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AAOI Q1 Loss Wider Than Expected on Higher Costs, Revenues Jump Y/Y
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Key Takeaways
AAOI Q1 non-GAAP loss was 7 cents; revenue up 51% to $151.1M, both missing consensus.
Datacenter revenues $81.4M more than doubled y/y as AAOI shipped its first volume 800G transceivers.
Applied Optoelectronics guides Q2 revenues between $180M and $198M.
Applied Optoelectronics (AAOI - Free Report) reported a non-GAAP loss of 7 cents per share for the first quarter of 2026, wider than the Zacks Consensus Estimate of a loss of 5 cents. The company reported a loss of 2 cents per share in the year-ago quarter and a loss of 1 cent in the previous quarter.
Revenues of $151.1 million rose 51.4% year over year but missed the consensus mark by 3.4%. On a sequential basis, revenues increased 12.5%.
Results reflected broad-based demand across datacenter and CATV products, with AAOI completing its first volume shipment of 800G transceivers to a large hyperscale customer during the quarter.
Applied Optoelectronics, Inc. Price, Consensus and EPS Surprise
Datacenter revenues reached $81.4 million, more than doubling from the year-ago quarter, as customer engagement strengthened around higher-speed optical products. The ramp helped offset a smaller telecom contribution and supported the company’s fourth consecutive quarter of record revenues.
CATV revenues were $66.8 million, modestly ahead of the prior-year period, underscoring steadier demand in the HFC networking business. On a year-over-year basis, CATV revenues increased 3.6%.
Telecom revenues came in at $2.6 million, while “Other” added $0.3 million, leaving the quarter’s mix more heavily weighted toward datacenter shipments.
Applied Optoelectronics Sees 800G Demand Stay Strong
AAOI highlighted accelerating AI-driven datacenter investment as a key demand driver and pointed to strong customer engagement around both 800G transceivers and emerging 1.6 Tb products. The company also said it anticipates sequential revenue growth through 2026, with significantly larger growth expected starting in the third quarter as additional capacity comes online.
On the supply side, Applied Optoelectronics exited the quarter with total manufacturing capacity of nearly 100,000 units of 800G transceivers per month across its U.S. and Taiwan locations. The company also said it has recently nearly doubled its Houston-area footprint through real estate acquisitions and leases to support additional capacity and future growth plans.
AAOI's Margins Suffer From Mix Shifts and Rise in Costs
In the first quarter of 2026, on a non-GAAP basis, gross margin was 29.2%, which contracted 150 basis points (bps) year over year and 220 bps on a sequential basis.
Adjusted EBITDA was positive at $1.0 million, indicating that operating leverage remains sensitive to manufacturing utilization and spending levels even as revenue scales.
Operating expenses increased year over year as the company supported product development and scaled its organization. GAAP research and development expense rose 44.1% year over year to $25.7 million, while sales and marketing expense increased 18.5% year over year to $6.3 million. General and administrative expense surged 52.6% year over year to $24.9 million, bringing total operating expenses to $56.9 million, which jumped 44.1% year over year.
GAAP operating loss was $13 million compared with a loss of $9 million reported in the year-ago quarter.
AAOI Strengthens Liquidity as Working Capital Builds
AAOI ended March with $449.4 million in cash, cash equivalents and restricted cash, up sharply from $216.0 million at the end of 2025.
Accounts receivable increased to $299 million and inventories rose to $206.2 million, consistent with higher shipment volumes and the demands of a capacity ramp.
For the second quarter of 2026, the company expects revenue in the range of $180 million to $198 million, implying continued sequential growth. Non-GAAP gross margin is projected between 29% and 30% as AAOI balances higher volumes with ongoing manufacturing and ramp-related costs.
Applied Optoelectronics guided non-GAAP earnings ranging from a loss of 3 cents per share to earnings of 3 cents per share.
Zacks Rank & Upcoming Earnings to Consider
Applied Optoelectronics currently carries a Zacks Rank #3 (Hold).
Cisco, Applied Materials and Keysight Technologies are set to report their respective quarterly results on May 13, 14 and 19. Year to date, shares of Cisco, Applied Materials and Keysight Technologies have returned 19.7%, 59.9% and 74.8%, respectively.
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AAOI Q1 Loss Wider Than Expected on Higher Costs, Revenues Jump Y/Y
Key Takeaways
Applied Optoelectronics (AAOI - Free Report) reported a non-GAAP loss of 7 cents per share for the first quarter of 2026, wider than the Zacks Consensus Estimate of a loss of 5 cents. The company reported a loss of 2 cents per share in the year-ago quarter and a loss of 1 cent in the previous quarter.
Revenues of $151.1 million rose 51.4% year over year but missed the consensus mark by 3.4%. On a sequential basis, revenues increased 12.5%.
Results reflected broad-based demand across datacenter and CATV products, with AAOI completing its first volume shipment of 800G transceivers to a large hyperscale customer during the quarter.
Applied Optoelectronics, Inc. Price, Consensus and EPS Surprise
Applied Optoelectronics, Inc. price-consensus-eps-surprise-chart | Applied Optoelectronics, Inc. Quote
AAOI Datacenter Demand Drives Record Revenue Run
Datacenter revenues reached $81.4 million, more than doubling from the year-ago quarter, as customer engagement strengthened around higher-speed optical products. The ramp helped offset a smaller telecom contribution and supported the company’s fourth consecutive quarter of record revenues.
CATV revenues were $66.8 million, modestly ahead of the prior-year period, underscoring steadier demand in the HFC networking business. On a year-over-year basis, CATV revenues increased 3.6%.
Telecom revenues came in at $2.6 million, while “Other” added $0.3 million, leaving the quarter’s mix more heavily weighted toward datacenter shipments.
Applied Optoelectronics Sees 800G Demand Stay Strong
AAOI highlighted accelerating AI-driven datacenter investment as a key demand driver and pointed to strong customer engagement around both 800G transceivers and emerging 1.6 Tb products. The company also said it anticipates sequential revenue growth through 2026, with significantly larger growth expected starting in the third quarter as additional capacity comes online.
On the supply side, Applied Optoelectronics exited the quarter with total manufacturing capacity of nearly 100,000 units of 800G transceivers per month across its U.S. and Taiwan locations. The company also said it has recently nearly doubled its Houston-area footprint through real estate acquisitions and leases to support additional capacity and future growth plans.
AAOI's Margins Suffer From Mix Shifts and Rise in Costs
In the first quarter of 2026, on a non-GAAP basis, gross margin was 29.2%, which contracted 150 basis points (bps) year over year and 220 bps on a sequential basis.
Adjusted EBITDA was positive at $1.0 million, indicating that operating leverage remains sensitive to manufacturing utilization and spending levels even as revenue scales.
Operating expenses increased year over year as the company supported product development and scaled its organization. GAAP research and development expense rose 44.1% year over year to $25.7 million, while sales and marketing expense increased 18.5% year over year to $6.3 million. General and administrative expense surged 52.6% year over year to $24.9 million, bringing total operating expenses to $56.9 million, which jumped 44.1% year over year.
GAAP operating loss was $13 million compared with a loss of $9 million reported in the year-ago quarter.
AAOI Strengthens Liquidity as Working Capital Builds
AAOI ended March with $449.4 million in cash, cash equivalents and restricted cash, up sharply from $216.0 million at the end of 2025.
Accounts receivable increased to $299 million and inventories rose to $206.2 million, consistent with higher shipment volumes and the demands of a capacity ramp.
Applied Optoelectronics Outlines Upbeat Q2 Revenue View
For the second quarter of 2026, the company expects revenue in the range of $180 million to $198 million, implying continued sequential growth. Non-GAAP gross margin is projected between 29% and 30% as AAOI balances higher volumes with ongoing manufacturing and ramp-related costs.
Applied Optoelectronics guided non-GAAP earnings ranging from a loss of 3 cents per share to earnings of 3 cents per share.
Zacks Rank & Upcoming Earnings to Consider
Applied Optoelectronics currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader Zacks Computer and Technology sector that are set to report their quarterly results are Cisco Systems (CSCO - Free Report) , Applied Materials (AMAT - Free Report) and Keysight Technologies (KEYS - Free Report) . Keysight Technologies sports a Zacks Rank #1 (Strong Buy) at present, while both Cisco and Applied Materials carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Cisco, Applied Materials and Keysight Technologies are set to report their respective quarterly results on May 13, 14 and 19. Year to date, shares of Cisco, Applied Materials and Keysight Technologies have returned 19.7%, 59.9% and 74.8%, respectively.