Applied Optoelectronics stock tanks amid soft datacenter revenue, weak Q4 outlook

[Modern Data Center with Server Racks with VFX Animation of Data Flow, Internet Traffic on Servers]
EvgeniyShkolenko

Shares of Applied Optoelectronics (AAOI [https://seekingalpha.com/symbol/AAOI]) fell 16% in pre-market trading on Thursday after the company missed revenue estimates and issued a weaker-than-expected Q4 outlook.

Applied Optoelectronics (AAOI [https://seekingalpha.com/symbol/AAOI]) expects Q4 revenue of $125–$140 million, below the $144.64 million consensus, and adjusted EPS of a $0.13–$0.04 loss versus the $0.03 expected, based on about 70.3 million shares.

“Exceptionally strong demand in our CATV business more than offset our datacenter revenue, which came in a touch below our expectations, largely due to the timing of certain shipments at quarter end due to various shipping and receiving delays," Stefan Murry, AOI’s CFO said.

"We continued to make progress on increasing our production capacity in both our U.S. and Taiwan locations... (and) expect to exit this year with a production capacity of around 100,000 units of 800G transceivers per month, with about 35% of this production being done in the U.S,” Murry added.

Furthermore, Applied Optoelectronics' (AAOI [https://seekingalpha.com/symbol/AAOI]) management stated that the broad appeal of its amplifiers and QuantumLink™ software was reflected in strong momentum with both its largest and new customers during the quarter, driving the highest quarterly CATV revenue in its history.

Ahead of the earnings, Seeking Alpha analyst Joseph Mwangi noted that Applied Optoelectronics has lately been able to nab the famous hyperscalers as key customers, thanks to the company’s strategic partnerships helping it execute rapid development of high-speed networking technology and supply large volumes of the critical components needed for AI data center infrastructure.

The internet data center market is the company’s largest and fastest-growing, contributing 59.5% of total revenue in 2024 compared to 35.2% by the CATV market.

Microsoft (MSFT [https://seekingalpha.com/symbol/MSFT]) and Oracle (ORCL [https://seekingalpha.com/symbol/ORCL]) are the company’s biggest customers [https://seekingalpha.com/article/4836228-applied-optoelectronics-growing-hyperscaler-ties-bode-well-for-a-comeback], accounting for nearly 60% of the company’s topline, Mwangi said.

MORE ON APPLIED OPTOELECTRONICS

* Applied Optoelectronics: Growing Hyperscaler Ties Bode Well For A Comeback [https://seekingalpha.com/article/4836228-applied-optoelectronics-growing-hyperscaler-ties-bode-well-for-a-comeback]
* The Market Is Sleeping On Applied Optoelectronics [https://seekingalpha.com/article/4835590-market-is-sleeping-on-applied-optoelectronics]
* Applied Optoelectronics: Weak Quarter But Strong Medium-Term Outlook, Hold (Rating Upgrade) [https://seekingalpha.com/article/4814678-applied-optoelectronics-stock-q2-weak-quarter-but-strong-medium-term-outlook-hold-upgrade]
* Applied Optoelectronics Non-GAAP EPS of -$0.09 in-line, revenue of $118.63M misses by $1.14M [https://seekingalpha.com/news/4517861-applied-optoelectronics-non-gaap-eps-of-0_09-in-line-revenue-of-118_63m-misses-by-1_14m]
* Applied Optoelectronics Q3 2025 Earnings Preview [https://seekingalpha.com/news/4516043-applied-optoelectronics-q3-2025-earnings-preview]