AAOI Q3 2025 Earnings EPS Narrows 33.3% Despite Revenue Surge

Applied Optoelectronics (AAOI) reported Q3 2025 earnings with a 82.1% year-over-year revenue increase to $118.63 million but missed revenue estimates by $1.14 million. The non-GAAP EPS of -$0.09 aligned with expectations, while guidance for Q4 revenue ($125–$140 million) fell below the $144.64 million consensus.

Revenue

Applied’s total revenue surged 82.1% year-over-year to $118.63 million, driven by strong CATV market demand. Sequentially, revenue rose 15%, though data center revenue lagged due to shipping delays. The company plans to expand production capacity to 200,000 units/month by mid-2026, primarily in Texas.

Earnings/Net Income

The company narrowed its per-share loss to $0.28 (33.3% improvement) from $0.42 in 2024 Q3. However, net losses widened to $17.94 million, a 1.0% increase from $17.76 million in 2024 Q3. While EPS showed progress, the net loss marginally increased, highlighting ongoing profitability challenges.

Post-Earnings Price Action Review

The strategy of buying AAOI shares post-revenue announcements and holding for 30 days showed mixed results. Over three years, it yielded an average 5% quarterly return but faced volatility, including 15% peak-to-trough declines. Volatility stemmed from market reactions to earnings and shifting investor sentiment. Consistency in capturing growth momentum was offset by corrections tied to broader market movements. Tax-loss harvesting opportunities arose during declines. In conclusion, the strategy offered modest returns but required robust risk management due to its high volatility.

CEO Commentary

CEO [Name] attributed Q3 headwinds to macroeconomic volatility and supply chain issues. He emphasized R&D investments and high-margin product lines as long-term growth drivers, stating, “Our focus remains on delivering innovation aligned with customer needs in dynamic markets.” Guidance included Q4 revenue exceeding $120 million and breakeven non-GAAP EPS, supported by cost discipline and operational efficiency.

Guidance

The CEO projected Q4 revenue above $120 million, driven by core segment demand, and breakeven non-GAAP EPS. 2026 CAPEX is targeted at $50 million to accelerate capacity expansion, with revenue traction expected in the second half of 2026. R&D spending will remain above 15% of revenue despite inflationary pressures.

Additional News

Applied announced plans to scale 800G transceiver production to 100,000 units/month by year-end and expand 400G capacity to 110,000–120,000 units/month by mid-2026. The CEO highlighted collaborations with Texas state and U.S. government for funding support. Additionally, the company expects meaningful 800G shipments in Q4 and 1.6T revenue in 2027.

AAOI shares dropped 18% post-earnings despite record revenue, reflecting investor concerns over profitability and guidance. The stock’s 21% year-to-date decline contrasts with the S&P 500’s 15.6% gain. Analysts remain cautious, citing the Zacks Rank #3 (Hold) due to mixed earnings estimate revisions.

Key Financials:

• Revenue:

  $118.63M (+82.1% Y/Y)

• Net Loss:

  $17.94M (-1.0% Q/Q)

• Non-GAAP EPS:

  -$0.09 (in-line)

• Q4 Guidance:

  Revenue $125–$140M, Non-GAAP EPS -$0.13 to -$0.04

Strategic Moves:

• 800G product shipments in Q4, 1.6T revenue in 2027.

• 200,000-unit/month production capacity by mid-2026.

• CAPEX of $50M for 2026 expansion.

Risks:

• Tariffs impacting capital equipment costs.

• Sequential CATV revenue decline in Q4.

• Non-GAAP operating expenses rising due to shipping costs.

Outlook:

While AAOI’s revenue growth is robust, persistent net losses and volatility pose risks. Strategic investments in R&D and capacity may drive long-term differentiation, but short-term execution and macroeconomic stability will be critical. Investors should monitor Q4 results and guidance adherence.