Applied Optoelectronics (AAOI) shares surged 20.07% during intraday trading on Friday, extending a powerful post-earnings rally as investors continued to reprice the stock following a stellar second-quarter financial report and an overwhelmingly bullish demand outlook for its AI-related products.
The rally was fueled by the company's Q2 results, which saw revenue skyrocket 86.4% year-over-year to $191.9 million, beating analyst estimates. Adjusted earnings per share came in at $0.06, a significant swing to profitability and well above the consensus forecast of $0.02. The growth was primarily driven by the data center segment, where revenue surpassed $100 million for the first time, surging 140% year-over-year. Management highlighted that 800G product volume more than doubled sequentially, and they expect 800G revenue to grow nearly fivefold in the third quarter. Furthermore, the company's first 1.6T product is expected to complete customer certification within weeks and begin shipping soon, with over $200 million in orders already secured.
Beyond the strong quarterly numbers, market sentiment was boosted by management's commentary that AI infrastructure demand is so robust that customer orders are exceeding current supply capacity by approximately 20% to 40%, a dynamic expected to persist through mid-2027. The company also issued a strong third-quarter revenue guidance of $255 million to $290 million. Additionally, AAOI continued to benefit from reports earlier in the week that the U.S. is drafting a ban on imports of new Chinese data center components, including optical transceivers, which would position the company as a primary domestic beneficiary.
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