Applied Optoelectronics shares rise 6.8% after Q3 profit beats estimates

Applied Optoelectronics (AAOI) posted third-quarter 2026 non-GAAP earnings of 17 cents per share, above the 15 cents consensus estimate, while revenue of $269.88 million fell short of the $273.47 million estimate. The company, based in Sugar Land, Texas, makes optical and HFC networking products for AI datacenters, CATV and broadband fiber access networks.

Shares rose 6.8% at 3:59 p.m. ET, from a $46.89 close.

Here's how the company did:

• Revenue: $269.88 million vs. $118.63 million a year earlier, below the $273.47 million expected
• Non-GAAP diluted EPS: 17 cents vs. 15 cents expected, and a loss of 9 cents a year earlier
• GAAP net income: $6.3 million, or 7 cents per basic share, vs. a loss of $17.9 million, or 28 cents, a year earlier
• Non-GAAP gross margin: 28.7% vs. 31.0% a year earlier

Revenue has risen in each of the last three quarters, from $118.6 million in the third quarter of 2025 to $191.9 million in the second quarter of 2026.

Segment results

• Datacenter: $155.6 million vs. $43.9 million a year earlier
• CATV: $110.9 million vs. $70.6 million a year earlier
• Telecom: $2.7 million vs. $3.7 million a year earlier

Datacenter revenue was the largest driver of the increase, and it now accounts for most of the company's sales.

Capacity and costs

CFO Dr. Stefan Murry said: "We expect our 2027 capacity expansion plan in the US to take longer to complete due to longer than expected time to obtain necessary electrical power."

Total manufacturing equipment capacity is approaching 330,000 units per month. The company now expects enough equipment to be installed by the end of 2026 to produce over 500,000 pieces of 800G and 1.6 Tb products per month, and over 1 million pieces of 800G and 1.6 Tb transceivers per month by the end of 2027.

Research and development expense was $38.1 million, up from $21.3 million a year earlier. General and administrative expense was $31.6 million, up from $20.3 million.

Adjusted EBITDA was $28.5 million, up from $2.0 million a year earlier. Cash, cash equivalents and restricted cash were $621.46 million at Sept. 30, 2026, up from $216.04 million at Dec. 31, 2025.

Fourth-quarter outlook

For the fourth quarter of 2026, the company expects revenue of $385 million to $420 million and non-GAAP gross margin of 29.5% to 31%.

It also expects non-GAAP net income of $45.9 million to $60.4 million, and non-GAAP income per share of 48 cents to 63 cents on about 96 million shares.