AAOI Q2 Earnings Call Focuses on Capacity-Led 800G Ramp

The company reported second-quarter revenues of $191.90 million, which topped the Zacks Consensus Estimate of $191.10 million. Non-GAAP EPS of $0.06 beat the consensus estimate of $0.03. Non-GAAP gross margin was 29.8%.

AAOI Makes Capacity the Core Constraint

CFO and chief strategy officer Stefan Murry said that 800G revenues reached $12.8 million in the second quarter, more than doubling sequentially and rising more than 10-fold year over year.

Murry said that AAOI expects nearly five-fold sequential 800G revenue growth in the third quarter, with capacity and component supply limiting further growth. He further added that monthly 800G and 1.6T capacity is approaching 200,000 units, up from nearly 100,000 at the first-quarter end, and should exceed 650,000 by year-end.

Applied Optoelectronics Sets a Steeper Q3 Path

For the third quarter, AAOI expects revenues of $255 million to $290 million, non-GAAP gross margin in the range of 29% to 30.5% and non-GAAP EPS of $0.11 to $0.26.

CEO Thompson Lin said that one customer's inability to source enough 100G switches is likely to reduce third-quarter 100G revenues by $20 million to $25 million. Stefan Murry maintained the 2026 revenue outlook at around $1.1 billion.

AAOI Pushes 1.6T Toward a Commercial Ramp

Murry said that qualification of AAOI's first 1.6T product with a major hyperscale customer should finish within weeks, with shipments beginning later in the third quarter.

A Raymond James analyst asked about timing for the previously discussed order of more than $200 million. Murry said that deliveries should start late in the third quarter, ramp up in the fourth quarter and extend into early 2027.

A Rosenblatt analyst asked whether fourth-quarter gross margin could still reach the mid-30s. Lin said that 32% to 33% was a better near-term range, with 1.6T mix supporting improvement but key-supplier expedite fees weighing on margin.

Applied Optoelectronics Funds a Large Texas Build

Murry said that AAOI expects initial production at its 210,000-square-foot facility near headquarters late in the third quarter. Additional Pearland and Houston facilities should come online in early 2027.

Murry said that second-quarter capital investments totaled $565.5 million, including $280 million of equipment prepayments. He expects second-half capital intensity to be higher as high-speed transceiver capacity expands.

A Wolfe Research analyst asked about potential U.S. restrictions on Chinese transceivers. Murry said that details remain uncertain, but U.S. manufacturing is already central to customer appeal.

AAOI Keeps CATV as a Second Growth Engine

Murry said that CATV revenues reached a record $80.6 million, up 43.8% year over year and 20.6% sequentially, helped by 1.8 GHz amplifier shipments.

For the third quarter, Murry expects CATV revenues of $100 million to $110 million. He also said that the company continues to expect more than $325 million in annual CATV revenues.

He said that the top 10 customers represented 99% of second-quarter revenues, including three customers above 10%.

Applied Optoelectronics Leaves Execution in Focus

Lin and Murry tied the growth outlook to capacity additions, qualification progress and access to DSP, TIA and other components rather than demand creation. They kept U.S. manufacturing expansion, 800G volume growth and the 1.6T transition at the center of near-term execution, with CATV as a second revenue stream.

Zacks Signals for AAOI

AAOI currently carries a Zacks Rank #3 (Hold). Its Value Score is F, Growth Score is F, Momentum Score is D and VGM Score is F, placing the stock toward the weaker end of the Style Score grading scale. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Style Scores complement the Zacks Rank, with A and B grades viewed more favorably than lower grades. This combination does not match the stronger Rank-and-Style profile associated with Zacks Rank #1 or 2 (Buy) stocks and A or B Style Scores. The Zacks Rank can change as analysts revise estimates after the just-reported results.

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