Is all the tooling for 800G fully installed and ready, and are laser datacom chips built and sitting on the shelf?

Management clarified that not all manufacturing capacity is online yet, and the ability to deliver 800G revenue is currently limited by production capacity. They are continuously adding capacity, with significant expansion planned through next year, including increasing 800G/1.6T capacity from 200,000 units/month to 650,000 units/month by year-end. “No. I mean as we said in our prepared remarks that our ability to deliver revenue in general and specifically when it comes to 800G products, is limited by our production capacity right now. So if we could produce more, we could ship more right now.”

How should investors think about the timing of the previously discussed $200 million 1.6T order, given it sounds like it may start in Q4 but be mostly a 2027 event?

Management stated that deliveries for the $200 million 1.6T order would start very late in Q3, with the bulk delivered in Q4 and a tail into Q1. They emphasized this order is just the beginning of significant future orders for 1.6T from this customer. “Actually, we'll start deliveries on that probably very late in the third quarter and then ramp into the fourth quarter. I think the bulk of it should get delivered in the fourth quarter. And then there may be a tail into the first quarter.”

How is AOI thinking about the potential for new Chinese laser manufacturing coming online, and what could its impact be on AOI's business?

Thompson Lin explained that the CPO laser market demand is 8 to 10 times larger than current worldwide capacity, requiring massive investment and long lead times (21-24 months for equipment). He believes new Chinese supply won't materially impact AOI for at least 2-3 years, especially for high-power, DWDM CPO lasers, due to the technical complexity and immense demand. “I think the investors maybe underestimate how big is the laser market. Let me say that. Right now, for the CPO laser, used in the ELSFP is 300-milliwatt laser compared to 70-milliwatt laser used at the 800G transceiver and 100-milliwatt use for the 1.6 terabit transceiver.”

AAOI

Applied Optoelectronics (AAOI) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Information Technology· Aug 6, 2026

Source: earnings call transcript

Executive summary

Applied Optoelectronics Q2 FY26 — Record Revenue and Return to Profitability Driven by AI Demand

Applied Optoelectronics delivered a strong Q2 FY26, achieving record revenue and non-GAAP profitability, fueled by robust demand in both its data center and CATV segments. The company is aggressively expanding its US manufacturing footprint to address surging AI-driven demand for 800G and 1.6T products, which are poised to drive significant sequential growth despite current component and capacity limitations. AOI's in-house laser technology provides a strategic advantage for future co-packaged optics.

Highlights

Achieved fifth consecutive quarter of record revenue at $191.9 million, up 86% YoY and 27% QoQ.
Returned to non-GAAP profitability with $0.06 non-GAAP EPS, exceeding guidance.
800G product revenue more than doubled sequentially to $12.8 million, representing 11.9% of data center revenue.
CATV business delivered record revenue of $80.6 million, increasing 43.8% YoY and 20.6% QoQ.
Secured Mediacom as a primary vendor for DOCSIS 4.0 network upgrades, expanding commercial adoption of CATV products.

Concerns

Near-term revenue growth is bounded by production capacity and key component availability, not market demand.
Expected decline of $20 million to $25 million in 100G business in Q3 due to a customer's inability to source sufficient 100G switches.
Non-GAAP gross margin is expected to face a slight headwind in the short term due to data center revenue mix.
Elevated R&D spending is anticipated to continue due to customer requests for new 800G and 1.6T product qualifications.
Material supply constraints, particularly for DSP and TIA, are limiting 1.6T transceiver delivery to $70 million-$80 million in Q4 despite higher demand.

Guidance & targets

Category	Target	Timeline	Confidence
Revenue	$255 million to $290 million high materiality	Q3 · FY26	High
Non-GAAP Gross Margin	29% to 30.5% medium materiality	Q3 · FY26	High
Non-GAAP Net Income	$10.1 million to $24 million high materiality	Q3 · FY26	High
Non-GAAP Earnings Per Share	$0.11 to $0.26 high materiality	Q3 · FY26	High
Full-year Revenue	around $1.1 billion high materiality	FY26	High
800G and 1.6T Production Capacity	over 650,000 pieces per month high materiality	Q4 · FY26	High
800G and 1.6T Production Capacity	over 930,000 pieces per month high materiality	Q4 · FY27	High
ELSFP Production	about 400,000 pieces per month medium materiality	2028 · FY28	Medium
CATV Annual Revenue	over $325 million annually medium materiality	future	High
Data Center Transceiver Monthly Revenue	$471 million per month high materiality	mid-2027 · FY27	High
800G and 1.6T Revenue	in the neighborhood of $330 million high materiality	Q4 · FY26	High
1.6T Transceiver Monthly Revenue	$300 million to $350 million medium materiality	end of next year · FY27	Medium
Q4 Revenue	more than $500 million high materiality	Q4 · FY26	Medium
Q3 to Q4 Revenue Growth	like 60% high materiality	Q4 · FY26	Medium
Non-GAAP Gross Margin	32% to 33% medium materiality	Q4 · FY26	Medium
1.6T Transceiver Revenue	$70 million to $80 million high materiality	Q4 · FY26	Medium
1.6T Transceiver Revenue	double Q4 or more high materiality	Q1 · FY27	Medium

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Data Center Strong growth driven by robust demand for next-generation AI infrastructure, particularly 800G and 400G products. Expect a temporary decline in 100G business in Q3 due to memory shortage for switches. 100G product revenue growth: 31.3% YoY400G product revenue growth: >4x YoY800G product revenue growth: >10x YoY100G revenue mix: 38.3%200G and 400G transceiver revenue mix: 45%800G transceiver revenue mix: 11.9%10G and 40G transceiver revenue mix: 4.4%	$107.7 million	140.4%	32.3%	—
CATV Record revenue, slightly above expectations of $75 million to $80 million. Driven by significant shipments of 1.8 gigahertz amplifiers and momentum with new MSO customers. Mediacom selected AOI as primary vendor for DOCSIS 4.0 upgrades.	$80.6 million	43.8%	20.6%	—

Product announcements

Product	Type	Timeline	Details
DOCSIS 4.0 Network Upgrades (Mediacom)	expansion	—

Deals & partnerships

Mediacom Selection as primary vendor for DOCSIS 4.0 network upgrades.

Mediacom selected AOI as the primary vendor to accelerate its DOCSIS 4.0 network upgrades.

Capital programs

Texas Manufacturing Expansion (Greater Houston Area) underway over 1.6 million square feet

Period spend: $565.5 million

Funding: combination of cash on hand, cash generated from operations, equity sales (ATM offering), and additional debt

Start: underway for several years, construction on Pearland facilities recently began

Benefit:210,000 sq ft facility dedicated to 800G and 1.6T transceivers; expansion of indium phosphide capacity; overall 800G/1.6T production capacity to >650,000 pieces/month by end 2026 and >930,000 pieces/month by end 2027

Expansion includes a 210,000 square foot facility near headquarters and new facilities in Pearland and Houston. $280 million of the Q2 spend was for prepayments on equipment. Over half of the 2027 output is expected from Texas.

Risks & headwinds

Production Capacity and Key Component Availability near-term (through mid-2027)

Near-term revenue bounded almost entirely by production capacity and key component availability.

Mitigation:Working hard to add additional capacity and secure necessary key components; expanding manufacturing footprint in Texas.

100G Business Decline due to Memory Shortage Q3 FY26, persisting until memory supply recovers (within a few months, by end of this year or early next year)

Expected decline of $20 million to $25 million in 100G revenue in Q3.

Mitigation:Believed to be a short-term effect; 100G demand expected to return to normal.

Gross Margin Headwind from Data Center Mix short term

Slight headwind to non-GAAP gross margin.

Mitigation:Committed to long-term objective of returning non-GAAP gross margins to around 40% as mix shifts towards higher-margin products and operational efficiencies are captured.

Elevated R&D Spending ongoing

R&D spending will continue to be elevated.

Mitigation:Due to customer requests to qualify new 800G and 1.6T products.

Material Supply Constraint for 1.6T Transceivers Q4 FY26

Limits Q4 1.6T revenue commitment to $70 million to $80 million.

Mitigation:Working very closely with DSP and TIA suppliers; AOI's in-house laser manufacturing provides an advantage over competitors.

What to watch in Q3 FY26

800G Product Revenue Growth

Q3 FY26

Current $12.8 million (Q2 FY26)

Target nearly 5x sequential growth

Why it matters

800G products are a key driver of near-term data center revenue ramp and overall company growth.

Looking ahead, we expect revenue from our 800G products to grow by nearly 5x sequentially in the third quarter and expect continued strong growth gated by our production capacity and component supply in the fourth quarter.

Find out whether AAOI delivers this. Inve re-checks your case every morning.

Q&A highlights

How might a potential US ban on Chinese transceivers affect AOI, its capacity planning, and customer conversations?

Management stated it's too early to assess specific ramifications but highlighted AOI's significant US manufacturing presence as a key appeal to customers. They believe such a ban would heighten interest in their US-made products, noting their capacity is already booked through Q2 next year.

“I think AOI's U.S. manufacturing presence has been a very important, probably the most important element of our appeal to our customers. And clearly, that announcement heightens that appeal.”

asked by George Notter · answered by Stefan Murry

3 min read 5 chapters

Detailed narrative

AI Infrastructure Demand & Capacity Expansion

Applied Optoelectronics is experiencing robust demand for its 800G and 1.6T data center products, primarily driven by next-generation AI infrastructure investments. This demand currently outstrips production capacity and key component availability, leading to aggressive expansion plans. The company is building out over 1.6 million square feet of manufacturing space in the Greater Houston area, with a new 210,000 sq ft facility dedicated to 800G/1.6T transceivers expected to begin initial production late in Q3.

Further facilities in Pearland and Houston are slated to come online in early 2027, with over half of the expanded output expected from Texas by end of 2027.

800G & 1.6T Product Ramp and Market Traction

The company saw a strong volume ramp of its 800G products in Q2, with revenue more than doubling sequentially to $12.8 million, representing 11.9% of total data center revenue. This is expected to grow nearly 5x sequentially in Q3. The first 1.6T product is nearing full qualification with a major hyperscale customer, with shipments anticipated to begin late Q3 and ramp significantly in Q4 and into 2027.

AOI expects to be capable of producing over 650,000 pieces of 800G and 1.6T products per month by the end of 2026, growing to over 930,000 pieces per month by the end of 2027.

CATV Business Strength and DOCSIS 4.0 Adoption

The CATV segment achieved record revenue of $80.6 million in Q2, marking a 43.8% year-over-year and 20.6% sequential increase, slightly exceeding expectations. This growth was driven by significant shipments of 1.8 gigahertz amplifiers to its largest CATV customer and momentum with newer MSO customers.

Notably, Mediacom selected AOI as the primary vendor to accelerate its DOCSIS 4.0 network upgrades, leveraging AOI's 1.8 gigahertz Quantum bandwidth smart amplifiers and software solutions. Q3 CATV revenue is projected to be between $100 million and $110 million, with annual revenue expected to exceed $325 million.

In-house Laser Technology and Co-Packaged Optics (CPO)

AOI emphasizes its long-standing expertise in laser manufacturing as a strategic advantage, producing high-power, narrow-linewidth lasers internally. This capability helps mitigate industry shortages and positions the company for future growth in co-packaged optics (CPO) and external light sources (ELSFP). While current ELSFP production is limited, AOI plans to ramp production to 400,000 pieces per month by 2028.

The company is aggressively expanding its laser manufacturing capacity in Texas, including building a second fab, to meet future CPO market demand, which is estimated to be 8 to 10 times larger than today's laser market.

Financial Performance and Capital Allocation

The company returned to non-GAAP profitability in Q2 with $5.5 million in net income and $0.06 EPS, surpassing its guidance range. Total cash, cash equivalents, short-term investments, and restricted cash increased to $508.8 million by quarter-end. AOI raised $538.8 million net of fees through a new at-the-market (ATM) offering to fund significant capital investments.

In Q2, capital investments totaled $565.5 million, including $280 million in prepayments for equipment, primarily for manufacturing capacity expansion for 400G, 800G, and 1.6T transceiver products. CapEx intensity is expected to be higher in the second half of 2026.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.