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AO

APPLIED OPTOELECTRONICS, INC. (AAOI)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 revenue was $99.9M, up 146% YoY and essentially flat QoQ; non-GAAP gross margin expanded to 30.7% (vs 18.9% YoY; 28.9% QoQ), and non-GAAP EPS was a loss of $0.02, a modest beat vs consensus; Adjusted EBITDA turned positive ($0.4M) .
  • Segment mix favored CATV: record CATV revenue of $64.5M (+6x YoY, +24% QoQ) drove margin expansion; Datacenter was $32.0M (+11% YoY, -28% QoQ) on 400G inventory digestion at a hyperscaler .
  • Management guided Q2 2025 revenue to $100–$110M, non-GAAP gross margin 29.5–31.0%, and non-GAAP EPS loss of $0.09–$0.03 on ~55.7M shares; reiterated confidence in a 2H25 ramp in 800G with US production coming online in Q3 .
  • Strategic catalysts: three new design wins with an existing hyperscale customer (not Amazon), an Amazon warrant-linked engagement targeting $400M+ annual revenue, US onshoring and tariff resilience, and a June milestone of first volume shipment to a re-engaged hyperscale customer, supporting the 2H datacenter ramp narrative .

What Went Well and What Went Wrong

What Went Well

  • Record CATV revenue and mix-driven margin expansion: “We continue to see strong demand in the CATV market and achieved the highest quarterly CATV revenue in AOI’s history” .
  • Datacenter traction despite digestion: “We…secured three new design wins with an existing hyperscale customer…growing demand for our 400G and 800G products…increased confidence in a second half of 2025 ramp in 800G sales” .
  • Capacity/onshoring plan firming up: “Exiting this year with a production capacity of over 100,000 units of 800G transceivers per month, with 40%…done in the US” and Texas onshore margins could be higher due to automation and customer willingness to pay .

What Went Wrong

  • Datacenter sequential decline (-28% QoQ) on 400G inventory digestion at a hyperscaler; 100G component constraints limited the ability to meet a demand surge (expected partial recovery in Q2, full recovery by Q3) .
  • Customer concentration remained high (top 10 customers 97% of revenue; two >10% customers comprised 64% CATV and 27% datacenter of total), elevating demand and deployment risk .
  • GAAP net loss persisted (-$9.2M; -$0.18/sh), and non-GAAP operating expenses grew with higher R&D/G&A tied to business activity (non-GAAP OpEx $35.5M; expected $36–$40M per quarter) .

Financial Results

Sequential and Trend Comparison

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Millions)$65.151 $100.271 $99.859
GAAP Gross Margin %24.4% 28.7% 30.6%
Non-GAAP Gross Margin %25.0% 28.9% 30.7%
GAAP Net Loss ($USD Millions)$(17.757) $(119.692) $(9.172)
Non-GAAP EPS ($USD)$(0.21) $(0.02) $(0.02)
Adjusted EBITDA ($USD Millions)$(7.685) $2.404 $0.435

Year-over-Year Q1 Comparison

MetricQ1 2024Q1 2025
Revenue ($USD Millions)$40.673 $99.859
GAAP Gross Margin %18.7% 30.6%
Non-GAAP Gross Margin %18.9% 30.7%
GAAP EPS ($USD)$(0.60) $(0.18)
Non-GAAP EPS ($USD)$(0.31) $(0.02)

Versus Wall Street Consensus (S&P Global)

MetricQ1 2025 Consensus*Q1 2025 ActualSurprise
Revenue ($USD)$99.37M*$99.86M +$0.49M (+0.5%)*
Primary EPS ($USD)$(0.0375)*$(0.02) +$0.0175*

Values retrieved from S&P Global.

Segment Breakdown

Segment Revenue ($USD Millions)Q3 2024Q4 2024Q1 2025
CATV$20.947 $52.212 $64.501
Datacenter$40.945 $44.242 $32.049
Telecom$2.798 $3.535 $2.937
FTTH$0.000 $0.003 $0.000
Other$0.461 $0.279 $0.372

KPIs (Q1 2025 unless noted)

KPIValue
Datacenter product mix (% of DC revenue): 100G / 200–400G / 40G78% / 10% / 10%
Customer concentration: Top CATV (>10%) as % of total revenue64%
Customer concentration: Top DC (>10%) as % of total revenue27%
Non-GAAP Operating Expenses ($USD Millions)$35.5
Cash, Cash Equivalents & Restricted Cash ($USD Millions)$66.8
Inventories ($USD Millions)$102.3
Capital Expenditures in Q1 ($USD Millions)$30.5

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD)Q2 2025N/A$100M–$110M New
Non-GAAP Gross Margin %Q2 2025N/A29.5%–31.0% New
Non-GAAP EPS ($)Q2 2025N/A$(0.09)–$(0.03) on ~55.7M shares New
Non-GAAP OpEx ($USD Millions per quarter)OngoingN/A$36–$40 New/Run-rate
Q1 2025 Revenue ($USD)Q1 2025$94M–$104M (issued 2/26/25) Actual: $99.9M In-line

Management reiterated confidence in 2H25 800G ramp and US production coming online in Q3, but did not provide quantified shipment guidance ranges beyond capacity objectives .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2: Q3’24, Q-1: Q4’24)Current Period (Q1’25)Trend
AI/technology initiatives (400G/800G/1.6T)Q3: double-digit DC growth, new 400G wins ; Q4: strong DC orders; planning sizeable capex for 2025 DC production New design wins with existing hyperscaler; qualification activity and small 800G revenue; confident in H2 ramp; demos of 800G/1.6T and CPO at OFC Strengthening; H2 ramp positioning
Supply chain/tariffsQ3/Q4: no explicit tariff commentary; operational ramp and orders Tariffs had no material impact in Q1; demand surge for 100G likely tariff-related; intent to reduce China content to near 0; inventory held stateside Proactive mitigation; onshoring advantage
Product performance (CATV)Q3: CATV >3x QoQ; transitioning architectures ; Q4: CATV more than doubled QoQ; substantial order for Quantum Bandwidth Record CATV ($64.5M); GameMaker shipments ramping; retooling to Motorola style amplifiers; modest Q2 pullback to balance production Strong, transitioning mix
Customer engagement (Hyperscalers)Q3/Q4: ramping DC capacity and customer wins Amazon warrants-linked path to $400M+ annual; three non-Amazon design wins; re-engaged hyperscale shipment milestone in June Broadening beyond Amazon
Regulatory/legal (TAA/PA compliance)Patent litigation updates in prior period press releases (not performance-related) Emphasized TAA/PA compliance advantage for US government-related demand; manufacturing in Taiwan/Texas meets requirements Positive differentiator
R&D and capex executionQ3: larger than expected non-GAAP loss due to accelerated R&D ; Q4: planning sizeable capex in 2025 Q1 CapEx $30.5M; full-year CapEx $120–$150M expected; ordering equipment for Texas/Taiwan capacity expansion Aggressive investment pace

Management Commentary

  • “We continue to see strong demand in the CATV market and achieved the highest quarterly CATV revenue in AOI’s history…secured three new design wins…increased confidence in a second half of 2025 ramp in 800G sales” — Dr. Thompson Lin, CEO .
  • “We…expanded our gross margins considerably…expectation of exiting this year with a production capacity of over 100,000 units of 800G transceivers per month, with 40%…done in the US” — Dr. Stefan Murry, CFO/CSO .
  • “Tariffs had no material impact in Q1…we remain on track…largest domestic production capacity…~40,000 transceivers per month or ~40% of overall capacity…by mid-2026…>200,000 pieces per month” — CFO .
  • “Demand for certain 100G products unexpectedly surged…likely tariff concerns…expect partial recovery in Q2 and full recovery by Q3” — CFO .
  • “We continue to expect shipments…to increase in line with our previous commentary of a second-half ramp” — CEO on first volume shipment to a re-engaged hyperscale customer (June release) .

Q&A Highlights

  • Channel inventory/telemetry: Intentional inventory buildup stateside amid tariff uncertainty; visibility to deployment and drawdown; remaining GameMaker inventory expected consumed by Q3 (around August) .
  • 800G ramp quantification: Capacity target ~100k pieces/month by year-end (majority 800G); deliveries lag production by ~one quarter; management expects material 800G revenue in Q3 .
  • Origin/tariffs: No products with China country of origin for tariff purposes; China-sourced component value <10% in 800G/1.6T, pathway to near 0 .
  • CATV retooling: Shift to Motorola-style amplifiers in Q2; field trial/qualification imminent; building sufficient inventory of both amplifier types by late June .
  • Margins: Cable TV margins currently ~300–600 bps higher vs datacenter; expectation for margin expansion from manufacturing efficiencies and product mix; US production likely improves margins .
  • Funding/CapEx: ATM raised ~$98M net; no additional fundraising announced; full-year CapEx $120–$150M to support onshoring and scale .

Estimates Context

  • Q1 2025 results modestly beat consensus: revenue $99.86M vs $99.37M*; EPS loss $0.02 vs $0.0375* loss estimate, helped by favorable mix and record CATV demand and margin * .
  • Q2 2025 guidance ($100–$110M; non-GAAP GM 29.5–31.0%; EPS loss $0.09–$0.03 on ~55.7M shares) broadly bracketed consensus revenue $105.8M* and EPS loss $0.074*; management highlighted sequential DC increase and modest CATV pullback, implying estimates may shift toward H2 as 800G ramps *.

Values retrieved from S&P Global.

Key Takeaways for Investors

  • Mix-driven margin expansion with record CATV revenue underpins near-term profitability trajectory; non-GAAP EBITDA turned positive and non-GAAP losses narrowed materially YoY .
  • Datacenter headwinds (400G digestion; 100G component constraints) appear transitory, with recovery expected by Q2/Q3 and material 800G revenue anticipated in Q3 as US/Taiwan capacity comes online .
  • Onshoring and low China content (<10% in 800G/1.6T) create strategic differentiation amid tariff/TAA/PA requirements; Texas margins likely higher, supporting long-term GM goals (~40% non-GAAP target) .
  • Amazon engagement (warrants tied to ~$400M annual revenue) and June shipment to a re-engaged hyperscaler validate demand; three new design wins (non-Amazon) diversify hyperscale exposure .
  • Customer concentration is high (two >10% customers = 91% of total revenue), magnifying deployment risk; monitor inventory drawdown timing and CATV retooling progress through Q2 .
  • CapEx intensity ($120–$150M 2025E) and OpEx run-rate ($36–$40M/quarter) reflect aggressive scaling; funding bolstered by ~$98M ATM; watch execution vs capacity milestones and margin realization .
  • Near-term trading: modest beat, strong H2 ramp narrative, and US production catalyst; medium-term thesis centers on 800G scale-up, margin expansion, and hyperscaler diversification.