Despite a sequential revenue decline in Q3 2025 due to delayed orders from a single customer, Goldman Sachs views this as a temporary setback for Eoptolink Technology Inc., Ltd. The real investment value and market expectations lie in 2026 and beyond.
On December 4, Goldman Sachs' research team noted that Eoptolink's Q3 performance dip was caused by delayed deliveries of 400G/800G products to one client, which does not reflect industry-wide or systemic risks. The report emphasized that Eoptolink's management remains confident in a growth recovery, expecting momentum to resume in Q4 2025 and accelerate with strong year-on-year and sequential growth in 2026. Thus, Goldman Sachs advises against overinterpreting the Q3 results.
The report also highlighted a shift in Eoptolink's core growth drivers, with future demand driven by the rapid adoption of 1.6T optical modules and incremental demand from ASIC AI servers.
**Growth Engine Shift: 2026 Marks the "Main Wave"**
Goldman Sachs identified four key pillars for Eoptolink's future growth:
1. **Accelerated 1.6T Product Adoption**: Eoptolink's 1.6T optical modules began initial volume production in H2 2025. With generative AI increasing bandwidth requirements, Goldman Sachs expects accelerated shipments of 800G and 1.6T modules in 2026. Projections show 800G module revenue growing 53% YoY in 2026, while 1.6T products could surge 141% YoY in 2027.
2. **New Demand from ASIC AI Servers**: The diversification of chips toward ASIC architectures, which require high-speed multi-chip interconnects, is driving demand for high-speed optical modules. Global cloud service providers (CSPs) are expected to ramp up ASIC AI server deployments in H2 2026, opening new market opportunities for Eoptolink's high-speed products.
3. **In-House Silicon Photonics to Boost Margins**: Beyond revenue growth, profitability improvements are critical. Eoptolink's internal silicon photonics (SiPh) team is developing higher-margin SiPh products. Gross margins are projected to rise steadily from 44.7% in 2024 to 53.0% in 2026, driven by product mix optimization.
4. **Capacity Expansion to Meet Demand**: Goldman Sachs believes Eoptolink's Thailand factory expansion will ensure it can handle surging future orders.
**Goldman Sachs Raises Earnings Forecasts, Bullish on High Growth**
Based on optimistic outlooks, Goldman Sachs revised Eoptolink's earnings forecasts. While 2025 revenue and net profit estimates were cut by 6% (to RMB 9.478 billion net profit) due to Q3 performance, the focus is on the future:
- **2026 revenue forecast raised 10% to RMB 42.368 billion**, with net profit up 12% to RMB 18.494 billion. - **2027 revenue forecast raised 11% to RMB 54.390 billion**, with net profit up 11% to RMB 24.095 billion.
This implies 61% and 29% YoY revenue growth in 2026 and 2027, respectively. Goldman Sachs maintained a 27x 2026 forward P/E multiple, lifting the 12-month target price from RMB 450 to RMB 502. The valuation aligns with Eoptolink's historical average of 29x forward P/E since 2018.
**Key Risks to Watch**: 1. **Slower-than-expected 800G adoption** could dampen near-term growth. 2. **Geopolitical risks** disrupting the global optical module supply chain. 3. **Intensifying competition** leading to price wars and margin erosion.
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