📊 AAOI Key Takeaways
Is Applied Optoelectronics, Inc.. (AAOI) a Good Investment?
Applied Optoelectronics demonstrates strong 82.8% revenue growth, but this is entirely offset by severe operational unprofitability and negative free cash flow of -$143.6M, indicating fundamental execution issues. Despite a fortress balance sheet with $439.7M cash and zero debt, the current burn rate of ~$85M quarterly operating outflow is unsustainable and provides only ~5 quarters of runway before depletion.
Applied Optoelectronics is showing strong top-line momentum, with revenue up 82.8% year over year and materially improved net loss and EPS trends. However, growth quality is weak because the business remains unprofitable at the operating and net levels while burning substantial cash, with deeply negative operating cash flow and free cash flow. The balance sheet is currently a stabilizer due to strong liquidity, high equity, and low debt, but the company needs much better operating conversion for fundamentals to become durable.
Applied Optoelectronics, Inc.. Key Strengths (AAOI)
- Exceptional revenue growth of 82.8% YoY demonstrates significant market demand and sales execution
- Fortress balance sheet: $439.7M cash, zero long-term debt, 3.83x current ratio provides substantial financial cushion and operational flexibility
- Gross margin of 29.1% indicates underlying product economics and manufacturing viability are sound
- Revenue growth is exceptionally strong, indicating rising demand and business momentum
- Gross margin of 30.0% shows the company can generate meaningful product-level profitability
- Balance sheet is healthy with $206.14M in cash, a 2.63x current ratio, and very low debt-to-equity of 0.05x
AAOI Stock Risks: Applied Optoelectronics, Inc.. Investment Risks
- Severe cash burn: negative operating cash flow of -$85.4M and free cash flow of -$143.6M is unsustainable despite strong revenue growth; indicates fundamental operational distress
- Unprofitable at scale: operating margin of -8.6% and net margin of -9.4% show the company loses money on every dollar of revenue sold despite 82.8% top-line expansion
- Operating expense control failure: estimated 5-quarter cash runway remaining; company must achieve immediate profitability turnaround or face dilutive financing/asset sales
- Operating margin remains negative at -12.0%, showing the company has not scaled into profitability
- Operating cash flow of -$174.43M and free cash flow of -$353.58M indicate poor cash generation and heavy funding needs
- Negative interest coverage and ongoing losses raise execution risk if growth slows or margins fail to improve
Key Metrics to Watch
- Operating margin trajectory - must improve toward break-even then positive within 2-3 quarters to avoid cash depletion
- Free cash flow inflection point - path to positive FCF is critical for long-term viability
- Operating expense ratio relative to revenue - indicates whether cost structure can scale with revenue growth
- Operating cash flow and free cash flow improvement
- Operating margin progression toward sustained profitability
Applied Optoelectronics, Inc.. (AAOI) Financial Metrics & Key Ratios
💡 AI Analyst Insight
Strong liquidity with a 3.83x current ratio provides a solid financial cushion.
AAOI Profit Margin, ROE & Profitability Analysis
AAOI vs Technology Sector: How Applied Optoelectronics, Inc.. Compares
How Applied Optoelectronics, Inc.. compares to Technology sector averages
Sector benchmarks are approximate industry averages. Actual sector performance may vary.
Is Applied Optoelectronics, Inc.. Stock Overvalued? AAOI Valuation Analysis 2026
Based on fundamental analysis, Applied Optoelectronics, Inc.. has mixed fundamental signals relative to the Technology sector in 2026.
Note: This is a fundamental analysis based on SEC filings. For P/E ratio, price targets, and market-based valuation, consult financial data providers. This is not investment advice.
Applied Optoelectronics, Inc.. Balance Sheet: AAOI Debt, Cash & Liquidity
AAOI Revenue & Earnings Growth: 5-Year Financial Trend
5-Year Trend Summary: Applied Optoelectronics, Inc..'s revenue has grown significantly by 94% over the 5-year period, indicating strong business expansion. The most recent EPS of $-1.75 indicates the company is currently unprofitable.
AAOI Revenue Growth, EPS Growth & YoY Performance
AAOI Quarterly Earnings & Performance
| Quarter | Revenue | Net Income | EPS |
|---|---|---|---|
| Q1 2026 | $99.9M | -$9.2M | $-0.18 |
| Q3 2025 | $65.2M | -$17.8M | $-0.28 |
| Q2 2025 | $43.3M | -$9.1M | $-0.16 |
| Q1 2025 | $40.7M | -$9.2M | $-0.18 |
| Q3 2024 | $62.5M | -$9.0M | $-0.27 |
| Q2 2024 | $41.6M | -$16.9M | $-0.57 |
| Q1 2024 | $40.7M | -$16.3M | $-0.56 |
| Q3 2023 | $56.7M | -$9.0M | $-0.27 |
Data sourced from SEC EDGAR 10-Q quarterly filings. Figures may represent quarterly or cumulative values.
Applied Optoelectronics, Inc.. Dividends, Buybacks & Capital Allocation
AAOI SEC Filings: Latest 10-K & 10-Q Analysis
Access official SEC EDGAR filings for Applied Optoelectronics, Inc.. (CIK: 0001158114)
📋 Recent SEC Filings
❓ Frequently Asked Questions about AAOI
What is the AI rating for AAOI?
Applied Optoelectronics, Inc.. (AAOI) has a Combined AI Grade of C from Claude (C) and ChatGPT (C) with 80% combined confidence, based on fundamental analysis of SEC EDGAR filings.
What are AAOI's key strengths?
Claude: Exceptional revenue growth of 82.8% YoY demonstrates significant market demand and sales execution. Fortress balance sheet: $439.7M cash, zero long-term debt, 3.83x current ratio provides substantial financial cushion and operational flexibility. ChatGPT: Revenue growth is exceptionally strong, indicating rising demand and business momentum. Gross margin of 30.0% shows the company can generate meaningful product-level profitability.
What are the risks of investing in AAOI?
Claude: Severe cash burn: negative operating cash flow of -$85.4M and free cash flow of -$143.6M is unsustainable despite strong revenue growth; indicates fundamental operational distress. Unprofitable at scale: operating margin of -8.6% and net margin of -9.4% show the company loses money on every dollar of revenue sold despite 82.8% top-line expansion. ChatGPT: Operating margin remains negative at -12.0%, showing the company has not scaled into profitability. Operating cash flow of -$174.43M and free cash flow of -$353.58M indicate poor cash generation and heavy funding needs.
What is AAOI's revenue and growth?
Applied Optoelectronics, Inc.. reported revenue of $151.1M.
Does AAOI pay dividends?
Applied Optoelectronics, Inc.. does not currently pay dividends.
Where can I find AAOI SEC filings?
Official SEC filings for Applied Optoelectronics, Inc.. (CIK: 0001158114) including 10-K, 10-Q, and 8-K reports are available on SEC EDGAR.
What is AAOI's EPS?
Applied Optoelectronics, Inc.. has a diluted EPS of $-0.19.
How is the AI analysis conducted?
Two independent AI systems — Claude (Anthropic) and ChatGPT (OpenAI) — analyze SEC EDGAR filings including 10-K annual reports and 10-Q quarterly reports. Each AI evaluates financial health, profitability ratios, balance sheet strength, and growth metrics. The combined grade reflects both perspectives for balanced insights.
What is AAOI's fundamental grade?
Based on our AI fundamental analysis in June 2026, Applied Optoelectronics, Inc.. has a C grade with 80% confidence. Review the strengths and risks sections above for full context. This is not investment advice.
Is AAOI stock overvalued or undervalued?
Valuation metrics for AAOI: ROE of -1.3% (sector avg: 22%), net margin of -9.4% (sector avg: 18%). Compare these metrics with sector averages to assess valuation.
What is AAOI's AI grade for 2026?
Our dual AI analysis gives Applied Optoelectronics, Inc.. a combined C grade for 2026. Revenue is data pending, with profitability at or below sector average. Always conduct your own research.
What is AAOI's free cash flow?
Applied Optoelectronics, Inc..'s operating cash flow is $-85.4M, with capital expenditures of $58.2M. FCF margin is -95.0%.
How does AAOI compare to other Technology stocks?
Vs Technology sector averages: Net margin -9.4% (avg: 18%), ROE -1.3% (avg: 22%), current ratio 3.83 (avg: 2.5).