Applied Optoelectronics (AAOI) AI Stock Analysis

• Market Cap: $1.61B
• Dividend Yield: N/A
• Average Volume (3M): 5.21M
• Price to Earnings (P/E): ―
• Beta (1Y): 3.36
• Revenue Growth: 77.94%
• EPS Growth: -75.13%
• Country: US
• Employees: 3,309
• Sector: Technology
• Sector Strength: 88
• Industry: Semiconductors
• EPS (TTM): -0.16
• Shares Outstanding: 62,366,480
• 10 Day Avg. Volume: 5,294,714
• 30 Day Avg. Volume: 5,209,917
• PEG Ratio: -0.05
• Price to Book (P/B): 6.68
• Price to Sales (P/S): 6.14
• P/FCF Ratio: -13.56
• Enterprise Value/Market Cap: 0.98
• Enterprise Value/Revenue: 4.30
• Enterprise Value/Gross Profit: 14.88
• Enterprise Value/Ebitda: -12.38
• 1Y Price Target: $27.20
• Price Target Upside: 5.55% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 6

• Rating: 50 Neutral
• Price Target: $23.50 ▼(-8.81% Downside)

Applied Optoelectronics faces significant financial challenges, particularly in profitability and cash flow, which weigh heavily on its overall score. While technical indicators and valuation present a mixed picture, recent corporate events and strategic expansions provide some positive outlook. The company's ability to address operational inefficiencies and leverage strategic opportunities will be crucial for future performance.

Positive Factors

Revenue Growth

Strong revenue growth indicates robust demand for AAOI's products, especially in datacenter and CATV segments, enhancing market position.

Production Capacity Expansion

Expanding production capacity supports future revenue growth and strengthens AAOI's competitive edge in high-speed data transmission.

Strategic Lease Agreement

The long-term lease supports operational stability and allows for production adjustments, enhancing AAOI's strategic positioning.

Negative Factors

Profitability Challenges

Persistent profitability issues indicate operational inefficiencies, which could hinder long-term financial health if not addressed.

Negative Operating Cash Flow

Negative cash flow from operations suggests liquidity constraints, potentially impacting AAOI's ability to fund growth initiatives.

Increased Operating Expenses

Rising operating expenses pressure margins and profitability, challenging AAOI's ability to improve financial performance.

Applied Optoelectronics Business Overview & Revenue Model

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.

How the Company Makes Money

Applied Optoelectronics generates revenue primarily through the sale of optical networking products, including optical transceivers used in data centers and telecommunications infrastructures. The company also earns income from its semiconductor lasers and photodiodes, which are critical components in fiber optic communication systems. Key revenue streams include direct sales to large technology companies and telecommunications providers, as well as partnerships with major data center operators. Additionally, AAOI may benefit from government contracts and collaborations with research institutions, which contribute to its earnings by expanding its market reach and enhancing product development capabilities.

Applied Optoelectronics Financial Statement Overview

Summary

Applied Optoelectronics shows revenue growth but faces significant profitability and cash flow challenges. Despite improved leverage, the company struggles with negative net profit margins and operating cash flow.

Income Statement

Applied Optoelectronics shows a mixed performance in its income statement. The company has achieved a revenue growth rate of 19.34% in the TTM, indicating a positive trend in sales. However, profitability remains a concern with negative net profit margins (-42.29%) and EBIT margins (-40.87%), reflecting ongoing operational challenges. The gross profit margin has improved to 28.88%, but the company still struggles to convert sales into net income.

Balance Sheet

The balance sheet presents a moderate level of financial stability. The debt-to-equity ratio has improved to 0.42 in the TTM, suggesting better leverage management compared to previous years. However, the return on equity remains negative (-53.00%), indicating that the company is not generating sufficient returns on shareholders' equity. The equity ratio stands at 53.32%, showing a reasonable proportion of equity financing.

Cash Flow

Cash flow analysis reveals significant challenges. The free cash flow growth rate is positive at 54.33%, but the company continues to experience negative operating cash flow (-$155.45 million) and free cash flow (-$243.95 million) in the TTM. The operating cash flow to net income ratio is negative, indicating cash flow issues relative to net income. The free cash flow to net income ratio is 1.57, suggesting some ability to cover net losses with free cash flow.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	368.23M	249.37M	217.65M	222.82M	211.56M	234.62M
Gross Profit	106.35M	61.80M	58.92M	33.63M	37.72M	50.54M
EBITDA	-127.80M	-159.26M	-26.18M	-36.88M	-23.17M	-20.86M
Net Income	-155.72M	-186.73M	-56.05M	-66.40M	-54.16M	-58.45M
Balance Sheet
Total Assets	796.85M	547.03M	389.19M	408.26M	454.46M	480.81M
Cash, Cash Equivalents and Short-Term Investments	64.70M	67.43M	45.37M	24.68M	34.66M	43.42M
Total Debt	211.22M	190.86M	121.07M	155.53M	149.90M	154.92M
Total Liabilities	371.87M	317.92M	174.32M	223.59M	199.89M	202.91M
Stockholders Equity	424.98M	229.11M	214.87M	184.67M	254.57M	277.89M
Cash Flow
Free Cash Flow	-243.95M	-112.93M	-17.60M	-18.26M	-22.30M	-63.57M
Operating Cash Flow	-155.44M	-69.53M	-7.93M	-14.02M	-11.64M	-44.01M
Investing Cash Flow	-113.73M	-50.70M	-14.76M	-3.83M	-10.55M	-19.35M
Financing Cash Flow	335.07M	142.18M	40.58M	10.75M	14.09M	47.44M

Applied Optoelectronics Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 25.77
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• MACD: Positive
• RSI: Neutral
• STOCH: Positive

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 25.77 is below the 20-day moving average (MA) of 26.51, above the 50-day MA of 24.97, and above the 200-day MA of 23.34, indicating a neutral trend. The MACD of 0.84 indicates Positive momentum. The RSI at 47.89 is Neutral, neither overbought nor oversold. The STOCH value of 17.67 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for AAOI.

Applied Optoelectronics Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
ACMR	75 Outperform	2.42B	22.92	11.46%	―	17.53%	27.74%
VECO	70 Neutral	1.80B	29.46	7.08%	―	-0.19%	-28.72%
HIMX	66 Neutral	1.49B	20.18	8.58%	4.33%	-2.16%	-2.77%
KLIC	64 Neutral	2.14B	519.62	0.71%	2.00%	-9.54%	―
AAOI	50 Neutral	$1.61B	―	-50.93%	―	77.94%	-75.13%
MXL	48 Neutral	1.40B	-6.50	-42.99%	―	-15.65%	-7.18%
Sector *	61 Neutral	$37.18B	12.37	-10.20%	1.83%	8.50%	-7.62%

Applied Optoelectronics Corporate Events

Applied Optoelectronics Signs 15-Year Lease Agreement

On September 1, 2025, Applied Optoelectronics‘ subsidiary, Prime World International Holdings Ltd., entered into a 15-year lease agreement for a property in New Taipei City, which includes a building and land. The lease allows for modifications to accommodate production needs and includes rights such as first refusal for purchase and renewal, ensuring strategic flexibility and operational stability for the company.

Applied Optoelectronics Signs Equity Distribution Agreement

On August 27, 2025, Applied Optoelectronics, Inc. entered into an Equity Distribution Agreement with Raymond James & Associates, Inc. and Needham & Company, LLC, allowing the company to issue and sell up to $150 million worth of common stock through these sales agents. This agreement facilitates ‘at the market’ offerings, providing flexibility for the company to raise capital as needed, while also detailing compensation and reimbursement terms for the sales agents. The agreement can be terminated by either party and includes indemnification clauses for the sales agents.

Applied Optoelectronics Terminates Lease with San Ho Electric

On August 20, 2025, Prime World International Holdings Ltd., a subsidiary of Applied Optoelectronics, Inc., agreed to terminate its lease with San Ho Electric Machinery Industry Co., Ltd., effective August 31, 2025. As part of the termination, Prime World will pay NT$9,400,000 to settle all obligations, ensuring no further claims between the parties, which may impact the company’s operational logistics and financial commitments.

Applied Optoelectronics Secures $35M Credit Line Agreement

On July 31, 2025, Applied Optoelectronics, Inc. entered into a Loan and Security Agreement with BOK Financial, securing a $35 million revolving line of credit with a potential increase to $75 million under certain conditions. This credit facility is intended to support the company’s general working capital and business operations, with the loan secured by most of the company’s assets, excluding foreign subsidiaries, and requiring adherence to specific financial covenants.

Applied Optoelectronics Secures Major Credit Line Agreement

On July 29, 2025, Global Technology, a subsidiary of Applied Optoelectronics, Inc., secured a five-year revolving credit line agreement worth 250,000,000 RMB with Shanghai Pudong Development Bank in Ningbo City, China. This credit line is intended for general corporate and capital investment purposes, with borrowing conditions and interest rates to be mutually agreed upon. The agreement allows the bank to revoke the credit line unilaterally under certain conditions, and Global Technology’s obligations are secured by real property under a mortgage contract.

Applied Optoelectronics Secures New Credit Facility

On July 18, 2025, Global Technology, a subsidiary of Applied Optoelectronics, secured an 82,000,000 RMB credit facility with Shanghai Pudong Development Bank to repay loans and for general corporate purposes. By July 23, 2025, Global Technology utilized this facility to clear its debts with China Zheshang Bank, terminating the previous credit line without penalties.

Applied Optoelectronics Secures Major Credit Line Agreement

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.

Applied Optoelectronics Settles Credit Line Obligations

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.

Applied Optoelectronics Approves Share Increase at Annual Meeting

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.

Applied Optoelectronics Signs 15-Year Lease in Taiwan

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.