Sign in

You're signed outSign in or to get full access.

AO

APPLIED OPTOELECTRONICS, INC. (AAOI)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 revenue of $103.0M and non-GAAP gross margin of 30.4% were in line with company guidance; EPS missed as OpEx rose due to R&D prototypes/samples, shipping ahead of tariff changes, and OFC trade show costs, plus FX headwinds . Versus consensus, AAOI delivered a modest revenue miss ($102.95M vs $105.80M*) and larger EPS miss (-$0.16 vs -$0.074*) .
  • Datacenter accelerated: +40% q/q to $44.8M, with first volume shipment of single‑mode 400G to a re‑engaged hyperscaler; 800G advanced with Taiwan factory approval and management still expecting meaningful 800G shipments in 2H25 .
  • CATV remained strong (Q2: $56.0M), down 13% q/q due to retooling to Motorola‑style amplifiers; Charter certification completed and broader MSO adoption progressing; management expects record or near‑record CATV revenue in Q3 .
  • Q3 guide: revenue $115–$127M, non‑GAAP GM 29.5%–31.0%, and non‑GAAP EPS loss of $0.10–$0.03 on ~62.3M shares; management reiterated long‑term non‑GAAP GM target of ~40% as mix shifts to 800G/1.6T and CATV efficiencies/software scale .
  • Potential stock catalysts: visible 800G qualification/first shipments, US onshoring milestones (>100k 800G units/month exit‑2025; ~40% US‑made), evidence of CATV durability beyond Charter, and signs of OpEx normalization .

What Went Well and What Went Wrong

What Went Well

  • Datacenter momentum: “We completed our first volume shipment of high speed single mode 400G… to a recently reengaged major hyperscale customer,” with 400G demand rising from multiple customers .
  • 800G progress: “One of our major hyperscale customers… approved [our] Taiwan factory for 800G… We’re approaching what we believe are the final stages for securing 800G product qualification,” with meaningful 2H25 shipments expected .
  • CATV scale and diversification: Charter certification (1.8GHz amplifiers + Quantum Link) completed; six additional MSOs ordering or in qualification; Q3 expected record/near‑record CATV revenue .

What Went Wrong

  • EPS miss driven by OpEx: Non‑GAAP EPS (-$0.16) missed company guide due to higher R&D (prototypes/samples) and SG&A (shipping ahead of tariff increases, samples, OFC), plus Taiwan dollar strength .
  • Sequential CATV dip: CATV fell 13% q/q on retooling to Motorola‑style amplifiers, though management expects sequential recovery in Q3 .
  • Working capital build: Receivables rose to $211.5M and inventory to $138.9M as AAOI staged product and raw materials for upcoming production; management cited extended terms to channel partners and strong near‑term demand visibility .

Financial Results

MetricQ2 2024Q4 2024Q1 2025Q2 2025
Revenue ($M)$43.27 $100.27 $99.86 $102.95
GAAP Gross Margin (%)22.1% 28.7% 30.6% 30.3%
Non‑GAAP Gross Margin (%)22.5% 28.9% 30.7% 30.4%
GAAP EPS-$0.66 -$2.60 -$0.18 -$0.16
Non‑GAAP EPS-$0.28 -$0.02 -$0.02 -$0.16
Total Operating Expenses ($M)$35.81 $35.20 $39.48 $47.14
Adjusted EBITDA ($M)-$11.92 $2.40 $0.44 -$3.42

Segment revenue ($M)

SegmentQ4 2024Q1 2025Q2 2025
Datacenter$44.24 $32.05 $44.79
CATV$52.21 $64.50 $56.02
Telecom$3.54 $2.94 $1.94
Other$0.28 $0.37 $0.20

KPIs and balance sheet

KPIQ1 2025Q2 2025
Revenue mixCATV 65%, DC 32%, Other/Telecom 3% CATV 54%, DC 44%, Other/Telecom 2%
>10% customersCATV 64% rev; DC 27% rev CATV 54% rev; DC 34% rev
Cash & equivalents ($M)$66.81 $87.20
Accounts Receivable ($M)$171.10 $211.45
Inventory ($M)$102.31 $138.87
Capex ($M)$30.5 in Q1 $38.8 in Q2; FY25 plan $120–$150
800G capacity targetsInitial US production in summer; exit 2025 >100k units/month (~40% US) Track unchanged; US/Taiwan ramp on plan

Non‑GAAP adjustments (illustrative, Q2 2025): add‑backs included $3.16M SBC, $1.07M discontinued products (non‑cash), $0.86M non‑recurring expense, and -$5.28M unrealized FX gain; see reconciliation tables for full detail .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueQ3 2025n/a$115M–$127M New
Non‑GAAP Gross MarginQ3 2025n/a29.5%–31.0% New
Non‑GAAP EPSQ3 2025n/a-$0.10 to -$0.03 (≈62.3M shares) New

Notes: Management reiterated long‑term non‑GAAP GM target ~40% over time as 800G/1.6T ramps and CATV efficiencies/software scale .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4’24, Q1’25)Current Period (Q2’25)Trend
800G qualification & timingH2’25 ramp anticipated; multiple large hyperscale qualifications underway; some 800G qualification revenue in Q1 Taiwan factory approved for 800G by a major hyperscaler; “final stages” of product qualification; meaningful shipments still expected 2H25 Progressing
US onshoring & tariffsPlan to bring US 800G production online in summer; customers value domestic supply; <10% China content in 800G/1.6T designs US capacity bring‑up ongoing; target ~40k/month in US late year (≈40% of total); tariffs immaterial in Q2 Advancing
Datacenter product mix100G supply constraints in Q1; 400G demand rising; new design wins (non‑AMZN) First volume 400G shipment to re‑engaged hyperscaler; 400G demand up; 800G low revenue for qualification Improving
CATV demand/adoptionRecord CATV Q1; staging inventory domestically; Motorola‑style amplifier qualification expected Charter certification done; six other MSOs in purchase/qualification; Q3 record/near‑record CATV expected Broadening
MarginsNon‑GAAP GM 30.7% in Q1; path to ~40% LT Non‑GAAP GM 30.4% in Q2; mid‑30s expected in a few quarters as 800G/software mix improves; LT ~40% reiterated Building
Working capital & fundingATM $98M raised; capex $120–$150M planned in 2025 Completed ATM ($98M); new $35M revolver; AR/inventory up to stage demand Supported

Management Commentary

  • “We completed our first volume shipment of high speed single mode 400G… to a recently reengaged major hyperscale customer… We continue to make progress on customer qualification on our 800G product and… have confidence in the second half ramp in 800G sales.” — CEO Thompson Lin .
  • “One of our major hyperscale customers… approved [our] factory in Taiwan for 800G production… we’re approaching… the final stages for securing 800G product qualification.” — CFO/CSO Stefan Murry .
  • “We continue to expect to exit this year with a production capacity of over 100,000 units of 800G transceivers per month, with 40%… in the US.” — CFO/CSO Stefan Murry .
  • “R&D expenses were up $2.6M q/q… mostly due to… prototypes and samples… SG&A… increased by $2.5M… shipping… ahead of tariff increases… and OFC trade show in April.” — CFO/CSO Stefan Murry .
  • “We expect Q3 revenue to be between $115M and $127M… non‑GAAP gross margin 29.5%–31%… EPS between a loss of $0.10 and a loss of $0.03.” — CFO/CSO Stefan Murry .

Q&A Highlights

  • CATV capacity/inventory and new products: Management is producing both Motorola and GainMaker platforms; expects a modest q/q increase in Q3 and launching a node product in Q4 that should begin contributing by Q4/Q1; comfortable with channel inventory visibility via MSO/partner reporting .
  • 800G/1.6T engagements: Three tier‑one engagements on 800G+; capacity build for 800G also supports 1.6T; 1.6T volume manufacturing targeted for mid‑2026, with 800G ramping first .
  • Gross margin levers: Further CATV cost reductions and higher‑margin software mix; vertical integration and wafer size transitions (from 2‑inch toward 4‑inch) expected to reduce laser costs; US manufacturing could carry higher margins .
  • Receivables/terms: AR increased with revenue growth and extended terms to stage CATV product stateside; inventory build primarily raw materials for upcoming production .
  • Customer concentration: In Q2 two >10% customers contributed 54% (CATV) and 34% (datacenter), with Q3 outlook including another potential >10% datacenter customer .

Estimates Context

Q2 2025 Actual vs S&P Global Consensus

MetricActualConsensusResult vs Consensus
Revenue ($M)$102.95 $105.80*Miss
EPS (Primary)-$0.16 -$0.074*Miss
EBITDA ($M)-$9.58 $4.50*Miss

FY outlook context (street): FY25 revenue $455.7M*, FY26 revenue $754.0M*, with FY26 EPS turning positive (consensus ~$0.61*) [GetEstimates].
Values marked with an asterisk (*) are retrieved from S&P Global.

Management framed the Q2 EPS miss as OpEx‑driven (R&D prototypes/samples, shipping/OFC, FX), with tariffs immaterial in Q2, and guided Q3 sequential growth in both CATV and datacenter .

Key Takeaways for Investors

  • Near‑term: Print showed healthy top‑line/margin execution but bottom‑line pressure from OpEx; focus on Q3 sequential growth and whether OpEx normalizes as qualification spend rolls off .
  • Datacenter catalyst path: Track 800G product qualification milestones and first meaningful shipments in late Q3/Q4; monitor 400G share gains with the re‑engaged hyperscaler .
  • CATV durability: Charter certification plus broader MSO pipeline supports sustained demand; Q3 guide implies record/near‑record CATV; watch for node product launch timing and software mix expansion .
  • Margin trajectory: Expect mid‑30s non‑GAAP GM in “a few quarters” as 800G scales and CATV efficiencies/software expand; LT target ~40% reiterated .
  • Capacity/onshoring: Exit‑2025 capacity >100k 800G units/month (~40% US) is a differentiator amid tariff/TAA dynamics; supply chain localization and wafer transitions are additional cost levers .
  • Working capital/watch items: Elevated AR and inventory reflect staging and raw material builds; new $35M revolver and completed $98M ATM provide liquidity to fund capex ramp .
  • Estimate resets: Consensus likely to adjust lower on EPS/EBITDA after OpEx‑driven miss; magnitude depends on confidence in 2H25 800G shipments and CATV strength (guide supports sequential acceleration) .

References: Q2’25 8‑K/press release and financial tables ; Q2’25 earnings call transcript ; Q1’25 8‑K/press release and call ; Q4’24 press release .

S&P Global disclaimer: Values marked with an asterisk (*) are retrieved from S&P Global.