Shares of optical technology leaders Lumentum Holdings Inc. (NASDAQ:LITE) and Coherent Corp. (NYSE:COHR) experienced some action after the quarterly reports. During the August 12 episode of CNBC’s Mad Money, Jim Cramer highlighted the short-term disconnect between market trading dynamics and business fundamentals in the optical hardware space. He noted:
Sometimes, even the best stocks get a little bit ahead of themselves. Today, we got a terrific quarter from Lumentum. It’s a fiber optics play with big data center exposure. And in response, its chief rival, Coherent, justifiably I think, rallied 8%. Then Coherent itself reported an even better quarter tonight, but the stock was sold off in after-hours trading, I think largely just because it came in a little hot. The actual quarter was excellent… A really terrific top and bottom-line beat, management giving strong guidance for the current quarter, but the stock had run a little bit.
Lumentum Ignites Sector Rally With Blowout Q4
The optics rally was set off by Lumentum Holdings Inc. (NASDAQ:LITE), which reported FQ4 2026 net revenue of $1.01 billion, up 109% year-over-year, beating consensus estimates. Non-GAAP diluted earnings per share reached $3.23, topping Wall Street expectations by $0.26.
Lumentum issued upbeat guidance for Q1 fiscal 2027, projecting net revenue between $1.225 billion and $1.275 billion with non-GAAP EPS of $4.05 to $4.35. The company’s non-GAAP operating margin is projected at 39.5% to 40.5%. The beat-and-raise report sent Lumentum shares surging and sparked a rally across the photonics sector.
Coherent Beats Estimates But Faces After-Hours Profit-Taking
Coherent Corp. (NYSE:COHR) delivered a strong FQ4 2026 report of its own. The company posted net revenue of $2.05 billion, a 34.0% year-over-year increase, surpassing consensus estimates by $70 million. Non-GAAP EPS came in at $1.74, beating Wall Street expectations by $0.12.
For Q1 fiscal 2027, Coherent provided a strong guidance, forecasting revenue between $2.2 billion and $2.4 billion along with non-GAAP EPS of $1.85 to $2.05. Non-GAAP gross margin is expected between 39.5% and 41.5%, with non-GAAP operating expenses forecasted at $400 million to $420 million and an effective non-GAAP tax rate of 18% to 20%.
However, despite top- and bottom-line beats and strong forward guidance, Coherent shares slid in after-hours trading. As Cramer observed, the after-hours dip was a textbook “sell-the-news” reaction after the stock had already gained over 8% during regular hours in anticipation of the results.
Hedge Fund Backing LITE and COHR
Smart money positioning reflects rising hedge fund interest across the two names despite elevated valuation multiples. Lumentum Holdings Inc. (NASDAQ:LITE), trading at a forward P/E of 43.10, saw hedge fund holders jump to 123 in Q1 2026, up from 97 in the prior quarter, though accompanied by a higher short interest of 12.16% of float. On the other hand, Coherent Corp. (NYSE:COHR) carries a more moderate forward P/E of 32.89 and counted 114 hedge funds holding positions in Q1, up from 109 previously, with a lower short interest of 5.42% of float.
While short-term trading dynamics and valuation-driven pullbacks can cause temporary volatility, both companies continue to show strong multi-quarter demand visibility across their optical networking portfolios. As long as hyperscalers continue scaling massive AI clusters where optical transceivers serve a critical bottleneck, both companies are positioned at the epicenter of multi-year secular growth.
While we acknowledge the risk and potential of LITE and COHR as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than LITE and COHR and that has 10,000% upside potential, check out our report about this cheapest AI stock.
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