NEW YORK, August 6, 2026, 17:17 EDT — U.S. regular session trading had ended, but after-hours action continued.
- Second-quarter revenue increased 86% to $191.9 million, while adjusted earnings were 6 cents per share.
- The midpoint of Q3 revenue guidance topped consensus, while the full guidance range stayed under forecasts.
- The number of diluted shares included in adjusted earnings climbed 42%. Revenue per diluted share was up approximately 31%.
Shares in Applied Optoelectronics NASDAQ:AAOI fluctuated following Thursday’s earnings report. The stock dropped 7.5% at first, but recovered to trade up 1.3% as of 17:10 EDT. Applied Optoelectronics ended the regular session at $124.22, marking a decline of about 3.7%.
The report was mixed. Second-quarter revenue surpassed forecasts and sales guidance for the third quarter was robust. However, profit guidance for Q3 stayed under consensus estimates.
The main concern for investors is conversion. Revenue climbed 86%, while the adjusted diluted share count increased by 42%. As a result, revenue per diluted share grew at a slower rate of 31%. The GAAP gross margin declined by 260 basis points.
| Q2 2026 scorecard | Actual | Comparison | Outcome |
|---|---|---|---|
| Revenue | $191.9m | Zacks consensus: $191.13m | 0.4% higher |
| Non-GAAP EPS | $0.06 | Zacks consensus: $0.03 | $0.03 higher |
| Revenue guidance | $191.9m actual | Company range: $180m-$198m | Within guidance |
| Non-GAAP gross margin | 29.8% | Company range: 29%-30% | Close to upper end |
| GAAP net loss | $22.8m | $9.1m one year earlier | Loss increased |
The quarterly numbers are unaudited and preliminary. Company forecasts and the Zacks consensus serve as distinct benchmarks.
Sales from data centers climbed 140% year over year to $107.7 million, contributing 56% of overall revenue. CATV sales increased 44%, totaling $80.6 million.
| Growth-conversion measure | Q2 2026 | Q2 2025 | Change |
|---|---|---|---|
| Revenue | $191.9m | $103.0m | +86.4% |
| Diluted shares for non-GAAP EPS | 88.2m | 62.0m | +42.1% |
| Revenue per diluted share | $2.18 | $1.66 | +31.2% |
| GAAP gross margin | 27.7% | 30.3% | -260 bps |
| GAAP operating loss | $24.7m | $16.0m | Loss grew 54.8% |
| Adjusted EBITDA | -$0.5m | -$3.4m | Loss reduced, remains negative |
Diluted share figures disclosed for non-GAAP earnings form the basis of these calculations.
The denominator continues to rise. Q3 guidance factors in roughly 92.8 million diluted shares, marking a further sequential gain of 5.3%.
Profit quality continues to be uneven. The non-GAAP figures reflected a tax-related gain of $14.3 million. Adjusted EBITDA remained in the red at $0.5 million. Adjusted net income was still $5.5 million.
Chief Executive Thompson Lin stated that demand will “continue to outpace our production capacity through mid-2027.” According to CFO Stefan Murry, monthly capacity has neared 200,000 units, and he anticipates approximately 650,000 units by the end of the year. SEC
The ramp supports Q3, with the revenue midpoint projected at $272.5 million, marking a 42% sequential increase. This figure is 3% higher than The Fly’s consensus. Profit guidance came in softer.
| Q3 outlook | Company guidance | Comparison | Read-through |
|---|---|---|---|
| Revenue | $255m-$290m | Consensus: $264.56m | Midpoint stands 3.0% ahead |
| Non-GAAP EPS | $0.11-$0.26 | Consensus: $0.28 | Highest range 7.1% short |
| Non-GAAP gross margin | 29%-30.5% | Q2 actual: 29.8% | Midpoint approximately unchanged |
| Diluted shares | About 92.8m | Q2: 88.2m | Sequential rise of 5.3% |
The guidance refers to future performance. AAOI has not included a GAAP reconciliation for these projections.
This week’s policy environment heightened anticipation. Reuters disclosed a draft U.S. proposal to ban new Chinese optical transceivers. Authorities may still revise or withdraw the plan.
AAOI surged 18% after the report. Shares of Coherent Corp. NYSE:COHR climbed 11%, and Lumentum Holdings NASDAQ:LITE advanced 7%. AAOI’s relative advantage was reversed during Thursday’s regular session.
| U.S. optical supplier | Aug. 4 policy-report reaction | Aug. 6 regular session |
|---|---|---|
| Applied Optoelectronics | up 18.0% | down 3.7% |
| Coherent | up 11.0% | up 1.8% |
| Lumentum | up 7.0% | up 1.4% |
Thursday’s adjustments reflect the most recent regular-session data.
Jefferies viewed the likelihood of the ban as “low risk”. Such a restriction may lead to higher expenses for U.S. cloud users. The policy premium remains vulnerable. Reuters
Analysts began with widely differing views in the report. Target prices most recently ranged between $57.50 and $220. Out of the five recommendations listed below, three were Buys.
| Analyst and firm | Latest action date | Rating | Target | Versus $124.22 close |
|---|---|---|---|---|
| Dave Kang, B. Riley Securities | July 31 | Hold | $94.00 | -24.3% |
| Ryan Koontz, Needham | July 22 | Buy | $220.00 | +77.1% |
| Michael Genovese, Rosenblatt | June 21 | Buy | $220.00 | +77.1% |
| Simon Leopold, Raymond James Financial NYSE:RJF | May 8 | Buy | $160.00 | +28.8% |
| Tim Savageaux, Northland | May 8 | Hold | $57.50 | -53.7% |
These suggestions were issued before Thursday’s results. Calculations for implied moves reference the regular session close.
AAOI advanced 37.9% across five sessions ending Thursday. Analyst revisions in the next week are set to challenge both outlooks. Investors are also monitoring if margins remain close to 30%.
The production build can be seen reflected on the balance sheet. Inventory increased by 52% from December, and property and equipment climbed 85%. Cash jumped to $508.8 million, more than twice the previous amount.
Risks: AAOI is exposed to risks including heavy customer concentration, possible delays in ramping up, supply limitations, and pressure on pricing. Margins could stall if the product mix softens. The suggested restriction on China might ultimately not be implemented.
Sales growth continues to be robust. The key challenge ahead is demonstrating per-share operating leverage. Third-quarter results need to prove that capacity gains drive margins as well as increased volume.
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