NEW YORK, August 7, 2026, 07:14 EDT — Before the opening bell in the U.S., premarket trading in Applied Optoelectronics was strong.
- At 06:45 EDT, shares signaled $141.66, a 14.0% increase compared with Thursday’s close at $124.22.
- Second quarter preliminary, unaudited revenue surged 86%, reaching a record high of $191.9 million.
- The midpoint for Q3 revenue indicates a 42% increase from the previous quarter, while the midpoint for gross margin remains largely unchanged.
Shares of Applied Optoelectronics jumped ahead of Friday’s session after the firm forecast another significant increase in revenue. The company’s executives attributed the guidance to greater output of 800G and 1.6-terabit optical products.
The market delivered a simple message. Investors seem to be assigning value to the resolution of a factory bottleneck, rather than to upcoming margin growth. The Q3 revenue midpoint shows a 42% increase from Q2, while the margin midpoint remains about flat.
The following Q2 results are preliminary and have not been audited. Revenue increased by 27% from the previous quarter and by 86% year-on-year. The company’s non-GAAP earnings, as defined by the firm, were positive.
| Metric | Q2 2026 | Q1 2026 | Q2 2025 | Sequential / annual change |
|---|---|---|---|---|
| Revenue | $191.9m | $151.1m | $103.0m | up 27.0% / up 86.4% |
| Non-GAAP gross margin | 29.8% | 29.2% | 30.4% | increase of 0.6 pp / decrease of 0.6 pp |
| Company-defined non-GAAP EPS | $0.06 | $(0.07) | $(0.16) | Returned to profit |
| GAAP net loss | $(22.8)m | $(14.3)m | $(9.1)m | Loss grew |
Source: company announcement and regulatory disclosure. Reported figures were used in the calculations.
Profit quality continues to lag behind revenue growth. Adjusted EBITDA stayed in negative territory at $0.5 million. GAAP operating loss increased to $24.7 million compared to $16.0 million.
Chief Executive Thompson Lin expects demand will “continue to outpace our production capacity through mid-2027.” He reported sequential doubling in 800G volume. CFO Stefan Murry stated that capacity is “approaching 200,000 units per month.” AO Investors
The aim is to reach a monthly output of approximately 650,000 800G and 1.6T units by year-end, about 3.25 times the present volume. Expansion drives the main equity narrative.
Datacenter revenue was the main driver, while CATV growth also picked up pace. The combination is significant, as both core segments contributed to the record-setting quarter.
| Business | Q2 revenue | Share of sales | Sequential growth | Annual growth |
|---|---|---|---|---|
| Datacenter | $107.7m | 56.1% | up 32.3% | up 140.4% |
| CATV | $80.6m | 42.0% | up 20.6% | up 43.8% |
| Telecom and other | $3.7m | 1.9% | up 27.0% | up 71.9% |
Six-month totals on file are used to determine sequential figures.
The investment appears in the balance sheet. Cash, equivalents and restricted cash increased by 136% since December. Net plant and equipment rose 85%, while inventory was up 52%.
| Measure | Q2 actual | Q3 guidance or year-end target | Midpoint or implied change |
|---|---|---|---|
| Revenue | $191.9m | $255m–$290m | $272.5m; up 42.0% sequentially |
| Non-GAAP gross margin | 29.8% | 29.0%–30.5% | 29.75%; down 0.05 percentage points |
| Company-defined non-GAAP EPS | $0.06 | $0.11–$0.26 | $0.185 |
| Diluted share count | 88.15m | About 92.8m | Increase of 5.3% |
| 800G and 1.6T monthly capacity | Approaching 200,000 | Estimated 650,000 by year-end | Approximately up 225% |
Company projections apply to Q3 figures. Note that non-GAAP metrics can vary depending on the data source.
Market consensus remains cautious compared to premarket activity. Analysts currently expect Q3 EPS at 25 cents, a decline from 28 cents projected a month prior. This forecast is at the upper end of management’s guidance range of 11 to 26 cents, but calculation approaches may vary.
| Recommendation measure | Current | Comparison |
|---|---|---|
| Buy ratings | 3 | 3 three months prior |
| Overweight ratings | 1 | 1 three months prior |
| Hold ratings | 3 | 4 three months prior |
| Underweight / Sell | 0 / 0 | 0 / 0 three months prior |
| Consensus | Overweight | No change |
| Price-target range | $57.50–$220 | Median $180.50; average $164.58 |
The snapshot from Friday morning might not include each revision made after results.
Shares, priced at $141.66, were just 16% below the average target of $164.58. The target range remains highly volatile, with the lower bound nearly 60% under the premarket indication.
The stock rose 31.7% across the five sessions to Thursday. A policy report on Tuesday provided further momentum, as Washington was preparing restrictions on fresh Chinese optical transceiver imports. The proposal remains subject to revision or cancellation.
Following the report, shares of Applied increased by 18%. Coherent Corp. NYSE:COHR was up 11%, and Lumentum Holdings Inc. NASDAQ:LITE climbed 7%. These movements among peers highlight the significant policy optionality present in the optics sector.
In the week ahead, investors will focus on updates to estimates and the progress of factory ramp-up. The next scheduled investor event is the Rosenblatt summit on August 18, which takes place after the upcoming trading week.
Risks: Flat margin outlook, ongoing negative adjusted EBITDA, and an increasing diluted share count provide limited room for error. The proposed U.S. import policy remains pending. Additionally, Chinese dominance in indium-phosphide supply may restrict broader optics scaling.
Capacity is currently being prioritized by the market. Margin conversion will be the next measure.
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