Applied Optoelectronics Stock Surges on AI Data Center Momentum

Applied Optoelectronics US03823U1025

The strategic pivot by Applied Optoelectronics toward high-performance artificial intelligence infrastructure is yielding significant commercial and operational results. A combination of technological innovation, a landmark product order, and aggressive capacity expansion is fueling the company's growth trajectory.

The company's operational momentum is clearly reflected in its financial statements. For the third quarter of 2025, Applied Optoelectronics reported revenue of $118.6 million, representing a substantial year-over-year increase of 82.1 percent. Management anticipates a further notable rise in data center revenue for the fourth quarter, driven by shipments of 400G products and the initial significant deliveries of 800G transceivers.

Looking ahead, the leadership has provided an optimistic outlook for the coming fiscal year. The company expects to achieve profitability with a net income exceeding $150 million. Market analyses from January 2026 view major agreements with clients like Microsoft as a validation of its technology roadmap and growth strategy. Current estimates project a revenue increase of 65 percent for fiscal year 2026, alongside a near-doubling of EBITDA. The progress toward these ambitious targets will be detailed in upcoming quarterly earnings reports.

Securing a Major 800G Transceiver Deal

A pivotal commercial breakthrough was achieved with the securing of Applied Optoelectronics' first volume purchase order for 800G data center transceivers. Issued by a major hyperscale customer—widely believed by industry observers to be Amazon—the order was placed on December 10, 2025, and confirmed on January 28, 2026. This deal is projected to contribute between $4 million and $8 million to the company's revenue for the fourth quarter of 2025. It marks a critical step in deepening the firm's collaboration with leading cloud and data center operators.

Ramping Up Production Capacity

To meet escalating demand for its optoelectronic components, the company is executing a substantial expansion of its manufacturing capabilities. On January 22, 2026, a supply agreement was signed with Oxford Instruments for plasma processing tools. Multiple etching and deposition systems are slated for installation at the company's facility in Sugar Land, Texas. This investment is designed to bolster production capacity for indium phosphide (InP) components, which are essential for optical transceivers used in AI data centers. The production lines are currently being upgraded to handle wafer sizes from 3 inches to 6 inches, a move aimed at enhancing quality and reducing costs.

Innovation in Laser Technology for AI

Supporting these commercial and operational strides is continued innovation. On December 18, 2025, the provider of fiber-optic networking solutions unveiled a new 400-milliwatt pump laser with a narrow linewidth, engineered specifically for AI data center applications. This technology targets use in silicon photonics and co-packaged optics, with the goal of boosting performance within AI infrastructure frameworks.