TradingKey - AI data center expansion is driving demand growth for high-speed optical modules, lasers, and optical switching equipment. Lumentum (LITE)'s business is more focused on optical communications, while Coherent (COHR), in addition to data center connectivity products, also covers industrial lasers and engineered materials.

What Are Optical Communication Concept Stocks?

Optical communication stocks refer to listed companies whose businesses involve optical chips, lasers, optical modules, optical fibers, optical switching equipment, and related systems. These products use optical signals to transmit data and are applied in data centers, telecommunications networks, and long-distance communications.

As the scale of AI clusters expands, data transmission volumes among GPU clusters, servers, and switches are growing rapidly. Copper connections face limitations in transmission distance, bandwidth density, and power consumption, driving data centers to upgrade to 800G, 1.6T, and higher-speed optical interconnects.

Lumentum mainly provides laser chips, optical modules, and optical switching systems, while Coherent covers optical transceivers, optical engines, lasers, and engineered materials. Both companies benefit from the growing demand for high-speed optical interconnects in AI data centers.

How Do Lumentum and Coherent’s AI Optical Communication Businesses Differ?

Lumentum has a smaller revenue scale, so growth in laser chips, cloud optical modules, and OCS has a more pronounced driving effect on its overall performance. Coherent has a broader product range, with its data center and communications business already becoming the primary source of revenue.

Lumentum Leads in Growth, Coherent Has Larger Business Scale

Lumentum reported fiscal 2026 revenue of $3.014 billion, up 83.2% year-over-year; its GAAP operating margin rose from negative 10.9% to 17.4%, and operating cash flow reached $751 million.

Revenue from its cloud optical transceiver product line grew by more than 173%, primarily driven by increased shipments, while OCS revenue exceeded $90 million. The company expects first-quarter fiscal 2027 revenue to be between $1.225 billion and $1.275 billion.

Lumentum recorded a full-year GAAP net loss of $6.935 billion, primarily due to a $7.757 billion non-cash loss on debt extinguishment. The company exchanged approximately 10.6 million shares of common stock for a portion of convertible notes with an aggregate principal amount of approximately $1.125 billion. Its top two customers contributed 26.6% and 15.0% of total revenue, respectively.

Coherent generated fiscal 2026 revenue of $7.118 billion, up approximately 23% year-over-year, with net income attributable to the company at $805 million. Revenue from the Datacenter and Communications segment grew 40% to $5.275 billion, representing approximately 74% of total revenue.

Revenue from the Industrial segment declined 10% to $1.844 billion, primarily due to the sale of its Aerospace & Defense and Munich operations. Its top two customers accounted for 20% and 12% of revenue, respectively.

Coherent has demonstrated multiple 1.6T optical transceivers and is advancing 3.2T optical interconnects and co-packaged optics technology. The company plans to present research results on a 448 Gb/s single-channel InP modulator array at ECOC 2026. Revenue contributions from related technologies will depend on the progress of customer qualification and mass production.

Coherent also signed a multi-year optical technology and capacity agreement with Nvidia, covering R&D, manufacturing capacity, and multi-billion-dollar purchase commitments; Nvidia separately invested $2 billion to purchase Coherent common stock.

What Are the Differences Between Cash Flow, Debt, and Valuation?

Coherent's operating cash flow for fiscal year 2026 was $79.51 million, capital expenditures were $1.103 billion, and free cash flow was approximately negative $1.023 billion. As of June 30, 2026, the company's debt was $3.222 billion. Nvidia purchased Coherent common stock for approximately $2 billion, with the funds used for R&D, capacity expansion, and operations.

During the same period, Lumentum's operating cash flow was $751 million, capital expenditures were $451 million, and free cash flow was approximately $300 million. As of June 27, 2026, the company's cash and short-term investments were $2.738 billion, and book debt was $1.637 billion.

During the year, Lumentum secured $2 billion in preferred stock financing. The principal of its convertible notes must be settled in cash, while the conversion value exceeding principal can be settled in cash, stock, or a combination of both. As of June 27, the carrying value of the convertible notes was $1.545 billion, with an estimated fair value of $7.607 billion.

As of September 18, 2026, the common stock market capitalizations of LITE and COHR were approximately $89.6 billion and $62.1 billion, respectively. Calculated by dividing common stock market capitalization by fiscal 2026 revenue, their trailing price-to-sales ratios were approximately 29.7x and 8.7x, respectively; this metric does not account for cash, debt, preferred stock, or other non-common equity interests.

LITE or COHR: Which Is More Suitable for Long-Term Holding?

Based on fiscal year 2026 performance, LITE holds an advantage in revenue growth, GAAP operating margin, and operating cash flow. A trailing price-to-sales ratio of around 29.7x also implies that the company needs to rely on sustained growth in 1.6T optical modules, high-speed lasers, and OCS to justify its current valuation.

COHR possesses a larger revenue scale and a broader product range, with its trailing price-to-sales ratio of around 8.7x being lower than LITE's. The company's capital expenditures reached $1.103 billion in fiscal year 2026, free cash flow stood at approximately -$1.023 billion, and year-end debt was $3.222 billion. The progress of capacity expansion and capital efficiency will impact its future earnings performance.

For investors prioritizing revenue growth, profit margins, and cash flow, LITE holds a relative advantage; for those who value business scale and a relatively lower trailing price-to-sales ratio while tolerating capacity expansion and debt pressures, COHR aligns better with their preferences. Cloud providers' capital expenditures, customer procurement cadence, capacity ramp-up, and optical module and laser pricing will jointly affect the long-term performance of both companies.

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