Applied Optoelectronics Q4 Earnings Call Highlights

Key Points

• Applied Optoelectronics reported a record 2025 with total revenue of $456 million (up 83% YoY) and Q4 revenue of $134.3 million, driven by strong data center (56% of Q4) and CATV demand, with a non-GAAP gross margin of 31.4% and a non-GAAP loss per share of $0.01.
• Management said 800G shipments were below expectations in Q4 due to firmware work but expect a major volume ramp in Q2 2026—forecasting 800G could be “more than $25 million” in Q2—and view 800G (and future 1.6T) as the primary driver of data center revenue going forward.
• Growth is constrained by manufacturing capacity, so AOI is expanding production (Sugar Land, Texas lease and buildout) and aims for >500,000 units/month of 800G/1.6T by end-2026 with increased U.S. output; despite capacity limits, the company guided 2026 revenue of over $1 billion and non-GAAP operating profit above $120 million.

Applied Optoelectronics NASDAQ: AAOI management said the company capped what it called its strongest year in history with record fourth-quarter revenue, driven by demand in both its CATV and data center businesses, while also outlining an outlook that anticipates continued sequential growth and a larger ramp in next-generation data center products beginning in the second quarter of 2026.

2025 results and fourth-quarter performance

Founder, Chairman and CEO Thompson Lin said 2025 total revenue rose 83% from 2024 to a record $456 million. CFO and Chief Strategy Officer Stefan Murry added that data center revenue increased 32% year-over-year to $196 million, while CATV revenue nearly tripled to $245 million.

For the fourth quarter, the company reported revenue of $134.3 million, in line with guidance of $125 million to $140 million. Non-GAAP gross margin was 31.4%, above the company’s guided range of 29% to 31%, and non-GAAP loss per share was $0.01, narrower than the guided range of a loss of $0.13 to a loss of $0.04.

Murry said fourth-quarter revenue increased 34% year-over-year and 13% sequentially. By end market in the quarter, 56% of revenue came from data center products, 40% from CATV products, and 4% from FTTH, telecom, and other.

• Data center: Q4 revenue was $74.9 million, up 69% year-over-year and 70% sequentially. The company said 100G sales increased 54% year-over-year and 400G sales increased 141% year-over-year. AOI reported that 51% of data center revenue was from 100G products, 41% from 200G and 400G transceivers, and 8% from 10G and 40G products.
• CATV: Q4 revenue was $54 million, up 3% year-over-year but down 24% sequentially from a record third quarter, which management said was in line with expectations. The company cited shipments of 1.8 GHz amplifiers to its largest CATV customer and said demand from that customer remained robust, while also pointing to momentum from newer MSO customers.
• Telecom: Q4 telecom revenue was $5.1 million, up 45% year-over-year and 37% sequentially, with management reiterating that telecom sales can fluctuate quarter to quarter.

Murry also detailed customer concentration in the quarter: the top 10 customers represented 96% of revenue, and AOI had three customers above 10% of revenue, including one CATV customer at 39% of total revenue and two data center customers at 31% and 21%.

800G ramp, firmware work, and 1.6T trajectory

A central focus of the call was AOI’s next-generation data center roadmap. Lin said the company received its fourth 800G volume order from a major hyperscale customer to support AI data center growth, following qualification of AOI’s 800G products. Murry likewise described the order as a milestone and said the company was working with the customer to finalize firmware for interoperability across the customer’s network, which management expects to complete in March.

Management said it has begun ramping production of the 800G module ahead of a strong volume ramp expected to start in the second quarter. However, AOI noted that fourth-quarter 800G revenue came in below its expectation of $4 million to $8 million due to ongoing firmware optimizations. In the Q&A, management said it did not break out 800G revenue precisely, but confirmed it was below $4 million and described it as “a lot below,” with some delayed into the first quarter.

While 800G was below expectations in Q4, management said 400G strength with the same customer more than offset the shortfall. AOI said it expects continued strength in 400G, with 800G expected to “dominate” revenue beginning in Q2. On the Q&A, executives framed that as 800G becoming the largest contributor within the data center segment, with Lin suggesting 800G revenue in Q2 could be “more than $25 million” and potentially higher depending on capacity.

AOI also discussed expanding customer activity beyond one hyperscaler. Lin said another existing hyperscale customer had indicated it intends to begin ordering 800G soon, and that a new hyperscale customer had begun discussions in recent weeks about qualifying AOI’s 800G and 1.6T products.

Capacity expansion, Texas footprint, and laser strategy

Management repeatedly emphasized that growth is constrained by manufacturing capacity and supply chain rather than market demand. Murry said AOI has scaled automation across key elements of production, from laser fabrication to transceiver assembly and testing, and believes this improves yield and supports a faster scale-up with more flexibility in where production is located.

On 800G manufacturing capacity, Murry said AOI exited 2025 with approximately 90,000 units per month of 800G capacity, nearing a target of 100,000 units per month, and said roughly 31% of that output was based in the U.S. He added that AOI signed an agreement during Q4 to lease an additional building in Sugar Land, Texas, and began construction earlier in February to support scaling production toward the middle to end of 2026.

Looking further ahead, Murry said AOI expects that by the end of 2026 it will be capable of producing over 500,000 pieces per month of 800G and 1.6 Tb products, with about a quarter of that output coming from Texas. In the Q&A, Lin suggested the U.S. manufacturing share could increase further over time, while acknowledging additional clean room buildout, equipment installation, qualification, and training take time.

AOI also highlighted in-house laser manufacturing as a strategic advantage, with Murry saying it helped the company avoid shortages affecting others in the industry and that future trends such as CPO could drive increased demand for high-power lasers. Lin cited broader industry laser constraints and said the company is investing heavily in Texas to expand laser manufacturing capacity.

Tariffs, expenses, balance sheet, and capital spending

Murry said direct tariffs had a $1.2 million impact on the fourth-quarter income statement, and tariffs on capital equipment were $3.1 million in the quarter. He added that, in AOI’s 800G and 1.6T designs, less than 10% of component value is currently sourced from China, and the company has “a path” to further reduce that exposure. During the Q&A, management said it was analyzing potential pathways to recoup some IEEPA-related tariffs and estimated total tariffs paid in 2025 at roughly $7 million to $8 million, while noting not all tariffs fall into that category.

On profitability and costs, AOI reported non-GAAP operating expenses of $49.3 million in Q4, or 37% of revenue, and guided to $50 million to $57 million per quarter going forward. The company reported a non-GAAP operating loss of $7.1 million for the quarter. GAAP net loss was $2 million, or $0.03 per basic share, compared with a much larger GAAP net loss in the prior-year quarter.

AOI ended Q4 with $216 million in total cash, cash equivalents, short-term investments, and restricted cash, up from $150.7 million at the end of Q3. Inventory was $183.1 million, up from $170.2 million, which management attributed primarily to raw material purchases for increased production. The company reported $84 million in fourth-quarter capital investments and $209 million for full-year 2025, above its prior CapEx projections due to increased customer demand projections.

First-quarter outlook and 2026 expectations

For the first quarter of 2026, AOI guided revenue to $150 million to $165 million, reflecting expected sequential increases in both CATV and data center revenue. The company projected non-GAAP gross margin of 29% to 31% and non-GAAP EPS ranging from a loss of $0.09 to breakeven, using an expected weighted average basic share count of approximately 76.4 million shares.

In CATV, management guided Q1 revenue to $61 million to $67 million and said it continues to see broad-based appeal for its amplifier portfolio. Murry also discussed the company’s QuantumLink software suite, describing it as an increasingly important part of the CATV offering, and said AOI expects to generate some software-related revenue in 2026.

Looking to the full year, Murry said that while it is early, AOI expects to generate over $1 billion in revenue in 2026 with a non-GAAP operating profit of over $120 million, describing the revenue target as limited by production capacity and supply chain rather than demand. Management said it expects strong sequential revenue growth in the first half of the year and an acceleration in the second half as new capacity comes online and additional customer qualifications are completed.

About Applied Optoelectronics NASDAQ: AAOI

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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