Applied Optoelectronics Inc. Reports Record CATV Revenue

Applied Optoelectronics Inc ((AAOI)) has held its Q1 earnings call. Read on for the main highlights of the call.

Applied Optoelectronics Inc. (AOI) recently held its earnings call, showcasing a strong performance with record-breaking CATV revenue and improvements in gross margin. Despite some challenges, such as a sequential decline in data center revenue and an increase in inventory, the company remains optimistic about its long-term growth prospects and is actively expanding its production capacity.

Record-Breaking CATV Revenue

AOI achieved the highest quarterly CATV revenue in its history, reaching $64 million. This represents a remarkable increase of more than six times year-over-year and a 24% sequential growth. This milestone underscores the company’s strong position in the CATV market.

Data Center Business Progress

The company secured three new design wins with existing hyperscale data center customers, contributing to a data center product revenue of $32 million. This marks an 11% increase year-over-year, although there was a 28% sequential decline due to inventory digestion from a major customer.

Non-GAAP Gross Margin Improvement

AOI reported a non-GAAP gross margin of 30.7%, which exceeded the guidance range and showed a significant improvement from 18.9% in the first quarter of 2024. This improvement highlights the company’s effective cost management strategies.

Expansion in Manufacturing Capacity

To meet the growing demand, AOI plans to expand its production capacity for 800G and 1.6 terabit transceivers in Texas. The goal is to reach a production capacity of 100,000 pieces per month by the end of the year, positioning the company to capitalize on future opportunities.

Positive Long-Term Growth Trends

AOI is optimistic about the long-term demand in the CATV and data center markets, particularly with significant opportunities in 800G products. This positive outlook is expected to drive the company’s growth in the coming years.

Sequential Decline in Data Center Revenue

Despite the overall progress, AOI experienced a sequential decline in data center revenue, which fell to $32 million. This was primarily due to inventory digestion from a major customer, highlighting a temporary challenge in this segment.

Non-GAAP Operating Loss

The company reported a non-GAAP operating loss of $4.8 million in the first quarter, which, although a loss, showed improvement from the previous year, indicating a positive trend in operational efficiency.

Inventory Increase

AOI’s inventory increased to $102.3 million from $88.1 million in the previous quarter. This rise was mainly due to raw materials for CATV and data center products, reflecting the company’s preparation for future demand.

Potential Tariff Impact

While tariffs had no material impact in the first quarter, AOI is closely monitoring the situation for potential risks in future quarters, ensuring they remain prepared for any changes in trade policies.

Forward-Looking Guidance

Looking ahead to the second quarter of 2025, AOI anticipates revenue between $100 million and $110 million, with a non-GAAP gross margin between 29.5% and 31%. The company expects a non-GAAP net income loss ranging from $4.8 million to $1.7 million, indicating a cautious yet optimistic outlook.

In summary, Applied Optoelectronics Inc. delivered a strong performance in its latest earnings call, with record CATV revenue and improved gross margins. While facing some challenges, the company’s strategic initiatives and optimistic long-term outlook suggest promising growth prospects for the future.