Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Performance was driven by an exceptional demand environment in AI data centers, where optical connectivity is essential for scaling compute power.
Revenue growth acceleration in Q4 was enabled by the rapid expansion of internal production capacity, specifically the transition to 6-inch Indium Phosphide manufacturing. Gross margin expansion of 152 basis points for the full year resulted from lower product input costs, improved manufacturing yields, and pricing optimization efforts. Management attributes their competitive advantage to a vertically integrated model and a significant US manufacturing footprint, which provides supply chain resiliency.
The Data Center and Communications segment now accounts for 79% of total revenue, reflecting a strategic pivot toward high-growth AI infrastructure. Operational efficiency gains from a regional shared services structure allowed EPS to grow at more than twice the rate of revenue growth. Management expects to achieve the company's first $3 billion revenue quarter by the end of fiscal 2027, driven by 800G and 1.6T transceiver ramps.
Capacity for internal Indium Phosphide is on track to double year-over-year by the end of the current quarter, one quarter ahead of the original plan. The company anticipates multiple new revenue streams to ramp in fiscal 2027, including Optical Circuit Switching (OCS), co-packaged optics (CPO), and multi-rail systems. Order visibility is described as exceptional, with customer orders extending into calendar 2028 and long-term agreements (LTAs) reaching the end of the decade.
Capital expenditures are expected to increase sequentially in Q1 to support advanced tooling for volume manufacturing, with a projected 18-month payback period for data center investments. The company successfully reduced its debt leverage ratio from 2x to 0.7x during fiscal 2026, significantly strengthening the balance sheet. Industrial segment weakness persists in broader markets, though management expects a return to growth led by semiconductor capital equipment bookings.
Management addressed speculative reports on potential US import restrictions, noting that while speculative, Coherent's 20+ US facilities position them as a primary domestic beneficiary. The transition from 3-inch to 6-inch Indium Phosphide production is a critical dependency for meeting margin targets, with yields currently exceeding legacy lines. Nvidia-level potential. 30M+ investors trust Moby to find it first.
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