Applied Optoelectronics Reports 86% Q2 Revenue Growth, Beats Estimates

AAOI posted second-quarter revenue of $191.9 million, up 86% year over year and 27% sequentially, edging past the roughly $190.5 million consensus. Non-GAAP earnings of $0.06 per share came in triple the $0.02 analysts modeled, and non-GAAP gross margin reached 29.8%. The stock nonetheless fell, with sources placing the decline in a 7.5% to 10% range.

The composition explains the growth. Datacenter revenue reached $107.7 million, up roughly 140% year over year, and now exceeds the CATV segment at $80.6 million, with telecom a residual $3.4 million. That is a genuine mix shift: a company historically levered to cable infrastructure is now majority-datacenter, which is where AI networking demand is being spent.

The selloff came from guidance rather than results. Third-quarter revenue was guided to $255 million to $290 million, a midpoint just below consensus, while non-GAAP EPS was guided to $0.11 to $0.26 against a $0.28 street figure, leaving the midpoint well short. Gross margin guidance of 29% to 30.5% implies little expansion despite the revenue ramp, which is the harder signal: scaling revenue by 86% without meaningful margin leverage points to capacity and input costs absorbing the gains.

What to watch is whether margin expands as the datacenter mix grows. A revenue guide that steps up to a $272 million midpoint while EPS guidance straddles $0.11 tells you the incremental business is being taken at thin contribution. If that persists into the fourth quarter, the growth rate stops being the relevant metric.