Coherent Joins the S&P 500 Soon: Buy the Dip Before the Index Funds Have To?

"Nvidia committed a $2 billion direct investment in Coherent alongside a multibillion-dollar multiyear purchasing agreement for advanced laser and optical networking products, a strategic validation that goes well beyond a typical customer relationship. The data center segment delivered $1.208 billion in revenue in fiscal Q2, up 34% year-over-year, now representing roughly 72% of total revenue."

"The data center book-to-bill ratio sits at over 4.0x, signaling demand well ahead of current supply. Coherent has beaten EPS estimates in each of the last four quarters, with an average beat of 6.3%. The quarter delivered $1.29 non-GAAP EPS on $1.685 billion in revenue, with non-GAAP operating margin expanding to 19.9%."

"We expect continued strong growth in the second-half of fiscal 2026 and throughout fiscal 2027 based on strong datacenter and communications demand and our continued production capacity expansion."

Coherent will be added to the S&P 500 on March 23, 2026, triggering mandatory purchases from passive index funds regardless of valuation. The stock initially rose 6% on the announcement but subsequently declined 18.5% from its March high of $300.20, driven by sell-the-news sentiment and geopolitical concerns, though it remains up 261% year-over-year. Nvidia's $2 billion direct investment and multiyear purchasing agreement validate Coherent's strategic importance. Data center revenue reached $1.208 billion in fiscal Q2, representing 72% of total revenue with 34% year-over-year growth. The data center book-to-bill ratio exceeds 4.0x, indicating strong future demand. Coherent has beaten EPS estimates for four consecutive quarters, averaging 6.3% beats. The company reported $1.29 non-GAAP EPS on $1.685 billion revenue with 19.9% non-GAAP operating margin expansion.

Read at 24/7 Wall St.