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Applied Optoelectronics
(NASDAQ:AAOI)
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Rating:62Neutral
Price Target:
$138.00
▲(21.96% Upside)
Action:Reiterated
Date:10/07/26
Overall score reflects a strong growth and guidance setup (robust revenue outlook and non-GAAP profitability) and a generally bullish price trend, offset by the most significant risk: very large negative operating/free cash flow and ongoing losses on a TTM basis. Valuation provides limited support given the negative P/E and no dividend yield.
Positive Factors
Strong data-center growth and product adoption
Rapid growth across 400G and 800G shows AAOI is participating in sustained data-center bandwidth upgrades rather than relying on a mature product base. The planned 1.6T ramp could extend product-cycle momentum and support revenue expansion over the next several quarters.
Negative Factors
Persistent negative cash generation
Deeply negative operating and free cash flow means current operations are not yet funding growth internally. If cash consumption persists during the expansion cycle, AAOI may need additional financing, limiting flexibility and increasing execution risk even with manageable reported leverage.
Read all positive and negative factors
Positive Factors
Negative Factors
Strong data-center growth and product adoption
Rapid growth across 400G and 800G shows AAOI is participating in sustained data-center bandwidth upgrades rather than relying on a mature product base. The planned 1.6T ramp could extend product-cycle momentum and support revenue expansion over the next several quarters.
Read all positive factors
Applied Optoelectronics (AAOI) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$11.05B
Dividend YieldN/A
Average Volume (3M)6.95M
Price to Earnings (P/E)―
Beta (1Y)3.57
Revenue Growth61.85%
EPS Growth76.82%
CountryUS
Employees4,691
SectorTechnology
Sector Strength88
IndustryCommunication Equipment
Share Statistics
EPS (TTM)-0.78
Shares Outstanding84,906,290
10 Day Avg. Volume8,309,753
30 Day Avg. Volume6,950,504
Financial Highlights & Ratios
PEG Ratio0.63
Price to Book (P/B)2.86
Price to Sales (P/S)4.60
P/FCF Ratio-5.93
Enterprise Value/Market Cap1.07
Enterprise Value/Revenue19.93
Enterprise Value/Gross Profit68.92
Enterprise Value/Ebitda-474.30
Forecast
1Y Price Target
$163.40Price Target Upside44.41% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering5
EPS Forecast (FY)0.74
Revenue Forecast (FY)$1.05B
Applied Optoelectronics Business Overview & Revenue Model
Company Description
Applied Optoelectronics, Inc. (AAOI) is a global technology firm specializing in the creation, production, and distribution of fiber-optic networking solutions. Its extensive product catalog features optical modules, a range of laser components, s...
How the Company Makes Money
AAOI makes money primarily by selling fiber-optic connectivity hardware—most notably optical transceivers—into high-volume communications markets. Its key revenue stream is product revenue from transceivers that convert electrical signals to optic...
Applied Optoelectronics Earnings Call Summary
Earnings Call Date:Aug 06, 2026
(Q2-2026)
| % Change Since: |
Next Earnings Date:Nov 05, 2026
Earnings Call Sentiment Positive
The call communicated very strong demand, record revenue growth (86% YoY), return to non-GAAP profitability, clear product momentum in 400G/800G/1.6T, and aggressive U.S. capacity expansion funded by recent equity raises. However, the company repeatedly emphasized that near-term revenue is capacity- and component-constrained, is incurring elevated OpEx and heavy CapEx to scale, and faces customer concentration and some supply-chain/timing risks. On balance, the operational wins, robust guidance, and financial resources to fund expansion outweigh the execution and supply constraints described.Positive Updates
Record Revenue and Strong Top-Line Growth
Q2 revenue of $191.9M (rounded to $192M) was a company record, up 86% year-over-year and up 27% sequentially; company delivered 5th consecutive quarter of record revenue.
Negative Updates
Capacity and Supply Constraints Limiting Near-Term Revenue
Company repeatedly stated near-term revenue is bounded by production capacity and key component availability; forecast demand expected to outpace production capacity through mid-2027, constraining ability to monetize strong demand.
Read all updates
Q2-2026 Updates
Positive
Negative
Record Revenue and Strong Top-Line Growth
Q2 revenue of $191.9M (rounded to $192M) was a company record, up 86% year-over-year and up 27% sequentially; company delivered 5th consecutive quarter of record revenue.
Read all positive updates
Company Guidance
AOI guided Q3 revenue of $255M–$290M (midpoint ≈130% YoY growth), non‑GAAP gross margin of 29.0%–30.5%, non‑GAAP net income of $10.1M–$24.0M and non‑GAAP EPS of $0.11–$0.26 on ~92.8M diluted shares, and expects Q3 CATV revenue of $100M–$110M; for 2026 management reiterated revenue of ~$1.1B (limited by production capacity and component availability) and continued non‑GAAP profitability, while forecasting non‑GAAP operating expenses of $70M–$80M per quarter. They said current 800G/1.6T capacity is approaching ~200k units/month (up from ~100k at Q1), targeting >650k/month by year‑end and >930k/month by end‑2027 (over half in Texas), that 800G revenue (Q2 was $12.8M and 11.9% of data‑center revenue) should grow ~5x in Q3, and that CPO ELS production could ultimately reach ~400k pieces/month in 2028; Q2 results to date included $191.9M revenue, 29.8% non‑GAAP gross margin, $5.5M non‑GAAP net income ($0.06/share), $508.8M cash, $278.8M inventory, $92.8M debt, $565.5M Q2 capex (including $280M equipment prepayments), and $538.8M raised under the ATM.Applied Optoelectronics Financial Statement Overview
Summary
Income Statement
44
Neutral
Balance Sheet
72
Positive
Cash Flow
28
Negative
| Breakdown | TTM | Dec 2025 | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 595.97M | 455.71M | 249.37M | 217.65M | 222.82M | 211.56M |
| Gross Profit | 172.33M | 136.91M | 61.80M | 58.92M | 33.63M | 37.72M |
| EBITDA | -25.04M | -15.51M | -159.26M | -26.18M | -36.88M | -23.17M |
| Net Income | -57.02M | -38.23M | -186.73M | -56.05M | -66.40M | -54.16M |
Balance Sheet | ||||||
| Total Assets | 2.30B | 1.17B | 547.03M | 389.19M | 408.26M | 454.46M |
| Cash, Cash Equivalents and Short-Term Investments | 499.74M | 216.03M | 67.43M | 45.37M | 24.68M | 34.66M |
| Total Debt | 264.54M | 167.33M | 190.86M | 121.07M | 155.53M | 149.90M |
| Total Liabilities | 633.17M | 434.50M | 317.92M | 174.32M | 223.59M | 199.89M |
| Stockholders Equity | 1.67B | 733.92M | 229.11M | 214.87M | 184.67M | 254.57M |
Cash Flow | ||||||
| Free Cash Flow | -413.26M | -353.58M | -112.93M | -17.60M | -18.26M | -22.30M |
| Operating Cash Flow | -131.82M | -174.43M | -69.53M | -7.93M | -14.02M | -11.64M |
| Investing Cash Flow | -769.12M | -210.60M | -50.70M | -14.76M | -3.83M | -10.55M |
| Financing Cash Flow | 1.31B | 527.94M | 142.18M | 40.58M | 10.75M | 14.09M |
Applied Optoelectronics Technical Analysis
Positive
113.15
Price Trends
112.91
Positive
130.81
Negative
110.24
Positive
Market Momentum
2.36
Negative
59.16
Neutral
91.07
Negative
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For AAOI, the sentiment is Positive. The current price of 113.15 is above the 20-day moving average (MA) of 105.64, above the 50-day MA of 112.91, and above the 200-day MA of 110.24, indicating a bullish trend. The MACD of 2.36 indicates Negative momentum. The RSI at 59.16 is Neutral, neither overbought nor oversold. The STOCH value of 91.07 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for AAOI.
Applied Optoelectronics Risk Analysis
Applied Optoelectronics disclosed 38 risk factors in its most recent earnings report. Applied Optoelectronics reported the most risks in the "Finance & Corporate" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Applied Optoelectronics Peers Comparison
UnderperformOutperform
Sector (61)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
78 Outperform | $62.91B | 96.63 | 22.82% | ― | 32.57% | 367.53% | |
71 Outperform | $464.99B | 34.94 | 27.39% | 1.42% | 11.77% | 27.65% | |
71 Outperform | $101.67B | -11.95 | -300.07% | ― | 83.22% | -24212.72% | |
67 Neutral | $2.22B | 44.99 | 6.54% | ― | 27.84% | ― | |
62 Neutral | $11.05B | -157.34 | -5.61% | ― | 61.85% | 76.82% | |
61 Neutral | $37.18B | 12.37 | -10.20% | 1.83% | 8.50% | -7.62% | |
58 Neutral | $60.07B | 75.27 | 4.55% | 1.54% | 13.04% | -24.13% |
* Technology Sector Average
AAOI
Applied Optoelectronics
105.90
73.53
227.15%
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Applied Optoelectronics Corporate Events
Business Operations and Strategy
Applied Optoelectronics Expands China Manufacturing with Long-Term Lease
Positive
Sep 15, 2026
On September 10, 2026, Global Technology, Inc., a wholly owned subsidiary of Applied Optoelectronics, Inc., signed a ten-year lease for a 38,311.8-square-meter factory building in Ningbo, China, with the term running from September 16, 2026, to Se...
Business Operations and Strategy
Applied Optoelectronics Expands Operations with Houston Facility Acquisition
Positive
Sep 10, 2026
On September 4, 2026, Applied Optoelectronics, Inc. exercised a previously granted purchase option and acquired a commercial property at 16851 Blue Ridge Commerce Dr., Building 3, in Houston, Texas, from Blue Ridge Commerce Center West LLC. The si...
Business Operations and Strategy
Applied Optoelectronics Signs Major Long-Term Houston Leases
Positive
Sep 1, 2026
On August 31, 2026, Applied Optoelectronics entered into two long-term leases with Hightower Phase II Owner for newly constructed industrial Buildings 4 and 5 in Houston, intended for light manufacturing, warehousing and related uses. The 10-year ...
Business Operations and StrategyRegulatory Filings and Compliance
Applied Optoelectronics Updates Indemnification for Leadership
Positive
Aug 24, 2026
On August 18, 2026, Applied Optoelectronics, Inc.’s board approved and adopted an updated indemnification agreement for its directors and certain executive officers, replacing prior agreements and extending to future leadership. The revised ...
Private Placements and FinancingRegulatory Filings and Compliance
Applied Optoelectronics Announces New Equity Distribution Program
Neutral
Aug 21, 2026
On August 21, 2026, Applied Optoelectronics, Inc. entered into an Equity Distribution Agreement with Raymond James Associates, Inc. and Needham Company, LLC to offer up to $600 million of its common stock through at-the-market transactions. The ...
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.