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Applied Optoelectronics (AAOI)
NASDAQ:AAOI

Applied Optoelectronics (AAOI) AI Stock Analysis

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Applied Optoelectronics

(NASDAQ:AAOI)

Rating:54Neutral
Price Target:
$26.00
▼(-9.28%Downside)
The overall stock score reflects significant financial struggles and valuation concerns, despite positive technical indicators and strategic corporate events. The financial performance heavily impacts the score due to high losses and operational inefficiencies, while the technical analysis and recent corporate events provide some optimism.
Positive Factors
Customer Diversification
Oracle was a new 10% customer, indicating potential for diversified revenue streams.
Revenue Stability
With Microsoft as the top customer, the company could sustain quarterly revenue of around $100M even if CATV slows down.
Valuation
The stock trades at approximately 2x revenue, which isn't excessively expensive.
Negative Factors
Market Transition
400G demand may start to decay as the industry transitions from Hopper to Blackwell, impacting future growth.
Product Qualification
Management expects 800G to ramp up, but it hasn't been qualified by any hyperscalers yet, which poses uncertainty.
Revenue Concerns
CATV strength may not be sustainable, raising concerns about future revenue sources.

Applied Optoelectronics (AAOI) vs. SPDR S&P 500 ETF (SPY)

Applied Optoelectronics Business Overview & Revenue Model

Company DescriptionApplied 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.
How the Company Makes MoneyApplied Optoelectronics generates revenue through the sale of its optical products and solutions, primarily to large data center operators and telecommunications service providers. The company's key revenue streams include the manufacturing and distribution of optical transceivers, which are essential for high-speed data transmission in data centers and broadband networks. Additionally, AAOI partners with major technology and telecommunications companies to enhance its product offerings and expand its market reach. The company's earnings are significantly influenced by technological advancements, demand for high-speed internet, and the growth of cloud computing and streaming services, which drive the need for more robust and efficient optical networking solutions.

Applied Optoelectronics Earnings Call Summary

Earnings Call Date:May 08, 2025
(Q1-2025)
|
% Change Since: 94.17%|
Next Earnings Date:Jul 31, 2025
Earnings Call Sentiment Positive
The earnings call presented a strong performance with record CATV revenue, improvements in gross margin, and promising progress in the data center business. However, there are challenges, including a sequential decline in data center revenue and a notable increase in inventory. The company is actively expanding its production capacity and remains optimistic about long-term growth trends.
Q1-2025 Updates
Positive Updates
Record-Breaking CATV Revenue
Achieved the highest quarterly CATV revenue in AOI's history at $64 million, which increased more than 6 times year-over-year and 24% sequentially.
Data Center Business Progress
Secured three new design wins with existing hyperscale data center customers. Revenue from data center products was $32 million, up 11% year-over-year.
Non-GAAP Gross Margin Improvement
Non-GAAP gross margin improved to 30.7%, above the guidance range, and up from 18.9% in Q1 of 2024.
Expansion in Manufacturing Capacity
Plans to expand production capacity for 800G and 1.6 terabit transceivers in Texas, aiming for 100,000 pieces per month by the end of the year.
Positive Long-Term Growth Trends
Strong long-term demand expected in CATV and data center markets, with significant opportunities in 800G products.
Negative Updates
Sequential Decline in Data Center Revenue
Data center revenue of $32 million was down 28% sequentially due to inventory digestion from a major customer.
Non-GAAP Operating Loss
Non-GAAP operating loss in Q1 was $4.8 million, though this was an improvement from the prior year.
Inventory Increase
Inventory increased to $102.3 million from $88.1 million in Q4, mainly for raw materials for CATV and data center products.
Potential Tariff Impact
While tariffs had no material impact in Q1, there is ongoing monitoring and potential risk for future quarters.
Company Guidance
During the first quarter of 2025, Applied Optoelectronics (AOI) reported a revenue of $99.9 million, which was within their guidance range of $94 million to $104 million. The company achieved a non-GAAP gross margin of 30.7%, surpassing the guidance range of 29% to 30.5%. The non-GAAP loss per share was $0.02, aligning with the guidance range of a loss of $0.07 to break even. The CATV segment generated $64 million in revenue, marking a year-over-year increase of more than six times, while the data center products revenue was $32 million, up 11% year-over-year but down 28% sequentially. Looking ahead to Q2 2025, AOI anticipates revenue between $100 million and $110 million, with a non-GAAP gross margin between 29.5% and 31%, and a non-GAAP net income loss ranging from $4.8 million to $1.7 million.

Applied Optoelectronics Financial Statement Overview

Summary
Applied Optoelectronics is experiencing financial difficulties characterized by declining revenues, high losses, and cash flow deficits. The company's operational inefficiencies and leverage position need addressing to improve financial health and shareholder value.
Income Statement
35
Negative
The company has faced declining revenues with a significant negative net income, suggesting profitability challenges. The gross profit margin is modest at 27.4% TTM, and the company has consistently reported negative EBIT and EBITDA margins, indicating operational inefficiencies.
Balance Sheet
45
Neutral
The company's debt-to-equity ratio stands at 0.53 TTM, reflecting moderate leverage. However, the negative return on equity of -55.9% TTM highlights poor profitability for shareholders. The equity ratio of 47.9% TTM suggests a balanced asset financing mix between debt and equity.
Cash Flow
40
Negative
Free cash flow growth is negative, with a substantial free cash flow deficit of -$158 million TTM. The operating cash flow to net income ratio is 0.53 TTM, indicating inadequate cash generation relative to losses. This suggests cash flow constraints amid operational challenges.
BreakdownTTMDec 2024Dec 2023Dec 2022Dec 2021Dec 2020
Income Statement
Total Revenue308.55M249.37M217.65M222.82M211.56M234.62M
Gross Profit84.65M61.80M58.92M33.63M37.72M50.54M
EBITDA-152.73M-159.26M-26.18M-36.88M-23.17M-20.86M
Net Income-172.74M-186.73M-56.05M-66.40M-54.16M-58.45M
Balance Sheet
Total Assets644.67M547.03M389.19M408.26M454.46M480.81M
Cash, Cash Equivalents and Short-Term Investments51.14M67.43M45.37M35.59M41.14M43.42M
Total Debt164.50M190.86M121.07M150.02M142.65M154.92M
Total Liabilities335.65M317.92M174.32M223.59M199.89M202.91M
Stockholders Equity309.01M229.11M214.87M184.67M254.57M277.89M
Cash Flow
Free Cash Flow-158.00M-112.93M-17.60M-18.26M-22.30M-63.57M
Operating Cash Flow-91.96M-69.53M-7.93M-14.02M-11.64M-44.01M
Investing Cash Flow-78.93M-50.70M-14.76M-3.83M-10.55M-19.35M
Financing Cash Flow213.61M142.18M40.58M10.75M14.09M47.44M

Applied Optoelectronics Technical Analysis

Technical Analysis Sentiment
Positive
Last Price28.66
Price Trends
50DMA
18.11
Positive
100DMA
18.37
Positive
200DMA
22.35
Positive
Market Momentum
MACD
2.84
Negative
RSI
72.60
Negative
STOCH
78.60
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For AAOI, the sentiment is Positive. The current price of 28.66 is above the 20-day moving average (MA) of 21.23, above the 50-day MA of 18.11, and above the 200-day MA of 22.35, indicating a bullish trend. The MACD of 2.84 indicates Negative momentum. The RSI at 72.60 is Negative, neither overbought nor oversold. The STOCH value of 78.60 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for AAOI.

Applied Optoelectronics Risk Analysis

Applied Optoelectronics disclosed 37 risk factors in its most recent earnings report. Applied Optoelectronics reported the most risks in the "Finance & Corporate" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 1 New Risks
1.
The parties may be unable to satisfy the conditions to the closing of our divestiture and the transaction may not be consummated, and the failure of the divestiture to be completed may adversely affect our business and our common stock price. Q3, 2022

Applied Optoelectronics Peers Comparison

Overall Rating
UnderperformOutperform
Sector (63)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
71
Outperform
$601.45M5.6937.53%1.99%375.37%
64
Neutral
$846.53M36.184.78%-6.97%
63
Neutral
£566.00M24.41-6.00%2.49%3.52%-29.29%
61
Neutral
$1.02B-15.78%6.26%-9.54%
60
Neutral
$765.11M-66.95%-10.18%75.30%
57
Neutral
$775.20M-2.35%13.41%72.56%
54
Neutral
$1.61B-68.45%50.30%-111.11%
* Technology Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
AAOI
Applied Optoelectronics
28.66
20.12
235.60%
ADTN
Adtran
9.56
4.33
82.79%
DJCO
Daily Journal
436.65
32.73
8.10%
NTGR
Netgear
29.41
14.88
102.41%
ICHR
Ichor Holdings
22.72
-19.08
-45.65%
FSLY
Fastly
7.03
-0.34
-4.61%

Applied Optoelectronics Corporate Events

Private Placements and Financing
Applied Optoelectronics Secures Major Credit Line Agreement
Positive
Jul 1, 2025

On June 26, 2025, Global Technology, a subsidiary of Applied Optoelectronics, Inc., secured a five-year revolving credit line agreement totaling 162,260,000 RMB with China Construction Bank in Ningbo City, China. This credit line, intended for general corporate and capital investment purposes, allows Global Technology to draw funds until June 26, 2030, with each draw subject to bank approval and secured by the company’s real property.

The most recent analyst rating on (AAOI) stock is a Buy with a $17.00 price target. To see the full list of analyst forecasts on Applied Optoelectronics stock, see the AAOI Stock Forecast page.

Private Placements and Financing
Applied Optoelectronics Settles Credit Line Obligations
Neutral
Jun 18, 2025

On June 12, 2025, Global Technology, a subsidiary of Applied Optoelectronics, secured a one-year credit facility worth 96,800,000 RMB with China Construction Bank to repay outstanding loans with Shanghai Pudong Development Bank. By June 18, 2025, Global Technology used the credit facility to settle its obligations under a previous revolving credit line with Shanghai Pudong Development Bank, terminating the associated agreements without incurring penalties.

The most recent analyst rating on (AAOI) stock is a Buy with a $17.00 price target. To see the full list of analyst forecasts on Applied Optoelectronics stock, see the AAOI Stock Forecast page.

Executive/Board ChangesShareholder Meetings
Applied Optoelectronics Approves Share Increase at Annual Meeting
Neutral
Jun 12, 2025

On June 12, 2025, Applied Optoelectronics, Inc. held its Annual Meeting of Stockholders, where an amendment to increase the number of authorized shares of common and capital stock was approved. The amendment, which raised the authorized common stock from 80 million to 120 million shares, was filed and became effective the same day. Additionally, the meeting included the election of directors, ratification of the company’s accounting firm, and approval of executive compensation, reflecting significant shareholder engagement with a 63.06% representation of eligible shares.

The most recent analyst rating on (AAOI) stock is a Buy with a $17.00 price target. To see the full list of analyst forecasts on Applied Optoelectronics stock, see the AAOI Stock Forecast page.

Business Operations and Strategy
Applied Optoelectronics Signs 15-Year Lease in Taiwan
Positive
Jun 11, 2025

On June 7, 2025, Prime World International Holdings Ltd., a subsidiary of Applied Optoelectronics, Inc., signed a 15-year lease agreement with San Ho Electric Machinery Industry Co., Ltd. for a property in Taoyuan City, Taiwan. This strategic move allows Prime World to modify the building to meet production needs and includes rights such as first refusal to purchase or renew the lease, potentially enhancing the company’s operational capabilities and market positioning.

The most recent analyst rating on (AAOI) stock is a Buy with a $17.00 price target. To see the full list of analyst forecasts on Applied Optoelectronics stock, see the AAOI Stock Forecast page.

Private Placements and Financing
Applied Optoelectronics Signs $100M Equity Distribution Deal
Positive
May 28, 2025

On May 28, 2025, Applied Optoelectronics, Inc. entered into an Equity Distribution Agreement with Raymond James & Associates, Inc. and Needham & Company, LLC to issue and sell up to $100 million worth of common stock through the Sales Agents. The agreement allows for ‘at the market’ offerings, with the company maintaining the flexibility to suspend sales and determine the terms of each transaction. The Sales Agents are entitled to a 2% commission on sales, and the agreement includes provisions for reimbursement and indemnification of the Sales Agents. This move could potentially enhance the company’s liquidity and provide financial flexibility, impacting its market positioning and stakeholder interests.

The most recent analyst rating on (AAOI) stock is a Buy with a $17.00 price target. To see the full list of analyst forecasts on Applied Optoelectronics stock, see the AAOI Stock Forecast page.

Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.Date of analysis: Jul 02, 2025