We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
AAOI Q3 Earnings Beat Estimates on Strong Datacenter and CATV Sales
Read MoreHide Full Article
Key Takeaways
AAOI's Q3 revenues surged 127.5% to $269.88 million on strong datacenter and CATV demand.
Datacenter sales jumped 254.2%, while CATV revenues hit a record $110.88 million.
AAOI projects Q4 revenues of $385M-$420M, supported by strong demand for optical products.
Applied Optoelectronics (AAOI - Free Report) reported third-quarter 2026 non-GAAP earnings of 17 cents per share against a loss of 9 cents in the year-ago quarter. The metric beat the Zacks Consensus Estimate by 21.43%.
Revenues surged 127.5% year over year to $269.88 million and topped the consensus mark by 0.27%. The topline benefited from robust datacenter and CATV demand. Datacenter revenues more than tripled year over year, supported by accelerating 800G optical transceiver shipments, while CATV revenues reached a record high.
AAOI Datacenter Sales Surge on 800G Demand
Datacenter revenues reached $155.61 million, up 254.2% year over year and 44.5% sequentially. The business accounted for approximately 58% of total revenues, supported by growing demand for high-speed optical connectivity products used in AI infrastructure.
Meanwhile, 400G revenues rose to $93.4 million from $48.4 million in the preceding quarter. However, 800G growth fell short of management's expectations as a major hyperscale customer shifted demand toward 1.6T products faster than anticipated.
Applied Optoelectronics CATV Sales Hit Record High
CATV revenues reached a record $110.88 million, increasing 57.0% year over year and 37.6% sequentially. The figure slightly exceeded management's guidance range of $100 million to $110 million.
The company continued shipping significant volumes of 1.8 GHz amplifiers to its largest CATV customer and reached the milestone of shipping its millionth amplifier. Management also highlighted positive customer responses to its newer broadband technologies, including QuantumWave modules and QuantumLink software.
AAOI Margins Face Product Mix Pressure
In the third quarter of 2026, non-GAAP gross margin was 28.7%, down 230 basis points (bps) year over year and 110 bps sequentially. The metric fell slightly below management's guidance of 29% to 30.5%, primarily reflecting a higher proportion of lower-margin 400G products.
Non-GAAP operating expenses increased 49.3% year over year to $70.3 million. Research and development expenses rose 79.2% to $37.5 million, while sales and marketing expenses declined 23.1% to $7.4 million. General and administrative expenses increased 53.4% to $25.3 million.
Non-GAAP operating income reached $7.2 million against an operating loss of $10.3 million in the year-ago quarter. Management continues to target non-GAAP gross margins of approximately 40% over the longer term.
Total manufacturing capacity approached 330,000 units per month, up from approximately 200,000 units at the end of the second quarter. Management now expects installed equipment capacity for 800G and 1.6T products to exceed 500,000 units monthly by year-end, below its previous target of 650,000 units.
The company expects capacity to exceed 1 million units monthly by the end of 2027. However, its second-phase U.S. expansion faces delays related to electrical power availability and construction issues. Initial operations at its new 210,000-square-foot Sugar Land facility are expected to begin in December.
AAOI Secures Major Hyperscale Customer Agreement
Applied Optoelectronics signed a multiyear agreement with an existing Tier 1 hyperscale data center customer covering 1.6T transceivers. Management expects the agreement to generate between $1 billion and $1.5 billion in revenues over three years, depending on customer demand and supply availability.
The customer committed to purchasing at least 10% of its required 1.6T transceivers from AAOI, subject to certain conditions. Management expects 1.6T shipments to begin contributing to revenues in the fourth quarter, although digital signal processor availability remains a near-term constraint.
As of Sept. 30, 2026, cash, cash equivalents, and restricted cash totaled $621.46 million, up from $508.76 million at the end of June 30, 2026.
The company made approximately $501 million in capital investments during the quarter, including $142.8 million in equipment prepayments. These investments primarily supported manufacturing expansion for 400G, 800G, and 1.6T products.
AAOI Offers Strong Fourth-Quarter Outlook
For the fourth quarter of 2026, Applied Optoelectronics expects revenues between $385 million and $420 million. Datacenter revenues are projected to be between $270 million and $300 million, while CATV revenues are expected to be between $105 million and $115 million.
Non-GAAP gross margin is projected to be between 29.5% and 31%. Non-GAAP net income is expected to be between $45.9 million and $60.4 million, translating into earnings of 48 cents to 63 cents per share based on approximately 96 million diluted shares.
AAOI’s Zacks Rank & Stocks to Consider
Applied Optoelectronics currently carries a Zacks Rank #3 (Hold).
View the Zacks #1 Rank List
Image: Bigstock
AAOI Q3 Earnings Beat Estimates on Strong Datacenter and CATV Sales
Key Takeaways
Applied Optoelectronics (AAOI - Free Report) reported third-quarter 2026 non-GAAP earnings of 17 cents per share against a loss of 9 cents in the year-ago quarter. The metric beat the Zacks Consensus Estimate by 21.43%.
Revenues surged 127.5% year over year to $269.88 million and topped the consensus mark by 0.27%. The topline benefited from robust datacenter and CATV demand. Datacenter revenues more than tripled year over year, supported by accelerating 800G optical transceiver shipments, while CATV revenues reached a record high.
AAOI Datacenter Sales Surge on 800G Demand
Datacenter revenues reached $155.61 million, up 254.2% year over year and 44.5% sequentially. The business accounted for approximately 58% of total revenues, supported by growing demand for high-speed optical connectivity products used in AI infrastructure.
800G revenues reached $47.5 million, nearly quadrupling sequentially from $12.8 million.
Applied Optoelectronics, Inc. Price, Consensus and EPS Surprise
Applied Optoelectronics, Inc. price-consensus-eps-surprise-chart | Applied Optoelectronics, Inc. Quote
Meanwhile, 400G revenues rose to $93.4 million from $48.4 million in the preceding quarter. However, 800G growth fell short of management's expectations as a major hyperscale customer shifted demand toward 1.6T products faster than anticipated.
Applied Optoelectronics CATV Sales Hit Record High
CATV revenues reached a record $110.88 million, increasing 57.0% year over year and 37.6% sequentially. The figure slightly exceeded management's guidance range of $100 million to $110 million.
The company continued shipping significant volumes of 1.8 GHz amplifiers to its largest CATV customer and reached the milestone of shipping its millionth amplifier. Management also highlighted positive customer responses to its newer broadband technologies, including QuantumWave modules and QuantumLink software.
AAOI Margins Face Product Mix Pressure
In the third quarter of 2026, non-GAAP gross margin was 28.7%, down 230 basis points (bps) year over year and 110 bps sequentially. The metric fell slightly below management's guidance of 29% to 30.5%, primarily reflecting a higher proportion of lower-margin 400G products.
Non-GAAP operating expenses increased 49.3% year over year to $70.3 million. Research and development expenses rose 79.2% to $37.5 million, while sales and marketing expenses declined 23.1% to $7.4 million. General and administrative expenses increased 53.4% to $25.3 million.
Non-GAAP operating income reached $7.2 million against an operating loss of $10.3 million in the year-ago quarter. Management continues to target non-GAAP gross margins of approximately 40% over the longer term.
Applied Optoelectronics Expands Manufacturing Capacity
Total manufacturing capacity approached 330,000 units per month, up from approximately 200,000 units at the end of the second quarter. Management now expects installed equipment capacity for 800G and 1.6T products to exceed 500,000 units monthly by year-end, below its previous target of 650,000 units.
The company expects capacity to exceed 1 million units monthly by the end of 2027. However, its second-phase U.S. expansion faces delays related to electrical power availability and construction issues. Initial operations at its new 210,000-square-foot Sugar Land facility are expected to begin in December.
AAOI Secures Major Hyperscale Customer Agreement
Applied Optoelectronics signed a multiyear agreement with an existing Tier 1 hyperscale data center customer covering 1.6T transceivers. Management expects the agreement to generate between $1 billion and $1.5 billion in revenues over three years, depending on customer demand and supply availability.
The customer committed to purchasing at least 10% of its required 1.6T transceivers from AAOI, subject to certain conditions. Management expects 1.6T shipments to begin contributing to revenues in the fourth quarter, although digital signal processor availability remains a near-term constraint.
Applied Optoelectronics Balance Sheet Supports Growth
As of Sept. 30, 2026, cash, cash equivalents, and restricted cash totaled $621.46 million, up from $508.76 million at the end of June 30, 2026.
The company made approximately $501 million in capital investments during the quarter, including $142.8 million in equipment prepayments. These investments primarily supported manufacturing expansion for 400G, 800G, and 1.6T products.
AAOI Offers Strong Fourth-Quarter Outlook
For the fourth quarter of 2026, Applied Optoelectronics expects revenues between $385 million and $420 million. Datacenter revenues are projected to be between $270 million and $300 million, while CATV revenues are expected to be between $105 million and $115 million.
Non-GAAP gross margin is projected to be between 29.5% and 31%. Non-GAAP net income is expected to be between $45.9 million and $60.4 million, translating into earnings of 48 cents to 63 cents per share based on approximately 96 million diluted shares.
AAOI’s Zacks Rank & Stocks to Consider
Applied Optoelectronics currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader Zacks Computer and Technology sector include Cisco Systems (CSCO - Free Report) , Analog Devices (ADI - Free Report) and NVIDIA (NVDA - Free Report) . Each stock presently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Cisco Systems shares have gained 24.3% year to date. Cisco Systems is set to report first-quarter fiscal 2027 results on Nov. 12.
Shares of Analog Devices have risen 33.2% year to date. Analog Devices is set to report fourth-quarter fiscal 2026 results on Nov. 24.
NVIDIA shares have lost 2.6% year to date. NVIDIA is set to report third-quarter fiscal 2027 results on Nov. 17.