Applied Optoelectronics (NASDAQ:AAOI) Releases Quarterly Earnings Results, Beats Estimates By $0.04 EPS

Key Points

• Applied Optoelectronics beat quarterly estimates: EPS was $0.06 versus the $0.02 consensus, while revenue rose 86.3% year over year to $191.92 million.
• AI-driven demand remains strong: 400G and 800G sales increased, with demand expected to exceed production capacity through mid-2027 as the company ramps capacity and prepares initial 1.6T shipments.
• Execution risks weighed on the outlook: Q3 EPS guidance of $0.11–$0.26 was below expectations, while component shortages, a projected decline in 100G revenue, heavy capital spending and planned financing needs pressured the stock.

Applied Optoelectronics (NASDAQ:AAOI - Get Free Report) released its earnings results on Thursday. The semiconductor company reported $0.06 EPS for the quarter, topping analysts' consensus estimates of $0.02 by $0.04, FiscalAI reports. Applied Optoelectronics had a negative return on equity of 4.64% and a negative net margin of 8.55%.The company had revenue of $191.92 million for the quarter, compared to the consensus estimate of $190.48 million. During the same quarter last year, the business posted ($0.16) EPS. Applied Optoelectronics's quarterly revenue was up 86.3% compared to the same quarter last year. Applied Optoelectronics updated its Q3 2026 guidance to 0.110-0.260 EPS.

Here are the key takeaways from Applied Optoelectronics' conference call:

• Record revenue and return to profitability: Q2 revenue reached $191.9 million, up 86% year over year, marking the fifth consecutive quarterly revenue record. Non-GAAP net income was $5.5 million, or $0.06 per diluted share, ahead of guidance.
• AI-related demand remains exceptionally strong: 800G revenue more than doubled sequentially to $12.8 million, while 400G revenue rose 27.4% sequentially to $48.4 million. Management said forecast demand for 800G and 1.6T products exceeds production capacity through mid-2027.
• Major capacity expansion and product ramps are underway: AOI expects 800G and 1.6T production capacity to rise from nearly 200,000 units per month currently to more than 650,000 by year-end 2026 and over 930,000 by year-end 2027. Initial 1.6T shipments are expected later this quarter, with a larger ramp in 2027.
• CATV business delivered broad-based growth: Record CATV revenue of $80.6 million increased 43.8% year over year, and management guided to $100 million-$110 million in Q3 revenue. Mediacom also selected AOI as its primary vendor for DOCSIS 4.0 upgrades.
• Execution and funding risks remain significant: Q3 100G revenue is expected to decline by $20 million-$25 million because of a customer’s switch and memory shortages, while DSP/TIA and other material constraints could limit the 1.6T ramp. AOI also reported $565.5 million of Q2 capital investments, expects higher second-half CapEx, and plans to use additional equity and debt financing.

Applied Optoelectronics Stock Down 3.4%

AAOI stock traded down $4.34 during mid-day trading on Thursday, hitting $124.22. The stock had a trading volume of 15,005,061 shares, compared to its average volume of 9,766,170. Applied Optoelectronics has a 1-year low of $18.50 and a 1-year high of $233.67. The company has a fifty day moving average of $137.79 and a 200 day moving average of $118.02. The company has a current ratio of 3.83, a quick ratio of 3.03 and a debt-to-equity ratio of 0.18. The stock has a market capitalization of $9.97 billion, a price-to-earnings ratio of -188.21 and a beta of 3.76.

Trending Headlines about Applied Optoelectronics

Here are the key news stories impacting Applied Optoelectronics this week:

• Positive Sentiment: Second-quarter results exceeded expectations: AAOI reported adjusted EPS of $0.06, above the $0.02 consensus estimate, while revenue rose 86.3% year over year to $191.9 million, slightly ahead of forecasts. The company also improved from a $0.16 per-share loss in the year-ago quarter. Applied Optoelectronics Reports Second Quarter 2026 Results
• Positive Sentiment: Demand remains exceptionally strong: Management said demand is expected to exceed production capacity through mid-2027, supported by AI data-center deployments and rising demand for high-speed optical networking products. This suggests strong order visibility and potential pricing power, although capacity expansion is increasingly important. Applied Optoelectronics Q2 Demand Outlook
• Positive Sentiment: Potential U.S. restrictions on Chinese optical transceivers provide a tailwind: A possible ban could encourage U.S. data-center customers to source from domestic suppliers such as AAOI, strengthening the company’s strategic position in the AI infrastructure market. Potential U.S. Restrictions on Chinese Optical Transceivers
• Neutral Sentiment: Third-quarter revenue guidance was solid: Management forecast revenue of $255 million to $290 million, with the midpoint above analysts’ $265.7 million estimate. However, the range reflects continued uncertainty around production ramp timing and product mix.
• Negative Sentiment: Third-quarter EPS guidance disappointed: AAOI projected EPS of $0.11 to $0.26, below the $0.27 consensus at the midpoint and with the low end substantially below expectations. The cautious earnings outlook appears to be the main reason the stock moved lower despite the quarterly beat. AAOI Q2 2026 Earnings Call Transcript
• Negative Sentiment: Valuation and insider selling remain risks: AAOI continues to report negative net income, while insider Shu-Hua Yeh sold approximately $596,000 of stock under a pre-arranged Rule 10b5-1 plan. The sale was relatively small compared with his remaining stake but adds a modest cautionary signal. AAOI Insider Sale

Insider Transactions at Applied Optoelectronics

In other Applied Optoelectronics news, CFO Stefan J. Murry sold 4,000 shares of the business's stock in a transaction that occurred on Friday, July 10th. The shares were sold at an average price of $122.09, for a total value of $488,360.00. Following the completion of the sale, the chief financial officer directly owned 380,576 shares of the company's stock, valued at $46,464,523.84. The trade was a 1.04% decrease in their ownership of the stock. The transaction was disclosed in a legal filing with the SEC, which is available at this hyperlink. The transaction was executed under a pre-arranged Rule 10b5-1 trading plan. Also, CEO Chih-Hsiang (Thompson) Lin sold 59,000 shares of the firm's stock in a transaction that occurred on Friday, June 12th. The shares were sold at an average price of $166.53, for a total value of $9,825,270.00. Following the completion of the transaction, the chief executive officer directly owned 1,302,436 shares in the company, valued at $216,894,667.08. The trade was a 4.33% decrease in their ownership of the stock. The disclosure for this sale is available in the SEC filing. The sale was made to cover tax withholding obligations related to the vesting of equity awards. Over the last three months, insiders sold 506,215 shares of company stock valued at $87,409,447. Insiders own 3.80% of the company's stock.

Institutional Investors Weigh In On Applied Optoelectronics

Several hedge funds and other institutional investors have recently modified their holdings of the stock. Comerica Bank bought a new stake in Applied Optoelectronics in the 3rd quarter valued at $28,000. Northwestern Mutual Wealth Management Co. lifted its stake in shares of Applied Optoelectronics by 166.7% in the fourth quarter. Northwestern Mutual Wealth Management Co. now owns 1,200 shares of the semiconductor company's stock valued at $42,000 after buying an additional 750 shares during the period. Headlands Technologies LLC acquired a new stake in Applied Optoelectronics during the second quarter worth about $57,000. Wexford Capital LP acquired a new stake in Applied Optoelectronics during the third quarter worth about $95,000. Finally, State of Wyoming bought a new position in Applied Optoelectronics during the fourth quarter valued at about $160,000. Institutional investors and hedge funds own 61.70% of the company's stock.

Analysts Set New Price Targets

Several research analysts recently weighed in on the company. Rosenblatt Securities reaffirmed a "buy" rating and set a $220.00 target price on shares of Applied Optoelectronics in a research note on Monday, June 22nd. Weiss Ratings restated a "sell (d-)" rating on shares of Applied Optoelectronics in a report on Tuesday, July 7th. Needham & Company LLC reduced their price objective on shares of Applied Optoelectronics from $260.00 to $220.00 and set a "buy" rating for the company in a research note on Wednesday, July 22nd. Raymond James Financial reiterated an "outperform" rating on shares of Applied Optoelectronics in a report on Wednesday, June 10th. Finally, Wall Street Zen lowered shares of Applied Optoelectronics from a "hold" rating to a "sell" rating in a report on Monday, April 13th. Three analysts have rated the stock with a Buy rating, two have assigned a Hold rating and one has assigned a Sell rating to the stock. According to data from MarketBeat.com, Applied Optoelectronics presently has an average rating of "Hold" and a consensus price target of $141.80.

Applied Optoelectronics Company Profile

Applied Optoelectronics, Inc develops and manufactures high-speed fiber-optic networking products designed to support the growing bandwidth demands of data centers, telecommunications carriers and internet content providers. The company's core offerings include pluggable optical transceiver modules, transponders and optical components that enable data transmission at rates ranging from 1G to 400G. These products are used to facilitate long-haul, metro and intra-data center connectivity, addressing the need for scalable, low-latency and energy-efficient solutions in modern network infrastructures.

The company's product portfolio spans small-form factor pluggable modules such as SFP+, QSFP+ and QSFP28 units, as well as more advanced form factors like CFP2 and OSFP for ultra-high-speed applications.

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