Coherent's net income rose 1,530.7% while operating cash flow fell 87.5%

Coherent Corp.'s most recent SEC filings show two very different accounts of the same business. Trailing twelve-month net income reached $805.0 million through the fiscal fourth quarter of 2026, up 1,530.7% from a year earlier. Over the identical period, operating cash flow fell 87.5%, to $79.5 million. One line of the income statement is accelerating sharply; the cash the business is actually collecting has nearly disappeared.

What the filings show

The gap runs through the rest of the cash flow statement too. Capital expenditure rose 150.2% year over year to $1,102.9 million, now equal to 15.5% of revenue. With operating cash flow already thin and capital spending running that high, free cash flow came to −$1,023.4 million for the twelve months, a margin of −14.4% on revenue. That is down 17.7 percentage points from a year earlier and sits below every one of the 64 prior quarterly readings in Coherent's trailing-twelve-month history, where the range had previously run from −8.2% to 17.0%.

Why cash and profit diverge

Net income and operating cash flow should move together over time; large, sustained gaps between them usually mean something below the operating-income line is doing heavy lifting that does not generate cash, such as non-cash gains, tax items or changes in working capital that consume cash even while the income statement records a profit. Coherent's filings confirm the size of the gap but do not itemise its cause at the level of detail available here; a fuller read would require the segment and working-capital disclosures in the filing's own management discussion. What is clear from the reported totals is that revenue is growing faster than before: TTM growth accelerated to 22.5%, up 4.5 percentage points from the prior quarter, and gross margin reached 37.5%, with net margin at 11.3%. Faster revenue and a higher net margin are consistent with the profit figure; they do not, on their own, explain why cash collection fell so far behind it.

The capital spending behind the gap

Capital expenditure is the more visible part of the divergence. At $1,102.9 million over the trailing year, it has grown 150.2% and now takes 15.5% of every dollar of revenue, roughly double the share it consumed a year earlier on the underlying numbers. That alone turns a modest positive operating cash flow into a deeply negative free cash flow figure. The filings do not specify which facilities, product lines or acquisitions this spending supports, so it is not possible from the data alone to say whether it reflects capacity being added for already-contracted demand or a broader bet on future orders. Separately, diluted shares outstanding rose 26.3% year over year; Coherent's filings do not attribute this change to a specific financing or acquisition event in the data available here, so the dilution and the capex increase should be treated as two separate facts rather than one explained by the other.

A different read

Dividends paid came to $11.4 million over the period, just 1.4% of net income, so the dividend itself is not competing with the capital programme for cash. Under that reading, the current free cash flow trough is a function of the investment phase rather than a sign of deteriorating operating quality, and the 1,530.7% net income growth reflects a real improvement in the underlying business that the cash flow statement will eventually catch up with once the capital spending programme matures. The filings available here do not confirm which reading is correct; the net income and cash flow trends are both real, and only the company's project-by-project disclosures would settle whether the capex is demand-backed.

What it means for value

A discounted cash flow model is built from the cash a business generates, not its reported net income, so the −14.4% free cash flow margin is the more consequential of the two figures for that kind of model, even though the 1,530.7% net income growth is the more striking headline number. Revenue growth of 22.5% is the other input such a model depends on, and it is moving in the opposite direction, having accelerated rather than slowed. Whether the current free cash flow margin persists, reverses as capital spending normalises, or settles somewhere between the −8.2% and 17.0% extremes seen in Coherent's own history over the past 64 quarters is the open question a cash-flow-based valuation has to take a view on. These are model values under stated assumptions, not a comparison with the share price.

For the fuller set of trailing financial trends behind these figures, see Coherent's full company analysis.