Key Highlights
- Shares declined 3.4% to $124.22 following Q3 2026 EPS forecast of $0.11ā$0.26, missing the $0.27 Street estimate
- Q3 revenue outlook of $255Mā$290M aligns with the $265.7M analyst consensus
- Second quarter revenue reached an all-time high of $191.9M, representing an 86% year-over-year increase
- Needham analysts reduced their price target to $190 from $220 while maintaining a Buy recommendation
- Company insiders offloaded more than 506,000 shares valued at $87.4M during the last three months
Shares of Applied Optoelectronics (AAOI) retreated 3.4% to close at $124.22 on Thursday following the company’s announcement of third-quarter 2026 projections that fell short of analyst expectations for profitability.
Applied Optoelectronics, Inc., AAOI
Management projected third-quarter earnings per share between $0.11 and $0.26, trailing the Street’s $0.27 estimate. The company’s revenue forecast range of $255M to $290M encompasses the analyst consensus of $265.7M.
However, the second-quarter performance demonstrated strong fundamentals. The company delivered all-time record revenue of $191.9M, marking an 86% jump from the prior year and a 27% sequential increase from the first quarter. This represented the fifth straight quarter of record-breaking sales.
Adjusted earnings per share reached $0.06, surpassing the consensus estimate of $0.02 by four cents. The quarterly results weren’t problematicāit was the forward-looking projections that triggered investor concern.
Forward Outlook and Margin Projections
Management extended its gross margin target timeline by one to two quarters, a shift that surprised several Wall Street analysts.
The rollout of the company’s 1.6T product has been postponed to the fourth quarter, attributed to limited availability of digital signal processors. This product is linked to a substantial $200M hyperscale customer contract, amplifying the significance of the timing shift.
Management reaffirmed its complete fiscal 2026 revenue outlook, suggesting a significant fourth-quarter acceleration to achieve annual targets.
Sales of 200G and 400G products surged 440% compared to the same period last year. Amazon accounted for approximately 25% of total quarterly revenue. The company is simultaneously expanding deliveries of 800G solutions.
Wall Street’s Take
Needham lowered its price objective to $190 from $220 while preserving its Buy recommendation. The firm modestly adjusted its fiscal 2026 and 2027 projections in response to the softer third-quarter outlook.
Rosenblatt Securities maintains a Buy stance with a $220 price target. Raymond James continues with an Outperform rating. Two analysts hold Sell recommendations, including Weiss Ratings and Wall Street Zen.
The aggregate rating among six analysts stands at Hold, with a mean price objective of $141.80.
Regarding insider activity, CFO Stefan Murry divested 33,000 shares in May at $173.26 per share, a sale connected to tax obligations on equity compensation. Director Cynthia Delaney unloaded 56,575 shares in late May at $189.23, trimming her position by approximately 49%.
Collectively, corporate insiders sold 506,215 shares totaling $87.4M during the previous 90 days. Insider ownership currently represents 3.80% of outstanding shares.
Institutional investors and hedge funds control 61.7% of AAOI shares. Recent institutional buyers include Persistent Asset Partners, State Board of Administration of Florida Retirement System, and Creative Planning.
AAOI trades within a 52-week range spanning $18.50 to $233.67. The stock’s 50-day moving average stands at $138.69, while the 200-day average is positioned at $117.41.
The equity has delivered approximately 456% returns over the trailing twelve months, although certain analysts suggest the valuation appears elevated compared to fair value calculations.
Needham revised its third-quarter EPS projections downward to align with the updated guidance, pointing to the postponed margin schedule and digital signal processor supply limitations as key contributing factors.
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