Applied Optoelectronics (NASDAQ:AAOI) experienced a large intraday rally on Monday, with the stock advancing 44.5% to close at $77.50 after the company reported quarterly results that exceeded Wall Street forecasts and released first-quarter guidance that topped consensus revenue expectations.
For the fourth quarter, Applied Optoelectronics recorded an adjusted loss of 1 cent per share on revenue of $134.27 million. Those results compared with analysts estimates calling for a loss of 11 cents per share and revenue of $132.94 million. The company also reported that revenue for the quarter increased versus the same period a year earlier.
Looking ahead, Applied Optoelectronics provided a first-quarter outlook that foresees adjusted earnings between a loss of 9 cents per share and breakeven, with revenue projected in a $150 million to $165 million range. By contrast, consensus estimates had been for a loss of 5 cents per share on revenue of $154.8 million.
Market commentary following the results was broadly supportive. B. Riley upgraded the stock and said, "based on the continued strength in 400G, with 800G expected to drive incremental growth, starting in 2Q." Needham analysts noted, "We see AAOI as a direct beneficiary of soaring optical transceiver demand, driven by AI/Cloud capex, and share shifts away from China-based vendors. While we continue to see execution risk, we believe these tailwinds, along with the company2 80 99s raised capex investments, as likely transformative to results."
Rosenblatt reiterated a bullish stance and Top Pick designation, highlighting the company's capital spending plans: "The company invested $209mn in capex in 2026 with a focus on increasing laser and transceiver capacity in Texas. This ongoing investment is poised to drive roughly a tripling of Data Center revenues in 2026 and even faster growth in 2027. Amazon and Oracle 800G demand are the primary revenue drivers in 2026 along with Microsoft e2 80 99s solid 100G and recently renewed 400G demand. By 2027, all of these customers should also be buying 1.6T"
The stock touched an intraday high of $79.50, marking its strongest level since August 2017.
Context and implications
The quarter's outperformance versus consensus and the above-estimate revenue guidance for the first quarter underpin the positive market reaction. Analysts highlighted demand for higher-speed optics - 400G and the ramp to 800G - and significant factory and capacity investments as critical inputs to the company's growth trajectory. Investors appear to have priced these dynamics into the sharp share-price appreciation during the session.
What remains uncertain
While analysts are constructive, they also referenced execution risk tied to scaling production and realizing the expected demand shifts. The company e2 80 99s ability to convert capex into timely capacity increases and to secure orders from major cloud customers will be central to sustaining the momentum signaled by the results and guidance.