginning of something more serious.
Why Coherent Stock Got Hit So Hard Monday
There does not appear to have been a major new Coherent-specific announcement behind Monday’s decline. Instead, the move came alongside broad weakness in optical and semiconductor stocks. The PHLX Semiconductor Index was down 1.9% during the session after gaining 9.3% the previous week, while the photonics-focused LYTE ETF fell more than 7%.
That matters because Coherent entered the week with a tremendous amount of optimism already reflected in its share price. On Friday alone, COHR jumped 13%. Lumentum gained about 6%, Corning rose 5%, and Applied Optoelectronics climbed 9%.
Part of that enthusiasm came after reports that the Federal Communications Commission is drafting a rule that could restrict imports of new Chinese-made optical transceivers into U.S. data centers. That is more specific than saying the Trump administration is simply “banning optical transceiver sales.” If implemented, such a rule could reduce Chinese competition for companies participating in the U.S. optical networking market.
Monday therefore looks more consistent with a sharp sector-wide de-risking event ahead of earnings than a reaction to newly disclosed trouble at Coherent.
The Optics vs. Memory Debate Is Heating Up
There is another interesting layer to this story.
A debate has been gaining traction among semiconductor investors over whether optical networking could become the next major AI infrastructure trade at the expense of memory stocks.
Citrini Research semiconductor analyst Jukan has been among those discussing the trade. Citrini identifies Jukan as part of its semiconductor research team focused on AI infrastructure and the chip supply chain.
In the social-media post that sparked much of this discussion, Jukan argued that investors could favor optics over memory in the short term, citing potential selling pressure in Korean memory-related investments, changes in Nvidia’s future systems, and concerns that memory pricing could eventually peak.
But that debate should be treated as market context, not the confirmed cause of Coherent’s selloff.
In fact, interest in optics remains substantial. MarketWatch reported Tuesday that Roundhill’s new Photonics & Optics ETF generated $76.7 million in first-day trading volume, surpassing the debut of the firm’s memory-focused DRAM ETF. Coherent and Lumentum together account for more than 30% of the optics fund.
So the more interesting question may not be whether investors have abandoned optics. It is whether expectations became too aggressive too quickly.
Coherent Earnings Are Now the Main Event
The speculation will not last much longer.
Coherent will release its fiscal fourth-quarter and full-year 2026 results Wednesday, August 12, after the NYSE closes, followed by a conference call at 4:30 p.m. Eastern.
The company’s most recent quarter gives investors plenty to be optimistic about. Fiscal Q3 revenue reached $1.81 billion, up 21% year over year, while non-GAAP earnings came in at $1.41 per share.
More importantly for the AI story, Datacenter & Communications generated approximately $1.362 billion of quarterly revenue, compared with about $969 million a year earlier. That represents roughly 75% of Coherent’s total quarterly sales and growth of about 41% year over year.
Management’s existing fiscal Q4 outlook calls for $1.91 billion to $2.05 billion in revenue, non-GAAP EPS between $1.52 and $1.72, and a non-GAAP gross margin of 39% to 41%.
Those numbers give investors a straightforward scoreboard for Wednesday.
Why Guidance May Matter More Than the Headline Numbers
One important correction from the earlier version of this story: Coherent’s fiscal Q4 2025 report was not simply an earnings miss.
The company actually reported adjusted EPS of $1.00 versus expectations of roughly $0.92, while revenue of $1.53 billion also came in above expectations. Yet COHR shares still plunged nearly 20% because investors were disappointed by the company’s forward revenue outlook.
That history is especially relevant now.
With expectations around AI optical networking running extremely high, merely beating the previous quarter may not be enough. Investors will likely focus heavily on Coherent’s outlook for datacenter demand, capacity expansion, gross margins, and the pace of growth heading into fiscal 2027.
What Investors Should Watch Now
For COHR investors, Wednesday’s earnings report has become much more important than Monday’s selloff.
The stock has already demonstrated how quickly sentiment can swing, soaring Friday, plunging Monday, and then stabilizing Tuesday. The underlying AI optical-networking opportunity remains substantial, but expectations are equally substantial.
If Coherent delivers another strong quarter and gives investors confidence that Datacenter & Communications growth can continue, Monday’s plunge could end up looking like a violent bout of profit-taking.
If guidance disappoints, however, last year’s post-earnings reaction is a reminder that investors have been willing to punish COHR severely even when the headline results look good.
Wednesday’s outlook, more than Monday’s social-media debate, should determine the stock’s next major move.