Applied Optoelectronics Inc. missed Wall Street’s first-quarter estimates but projected a significant revenue ramp driven by demand for its AI data center optics, forecasting that sales would exceed $1.1 billion for the full year. The guidance suggests the company's production can’t keep pace with demand from the artificial intelligence buildout.
“We continue to see strong customer engagement around our 800G transceivers and 1.6 Tb products, particularly as AI-driven datacenter investments accelerate,” said Dr. Thompson Lin, AOI’s Founder, President and Chief Executive Officer. “Looking ahead, we continue to anticipate a strong volume ramp of our 800G products starting in Q2.”
The Sugar Land, Texas-based company reported a first-quarter non-GAAP loss of $0.07 per share, wider than the consensus estimate for a $0.05 loss surveyed by Zacks Investment Research. Revenue came in at $151.1 million, missing the $156.5 million Street forecast, even as it grew 51 percent year-over-year.
Despite the miss, the company’s outlook topped expectations. For the second quarter, Applied Optoelectronics expects revenue between $180 million and $198 million, with adjusted earnings ranging from a loss of three cents to a profit of three cents per share. More significantly, it raised its full-year 2026 forecast to over $1.1 billion in revenue with more than $140 million in non-GAAP operating income, citing demand that outpaces its production capacity through mid-2027.
To meet the surge in orders, Applied Optoelectronics is aggressively expanding its manufacturing footprint. CFO Dr. Stefan Murry noted the company has nearly doubled its Houston-area presence and is increasing capacity in Taiwan. The company exited Q1 with a manufacturing capacity of nearly 100,000 units of 800G transceivers per month and expects to approach 150,000 per month in the current quarter.
By the end of 2026, management plans to be capable of producing over 650,000 units of its 800G and 1.6T products per month. This expansion is critical as the company has already completed its first volume shipment of 800G products to a major hyperscale customer and expects to begin delivering on a 1.6T order as early as the third quarter.
The earnings report came after a volatile day for the optics sector. Shares of Applied Optoelectronics fell 14% during Thursday's trading session ahead of the results, part of a broader cooldown that also saw peers like Coherent (COHR) and Lumentum (LITE) slide 10% and 7%, respectively.
The selloff was largely seen as profit-taking after a blistering rally. Heading into the day, Applied Optoelectronics shares had soared 412% year-to-date, fueled by investor enthusiasm for companies providing essential hardware for the AI infrastructure boom. The structural demand thesis remains intact, underscored by management's guidance and the "unprecedented investments that are being made in AI infrastructure." For investors, the key question is whether the company's execution on its ambitious capacity ramp can justify its premium valuation and fend off competitors.
This article is for informational purposes only and does not constitute investment advice.
