Applied Optoelectronics, Inc. — AAOI

[~] I    THE BUSINESS     what they sell, how it earns, who pays
[ ] II   THE MOAT         pricing power, and the clock on it
[ ] III  OWNER EARNINGS   what it really earns, and where the cash goes
[ ] IV   INVERT           what kills it — ranked and dated
[ ] V    THE LADDER       the cycle this name is standing on
[ ] VI   THE PRICE        what you pay against what you get

Resume at Chapter I, beat 2 — how each product category earns.

IDENTITY

Name        Applied Optoelectronics, Inc.
            Designs and manufactures fiber-optic networking products,
            starting from its own laser chips and building up through
            components, subassemblies and modules to complete turn-key
            equipment.
            One reportable segment; revenue disclosed by four product
            categories: Data Center · CATV · Telecom · Other.
Ticker      AAOI  (Nasdaq Global Market)
Form        C-corp
Filed in    Delaware [^1]
HQ          13139 Jess Pirtle Blvd., Sugar Land, TX 77478
Founded     1997-02-28 [^1]          Listed  2013-09-26 at $10.00 [^2]
Fiscal year fixed year end, December 31 every year
            Q1 Jan–Mar · Q2 Apr–Jun · Q3 Jul–Sep · Q4 Oct–Dec
            FY2025 ended 2025-12-31 · last reported Q2 to 2026-06-30
Earnings    2026-11-05 estimated [C] — Q3 FY2026, July–September 2026 [^3]
Bought      2006-03-30 Global Technology, Inc. — a Chinese manufacturer
              founded 2002, bought by the company's British Virgin
              Islands subsidiary Prime World and still the China plant
Plants      Ningbo, China 1,203,740 sq ft owned · Taipei, Taiwan 705,760
            leased · Sugar Land, Texas 139,450 owned and leased ·
            Duluth, Georgia 38,900 leased [^4]
Employees   4,691 full-time at 2025-12-31 — 548 US, 1,262 Taiwan,
            2,881 China; 4,116 of them in manufacturing and R&D [^5]
Industry    Technology · Communication Equipment [^6]
Runs it     Chih-Hsiang (Thompson) Lin, Founder, President, CEO &
              Chairman (63, serving 29 years) [^7]
            Stefan J. Murry, CFO & Chief Strategy Officer
              (53, serving 29 years) [^7]
            Hung-Lun (Fred) Chang, SVP & North America GM
              (62, serving 25 years) [^7]
            Shu-Hua (Joshua) Yeh, SVP & Asia GM (60, serving 20 years) [^7]
            David C. Kuo, SVP, Chief Legal & Compliance Officer and
              Secretary (43, serving 17 years) [^7]
Ownership   3.8% insiders · 62.2% institutions · 34.0% retail [^8]

THE NUMBERS

The opening snapshot — all [F] 2026-08-29 unless tagged otherwise.

Scale       revenue $595.97M ttm · 84.57M shares · $8.98B market cap [^9]
Growth      revenue +61.8% y/y ttm [^10]
            Apr–Jun quarter, 2025 → 2026: Data Center $44.8M → $107.7M ·
              CATV $56.0M → $80.6M · Telecom $1.9M → $3.4M
            EPS  FY23 −$1.75 → FY24 −$4.50 → FY25 −$0.64 → −$0.78 ttm [M]
Margins     gross 28.9% · operating −11.3% · net −9.6% [^11]
Balance     cash $499.7M · debt $188.1M · net cash $311.7M [^12]
            net cash 3.5% of market cap · cap − net cash $8.67B
Capital     no dividend ever declared and no buyback — all cash retained
            equity raised, net: FY24 $146.3M · FY25 $518.9M ·
              Jan–Jun 2026 $1,028.2M [^13]
            2026-08-21 an at-the-market program for up to $600M of new
              stock, sold at the company's discretion, 2% agent fee [^14]
Price       $106.23 close 2026-08-28 [^15]
            1 wk −14.9% · 1 mo +20.5% · 3 mo −37.2% · 1 yr +316.8% ·
              5 yr +1,355.2%
            52-wk range $19.49 – $223.10 · 5-yr $1.50 – $223.10
EPS         −$0.78 trailing [M]  ·  $0.68 FY2026 [C]  ·  $4.60 FY2027 [C] [^16]
P/E         none trailing — the company lost money [^17]
            156.2x on FY2026 consensus · 23.1x on FY2027 consensus [^16]
            FY23 n/m · FY24 n/m · FY25 n/m · today n/m [^17]

THE BUSINESS

Taught against Lumentum, which Joe already reads. The comparison holds for the Data Center category and does not reach CATV, which was 42.0% of the June quarter and which Lumentum does not sell into at all.

The unit of sale — a pluggable transceiver, counted one at a time

A module the size of a fat USB stick that slots into a switch faceplate, converting electricity to light and back so machines can talk over fiber. The company counts them in pieces per month:

capacity approaching                200,000 units/month   Q2 2026 [A]
target, 800G and 1.6T pieces        650,000 units/month   end 2026 [G]

800G volume more than doubled sequentially in the June quarter, and 1.6T is in ramp. The company also sells lasers, laser components, subassemblies, amplifiers and turn-key CATV equipment, so the module is the main unit of sale rather than the only one.

Vertically integrated — it grows its own laser wafers

The 10-K calls the company "a leading, vertically integrated provider" and says that in designing products it "typically begin[s] with the fundamental building blocks of lasers and laser components." It names MBE and MOCVD as its own processes — epitaxial growth, the step that makes a laser wafer.

The filings never use the words EML or DFB, and never state the per-lane rate of the lasers inside the modules. R&D is described as covering "100 Gbps, 200/400/800/1,600 Gbps data center products," which are module rates, not lane rates. What the 1.6T modules are built out of, and whether those lasers are made or bought, is not in the FY2025 10-K or the Q2 2026 10-Q.

Where the margin says it sits

                                   AAOI            Lumentum
non-GAAP gross margin              29.8%              —
non-GAAP operating margin            —              36.6%
GAAP gross margin                  27.7%              —
GAAP operating margin, ttm        −11.3%              —

Lumentum keeps more of a dollar after paying research, sales and admin than AAOI keeps before paying any of them. AAOI's operating expenses were $77.9M against $53.2M of gross profit in the June quarter, which is the whole of the operating loss.

★ Both companies make their own lasers. Only one of them makes the part that is scarce. Vertical integration is a cost structure, not a franchise — and a high fixed base cuts both ways when volumes move.

The two of them, same day

2026-08-28              AAOI          Lumentum        ratio
revenue ttm           $0.596B          $3.014B         5.1x
market cap            $8.98B           ~$80.3B         8.9x
price/sales             15.1x            26.6x         1.8x

The market pays nearly twice as much for a dollar of Lumentum's revenue.

Taught 2026-08-29: the unit of sale, the position in the chain, the margin. Not yet taught: how each product category earns, the domain vocabulary, customer concentration, what is hard about it, and the gate.

[^1]: SEC EDGAR entity record, CIK 0001158114, and the FY2025 10-K. Incorporated in Texas on 1997-02-28 and converted to a Delaware corporation in March 2013, six months before the listing. Founded by Dr. Chih-Hsiang (Thompson) Lin, who has been President and CEO since inception.

[^2]: The IPO sold 3,600,000 shares at $10.00, priced 2013-09-25, and the stock began trading on the Nasdaq Global Market on 2013-09-26. Proceeds to the company were $9.30 a share, $33.5M before expenses. Bars in this archive begin 2019-07-17 at $9.68, so the return windows below do not reach the IPO; against the $10.00 offering price the stock is +962.3%.

[^3]: The company has not announced the date. It has filed its Q3 10-Q on 2025-11-06, 2024-11-07, 2023-11-09, 2022-11-03 and 2021-11-04 — the first week of November each year — which is the pattern the vendor's estimate is built on.

[^4]: FY2025 10-K, Item 2. Ningbo is 58% of the 2,087,850 sq ft total [M], and the only site the company owns outright at scale. Duluth, Georgia is sales and R&D only; the other three all carry manufacturing.

[^5]: FY2025 10-K, Human Capital. 69 employees hold a Ph.D. in a science or engineering field. None are covered by a collective bargaining agreement, though some employees of the China subsidiary belong to a trade union. The April 2026 proxy's cover summary says "4,800 in 3 countries (500+ in Texas)" — a rounder figure for the same workforce, read four months later.

[^6]: The vendor feed's classification. SEC EDGAR files AAOI under SIC 3674, "Semiconductors & Related Devices" — the company makes its own laser chips, so both fit.

[^7]: Ages and role dates are from the proxy statement filed 2026-04-24. Tenure is years at the company. Lin founded it in February 1997. Murry joined the same month as a Senior Engineer of Device Packaging, became Chief Strategy Officer in December 2012 and CFO in August 2014. Chang joined April 2001 as Deputy Packaging Manager and has run North America since October 2012. Yeh arrived with the March 2006 Global Technology acquisition, having been its President and CEO from April 2002, and has run Asia since February 2015. Kuo joined May 2009 as Assistant General Counsel and became Chief Legal Officer in May 2023. The vendor feed's ages run a year stale (62 / 52 / 61 / 59 / 42) and carry no tenure at all.

[^8]: Two sources, two dates. Insiders is the proxy's "all executive officers and directors as a group (12 persons)" — 3,028,408 shares, 3.8% of the 80,047,663 outstanding at 2026-04-10; the founder himself holds 1.8%. Institutions is the vendor feed at 2026-08-29, and retail is the [M] remainder, 100 − 3.8 − 62.2 = 34.0. The same vendor prints insiders at 9.8%, which the proxy does not support. The only disclosed 5% holders are Jane Street Group (5.1%) and Vanguard (5.1%).

[^9]: The price is the last settled daily close, from bars. Shares are the 10-Q cover count at 2026-08-03: 84,569,237 × $106.23 = $8.984B. The vendor quotes $9.02B on 84.91M shares. Both predate any sales under the ATM program opened 2026-08-21, so the real count is a floor. Revenue ttm is the four quarters to 2026-06-30, $595.970M, which is larger than FY2025's $455.715M — the fiscal year is only half over.

[^10]: 595.970 / 368.233 = 1.618 → +61.8%, against the four quarters to 2025-06-30. The product categories are as reported in the 10-Q for the three months ended June 30; Other was $0.2M in 2025 and $0.3M in 2026. Data Center went from 43.5% of revenue to 56.1% and CATV from 54.4% to 42.0% — a mix shift, not a CATV decline; CATV grew 43.8% in dollars. The EPS ladder is diluted GAAP; diluted equals basic in every year because the losses make everything else antidilutive. The ttm figure is [M]: the four quarterly EPS sum to −$0.7792, and −$57.020M over the four quarters' average weighted share count gives −$0.7829. The vendor prints −$0.72, which is the same trailing loss over a later share count — −57.020 / 78.789 = −0.724.

[^11]: Gross 172.330 / 595.970 = 28.9%; operating −67.406 / 595.970 = −11.3%; net −57.020 / 595.970 = −9.6%. The net loss is smaller than the operating loss in the trailing year, and was smaller in FY2025 too — $7.898M of non-operating income and an $8.476M deferred tax benefit sat between them. FY2024 ran the other way and it is the reason that year's EPS reads −$4.50: a −$70.908M operating loss became a −$186.733M net loss on $115.823M of non-operating expense, $111.962M of which was a single loss on extinguishment of debt from the convertible note exchange. That year's bottom line is not a measure of the business.

[^12]: At 2026-06-30. Debt is interest-bearing: $57.258M current portion of long-term debt, $1.657M non-current, and $129.142M of convertible senior notes carried at cost — the notes' fair value was $445.1M against that $129.1M carrying amount, the gap being the stock's run. A further $9.021M of cash is restricted and is not counted above. The vendor's $300.1M "total debt" adds $78.143M of operating lease liabilities and $33.940M of bank acceptances payable to this $188.1M.

[^13]: The common has never paid a dividend and the company has never repurchased a share. Jan–Jun 2026 financing brought in $1,028.2M net from common stock against $73.8M consumed by operations and $633.7M by investing — $335.1M of property and equipment plus $289.7M prepaid for equipment not yet delivered. Shares outstanding went 61,890,000 at 2025-06-30 to 84,386,000 at 2026-06-30, +36.4%: a holder kept 1 / 1.364 = 73¢ of the company they owned a year earlier.

[^14]: 8-K and 424B5 filed 2026-08-21. An Equity Distribution Agreement with Raymond James and Needham lets the company sell up to $600M of new common stock into the open market at times of its choosing, under the automatic shelf S-3ASR No. 333-283905. The company is not obliged to sell any of it and may suspend sales at any time. At the 2026-08-28 close, $600M is 6.7% of the market cap [M].

[^15]: Return windows are calendar, taking the last session on or before the same day of the month: 2026-08-21 $124.82, 2026-07-28 $88.14, 2026-05-28 $169.02, 2025-08-28 $25.49, 2021-08-27 $7.30. The ranges are closes; on an intraday basis the 52-week range is $18.50 – $233.67. The 1-week and 1-month windows disagree because both are true of the same tape — the stock closed at $154.89 on 2026-08-17 and has fallen 31.4% in eight sessions, having risen from $88.14 in the month before that.

[^16]: Both forward figures are the street's, and both are non-GAAP — the same source puts the year-ago quarter at −$0.09 where GAAP was −$0.28, so they are not comparable with the GAAP ladder above. FY2026 is $0.68 from 6 analysts (range $0.47–$0.85), FY2027 $4.602 from 5 (range $3.52–$8.08). Revenue consensus is $1,038M for FY2026 and $2,663M for FY2027. The estimates have been cut recently: 30 days ago the current quarter stood at $0.278 and now reads $0.143, and FY2026 went $0.888 → $0.680.

[^17]: Each year's multiple would be that fiscal year's closing price over the same year's GAAP diluted EPS, both ends at the same date. There is none to compute: FY2023 (−$1.75 against a $19.32 close on 2023-12-29), FY2024 (−$4.50 against $36.86 on 2024-12-31) and FY2025 (−$0.64 against $34.86 on 2025-12-31) were all losses, as is the trailing twelve months. The forward multiples are [C], inheriting the tier of the consensus EPS they divide by: 106.23 / 0.68 = 156.2x and 106.23 / 4.602 = 23.1x.