APPLIED OPTOELECTRONICS, INC. Q3 FY2025 earnings call

• The company successfully achieved revenue, gross margin, and non-GAAP loss per share in line with expectations, including the highest quarterly revenue in its history, driven by strong CATV demand. • The strength in the CATV business offset the slight shortfall in datacenter revenue due to timing issues with certain shipments, such as a $6.6 million 400G transceiver shipment to a hyperscale customer delayed to Q4. • 800G products are near the final stages of qualification with several customers, with meaningful shipments expected in the fourth quarter. • The company made progress in ramping up production capacity, including plans to expand in Texas and lease an additional facility in Sugar Land. • It has an in-house laser manufacturing capability, which has provided an advantage and avoided laser shortages affecting product delivery. • Four new software modules were added to the QuantumLink HFC remote management solution, receiving positive customer feedback.

Applied Optoelectronics reported third quarter 2025 revenue of $118.6 million, which was within the range of $115 million to $127 million. The CATV segment was a key driver, with record revenue of $70.6 million in the third quarter, more than tripling year-over-year and accounting for 60% of total revenue. The datacenter segment generated $43.9 million in revenue, up 7% year-over-year but down sequentially, making up 37% of total revenue. The 400G product revenue decreased 65% year-over-year, while other products' revenue saw a 32% year-over-year increase.

• For the fourth quarter of 2025, revenue is expected to be between $125 million and $140 million, with sequential growth in datacenter revenue driven by 400G and upcoming 800G shipments. • Non-GAAP gross margin is projected to be in the range of 29% to 31%. • Non-GAAP net loss is expected to be between a loss of $9 million and a loss of $2.8 million. • The company plans to expand production capacity in 2026, aiming to produce over 200,000 pieces per month by mid-2026.

• Tariffs had a $1.1 million impact on the income statement in the third quarter, and future results may be materially affected by changes in tariff rates and equipment import mix. • Uncertainties exist in the supply chain and production lead times, although in-house capabilities help mitigate some risks.

Q: Simon Leopold inquired about the CATV outlook and data center growth.

A: Stefan Murry stated that over $300 million in cable TV revenue is achievable in 2026 with new products, and Thompson Lin mentioned that Q4 CATV revenue is expected to be between $50 million and $55 million with significant datacenter growth.

Q: George Notter asked about the shipping and receiving delay at the end of the quarter and capital expenditure.

A: Stefan Murry explained that the delay was due to a single hyperscale customer's timing issue, and CapEx is tracking ahead of the $120 million to $150 million range for 2025, with uncertainty regarding Q4 and 2026 plans.

Q: Michael Genovese questioned 800G qualification and 100G.

A: Chih-Hsiang Lin said 800G qualification is expected soon, and 100G revenue is expected to remain consistent.

Q: Ryan Koontz asked about silicon photonics and cable share.

A: Stefan Murry and Chih-Hsiang Lin discussed the advantage of silicon photonics over EMLs and the share gain in the cable business.

Q: Timothy Savageaux asked about demand and capacity.

A: Stefan Murry and Chih-Hsiang Lin noted strong demand and plans for capacity expansion in 2026.