Applied Optoelectronics' Worst Fears Return - I'm Still Buying

Applied Optoelectronics' Worst Fears Return - I'm Still Buying

Applied Optoelectronics (AAOI) offers an asymmetric entry point after a sharp post-earnings correction, with shares now trading at attractive valuations. Despite a Q1 revenue miss and ambiguous capex guidance, AAOI raised its CY26 revenue outlook by 10% to $1.1B, now implying 141% growth. Forward multiples have compressed to 8.4x CY26 sales, while gross margins are guided to expand by 1000 bps to ~40%, supporting a bullish risk/reward. I am scaling exposure, monitoring capex deployment, margin expansion, and hyperscaler capex trends as key execution and risk factors.

When Applied Optoelectronics ( AAOI ) reported its Q1 CY26 earnings in May, the company’s shares rose, creating a new high, with investors digesting a mixed performance in the company’s Q1 ER. However, shares eventually