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1. Company Snapshot

1.a. Company Description

Applied Optoelectronics, Inc.designs, manufactures, and sells various fiber-optic networking products worldwide.It offers optical modules, lasers, subassemblies, transmitters and transceivers, and turn-key equipment, as well as headend, node, and distribution equipment.


The company sells its products to internet data center operators, cable television and telecom equipment manufacturers, and internet service providers through its direct and indirect sales channels.Applied Optoelectronics, Inc.was incorporated in 1997 and is headquartered in Sugar Land, Texas.

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1.b. Last Insights on AAOI

The recent 3-month performance of Applied Optoelectronics, Inc. was negatively impacted by a decline in profitability, despite strong sales growth. The company's Q4 results showed a significant decline in gross margins and net income due to one-time charges and operational inefficiencies. Additionally, the macroeconomic uncertainties, including tariff wars, added volatility, making it difficult to predict a near-term improvement in profitability. Furthermore, the company's recent announcement of a stock warrant agreement with Amazon, while potentially positive in the long term, may not have a significant impact on the company's short-term performance.

1.c. Company Highlights

2. Applied Optoelectronics' Q3 2025 Earnings: A Strong Performance

Applied Optoelectronics reported a record revenue of $118.6 million in the third quarter, driven by strong demand in the CATV market, which achieved record revenue of $70.6 million. The company's non-GAAP gross margin was 31% in the third quarter, in line with its guidance range. The non-GAAP net loss for Q3 was $5.4 million or $0.09 per share, which was in line with its guidance range and better than the estimated loss of $0.1 per share.

Publication Date: Nov -18

📋 Highlights

Segment Performance

The data center segment revenue was down 2% sequentially, while sales of 100G products increased 32% year-over-year. The company expects a substantial sequential increase in its data center revenue in the fourth quarter, driven by growth in 400G revenue and layering in some increased 800G revenue. Dr. Thompson Lin stated that the company is near the final stages of qualification with several customers for its 800G products and expects qualification in the near term.

Guidance and Outlook

For Q4, the company expects revenue to be between $125 million and $140 million, with a sequential decrease in CATV revenue and a significant increase in data center revenue. Non-GAAP gross margin is expected to be in the range of 29% to 31%. The company expects non-GAAP net income to be between a loss of $9 million and a loss of $2.8 million, with non-GAAP earnings per share between a loss of $0.13 per share and a loss of $0.04 per share.

Valuation Metrics

With a P/S Ratio of 3.5, the market is pricing in significant revenue growth, which is expected to be 81.7% next year. The EV/EBITDA ratio is -11.4, indicating that the company's valuation is sensitive to its ability to generate earnings. The ROE is -40.97%, and the ROIC is -6.52%, indicating that the company is currently not generating returns on its investments.

Growth Prospects

The company is optimistic about its position in the market, driven by its unique technology and growing demand from hyperscale data center customers. The company expects to increase the total production of 800G and 1.6 terabit products by 8.5x by the end of the year and is on track to achieve this goal. With a strong demand for transceivers, particularly in the data center market, driven by the adoption of higher data rates like 1.6T, the company is well-positioned for growth.

3. NewsRoom

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Ensign Peak Advisors Inc Takes Position in Applied Optoelectronics, Inc. $AAOI

Dec -01

Source: defenseworld.net

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Applied Optoelectronics Reports Record Revenues For Q3 2025

Nov -30

Source: seekingalpha.com

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Applied Optoelectronics to Present at the Raymond James 2025 TMT & Consumer Conference

Nov -25

Source: globenewswire.com

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Applied Optoelectronics: 800G Inflection Point

Nov -12

Source: seekingalpha.com

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Why Shares of Applied Optoelectronics Are Plummeting Today

Nov -10

Source: fool.com

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Why Applied Optoelectronics Stock Sank Today

Nov -07

Source: fool.com

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Applied Optoelectronics, Inc. (AAOI) Q3 2025 Earnings Call Transcript

Nov -07

Source: seekingalpha.com

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Applied Optoelectronics (AAOI) Reports Q3 Loss, Misses Revenue Estimates

Nov -07

Source: zacks.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (8.87%)

6. Segments

Data Center

Expected Growth: 10.43%

AOI's Data Center segment growth of 10.43% is driven by increasing demand for high-speed data transmission, growing adoption of cloud computing, and rising need for data storage and processing. Additionally, the shift towards 5G networks and IoT devices is fueling growth in data center infrastructure, benefiting AOI's optical connectivity products.

Cable TV Broadband

Expected Growth: 4.77%

AOI's Cable TV Broadband growth is driven by increasing demand for high-speed internet, rising adoption of streaming services, and growing need for reliable connectivity. Additionally, AOI's focus on 10G and 25G PON technologies, as well as its strong relationships with major cable operators, contribute to its market share gains and revenue growth.

Telecom

Expected Growth: 10.47%

AOI's Telecom segment growth of 10.47% is driven by increasing demand for high-speed data transmission, 5G network deployments, and growing adoption of cloud computing. Additionally, the company's focus on research and development, strategic partnerships, and expanding product portfolio in datacenter and telecom markets contribute to its growth momentum.

Other

Expected Growth: 10.43%

AOI's 10.43% growth in 'Other' segment is driven by increasing demand for its optical components in emerging markets, particularly in Asia. Growing adoption of 5G and IoT technologies, as well as rising investments in datacenter infrastructure, are also contributing to this growth.

Fiber-to-the-Home

Expected Growth: 10.78%

AOI's Fiber-to-the-Home (FTTH) growth is driven by increasing demand for high-speed internet, government initiatives for broadband expansion, and rising adoption in emerging markets. Additionally, AOI's vertically integrated manufacturing model and strong relationships with key customers contribute to its market share gains, resulting in a 10.78% growth rate.

7. Detailed Products

CATV Optical Transmitters

Applied Optoelectronics' CATV optical transmitters are designed for cable television networks, providing high-quality video and data transmission over fiber optic cables.

Fiber-To-The-Home (FTTH) Optical Components

AOI's FTTH optical components enable high-speed internet, voice, and video services over fiber optic cables, providing reliable and high-bandwidth connectivity.

Datacenter Optical Interconnects

Applied Optoelectronics' datacenter optical interconnects provide high-speed, low-latency connectivity within datacenters, enabling efficient data transfer and processing.

Telecom Optical Components

AOI's telecom optical components are designed for telecommunications networks, providing high-reliability and high-performance optical connectivity.

Silicon Photonics

Applied Optoelectronics' silicon photonics solutions integrate optical and electronic components on a single chip, enabling high-speed, low-power optical interconnects.

8. Applied Optoelectronics, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Applied Optoelectronics, Inc. faces moderate threat from substitutes due to the availability of alternative technologies and products in the optoelectronics industry.

Bargaining Power Of Customers

Applied Optoelectronics, Inc. has a diverse customer base, which reduces the bargaining power of individual customers, giving the company an upper hand in negotiations.

Bargaining Power Of Suppliers

Applied Optoelectronics, Inc. relies on a few key suppliers for critical components, giving them some bargaining power, but the company's size and scale also give it negotiating leverage.

Threat Of New Entrants

The optoelectronics industry has high barriers to entry, including significant capital requirements and technological expertise, making it difficult for new entrants to challenge Applied Optoelectronics, Inc.'s position.

Intensity Of Rivalry

The optoelectronics industry is highly competitive, with several established players competing for market share, leading to a high intensity of rivalry that Applied Optoelectronics, Inc. must navigate.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 36.04%
Debt Cost 7.79%
Equity Weight 63.96%
Equity Cost 14.14%
WACC 11.85%
Leverage 56.35%

11. Quality Control: Applied Optoelectronics, Inc. passed 2 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
inTEST

A-Score: 4.1/10

Value: 6.7

Growth: 4.6

Quality: 5.1

Yield: 0.0

Momentum: 5.0

Volatility: 3.3

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Everspin Technologies

A-Score: 4.0/10

Value: 1.4

Growth: 4.2

Quality: 5.2

Yield: 0.0

Momentum: 9.5

Volatility: 3.7

1-Year Total Return ->

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Stock-Card
Applied Optoelectronics

A-Score: 3.3/10

Value: 6.8

Growth: 0.8

Quality: 4.2

Yield: 0.0

Momentum: 8.0

Volatility: 0.3

1-Year Total Return ->

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Stock-Card
Transphorm

A-Score: 3.2/10

Value: 6.0

Growth: 3.3

Quality: 3.0

Yield: 0.0

Momentum: 5.0

Volatility: 1.7

1-Year Total Return ->

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QuickLogic

A-Score: 3.2/10

Value: 6.6

Growth: 5.9

Quality: 4.2

Yield: 0.0

Momentum: 0.5

Volatility: 1.7

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Alpha Omega Semi

A-Score: 2.4/10

Value: 4.8

Growth: 1.8

Quality: 3.9

Yield: 0.0

Momentum: 2.0

Volatility: 2.0

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

26.59$

Current Price

26.59$

Potential

-0.00%

Expected Cash-Flows