Will Strong Demand for 1.8 GHz Amplifiers Boost AAOI's CATV Growth?

Applied Optoelectronics AAOI is seeing strong demand for its cable television (CATV) products, especially the 1.8 gigahertz (GHz) amplifiers, which are mainly used by cable operators to upgrade their hybrid fiber-coax (HFC) networks. Here, the company continues to ship a significant quantity of 1.8 GHz amplifiers and expects the demand for these amplifiers to remain strong.

The company reported CATV revenues of $245 million in 2025, which nearly tripled compared with 2024. In the fourth quarter, CATV revenues were $54 million, which increased 3% year over year and came above the midpoint of management's guidance of $50-$55 million. Here, growth is being driven by strong demand and rising shipments of AAOI's amplifier products used in cable network upgrades.

Cable operators are currently upgrading the outside plant portion of their networks to support higher broadband speeds. Here, management stated that a significant portion of cable operators’ capital spending is focused on this part of the network. Since amplifiers are installed in the outside plant infrastructure, these upgrades are increasing demand for AAOI’s 1.8 GHz amplifiers.

Looking ahead, the company expects CATV revenues to be between $61 million and $67 million in the first quarter of 2026, suggesting strong sequential growth. Applied Optoelectronics is also seeing demand from a new group of multiple system operator customers in addition to its largest cable operator client and expects the CATV business to reach $300 million in annual revenues, if current trends continue. The Zacks Consensus Estimate for 2026 and 2027 revenues indicates a year-over-year increase of around 107.6% and 90.1%, respectively.

How Competitors Fare Against AAOI

Applied Optoelectronics faces stiff competition in the broader optical networking and HFC equipment markets from the likes of Lumentum Holdings LITE and Coherent Corporation COHR.

Lumentum develops optical components and modules used in telecommunications networks such as higher-capacity reconfigurable optical add-drop multiplexers, tunable laser and transceiver modules used in long-haul and metro applications. These products enable Lumentum to support growing bandwidth needs in telecom networks.

Coherent provides optical communication technologies such as coherent transmission components, optical transceivers, pump lasers, erbium-doped fiber amplifiers, passive components and optical line systems. These products enable Coherent to support high-speed optical transmission systems and transport networks to address growing global bandwidth demand.

AAOI’s Price Performance, Valuation & Estimates

Shares of AAOI have surged 198.9% in the past six months, outperforming the Zacks Electronics - Semiconductors industry’s return of 4.7%.

AAOI 6-Month Price Performance

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In terms of forward 12-month Price/Sales (P/S), Applied Optoelectronics is trading at 5.78X, lower than the industry’s forward 12-month P/S ratio of 7.38X.

AAOI Forward 12 Months (P/S) Valuation

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The Zacks Consensus Estimate for Applied Optoelectronics’ 2026 earnings is pegged at 84 cents per share, up by 52.7% over the past 30 days.

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Currently, Applied Optoelectronics carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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