By Nate Wolf
A year ago, Applied Optoelectronics was a sleepy, unprofitable tech stock best known for crashing in 2017 when orders from Amazon.com dried up. Today, it is one of the hottest mid-cap stocks on the market.
The optical networking company announced after the closing bell Thursday that it received a new $71 million order for data-center transceivers from a hyperscale customer, bringing that client's orders to $124 million since mid-March.
The stock jumped 4.4% to $108.50 in after-hours trading Thursday, but that is nothing compared with its recent moves. Shares have soared 198% this year and 862% over the last 12 months, bringing the company's market capitalization to $7.8 billion.
One reason: Applied Optoelectronics reported 83% year-over-year revenue growth in 2025, driven by an almost threefold jump in its cable-television end market. The more important reason: artificial intelligence.
"Given accelerating demand and extending lead times, many AI ecosystem players are now locking in supply of key optical products and components with 2-3 year contract minimums," Needham analyst Ryan Koontz wrote in a research note last month. The firm has a Buy rating on the stock and a $130 price target.
AI spending has boosted the shares of optical players with big hyperscaler deals, such as Ciena, Coherent, and Lumentum. That story is well-known. But Applied Optoelectronics' customers aren't minnows.
Microsoft is the company's largest buyer of transceivers, but Applied Optoelectronics also received an investment from Amazon.com last March that vests over time as the tech giant makes up to $4 billion in purchases.
Applied Optoelectronics' data-center segment grew to 56% of its total revenue in the fourth quarter of 2025. Needham expects that number to rise substantially in 2026 as Amazon and other hyperscalers ramp up purchases of advanced 800G and 1.6T transceivers.
Despite all the momentum, just seven Wall Street firms -- including none of the very largest investment banks -- provide analyst coverage for Applied Optoelectronics. Ciena, Coherent, and Lumentum each have at least 23 analysts, per FactSet.
That discrepancy isn't without reason. Even including its blockbuster 2025, Applied Optoelectronics hasn't posted a net profit since 2017. That year, a customer understood to be Amazon -- which comprised half its annual sales at the time -- drastically pulled back orders.
The stock spent years in the wilderness afterward, falling to as low as $1.50 in July 2022 from a 2017 closing high of $99.61.
The analysts who do cover Applied Optoelectronics expect a profit of 94 cents a share in 2026 and $4.64 a share in 2027. The stock now trades at 55.1 times projected earnings over the next 12 months -- a higher multiple than that of Coherent at 37.2 times, though lower than those of Lumentum and Ciena.
Replicating the last year's 850% spike will be a tall order considering that premium, but it isn't too late for Wall Street to start paying attention.
Write to Nate Wolf at nate.wolf@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
April 03, 2026 09:12 ET (13:12 GMT)
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