Can 800G Transceivers Drive AAOI's Revenue Growth in 2026?
Applied Optoelectronics AAOI expects 800G data center transceivers to become the largest contributor to its data center revenues starting in the second quarter of 2026. The company sees revenue contribution from 800G data center transceivers to take over 400G products in the upcoming quarters as hyperscale customers increase spending on AI data centers.
Recent orders support AAOI’s preparation for ramping up higher production volumes. So far, AAOI has received more than $124 million in 800G orders from one major hyperscale customer and a 1.6T transceiver order worth more than $200 million from a long-term hyperscale customer. Management expects shipments for 800G to begin in the second quarter of 2026, and 1.6T shipments to start in the third quarter and be completed by the fourth quarter of 2026.
The production ramp-up was delayed earlier due to firmware-related issues. 800G revenues were below $4 million in the fourth quarter and will remain limited in the first quarter. The company expects a step-up in the revenues for 800G in the second quarter after completing product qualification. AAOI is witnessing demand for 800G products to be higher than its current production capacity and forecasts demand to exceed supply through mid-2027.
AAOI ended 2025 with about 90,000 units per month of 800G production capacity, and to support excess demand, the company is expanding its manufacturing footprint in Texas and Taiwan. The production ramp should help the company produce more than 500,000 units per month of 800G and 1.6T products by the end of 2026. If the 800G ramp progresses as expected, it could support further growth in AAOI’s revenues and help the company reach the target of $1 billion in revenues in 2026.
The Zacks Consensus Estimate for 2026 and 2027 revenues indicates a year-over-year increase of around 107.6% and 90.1%, respectively.
How Competitors Fare Against AAOI
Applied Optoelectronics faces stiff competition from the likes of LumentumLITE and CoherentCOHR in the optical networking market.
In March, Coherent and NVIDIA announced a multi-year strategic agreement to develop advanced optical technologies used in AI data centers. As part of the deal, NVIDIA has made a multibillion-dollar purchase commitment for Coherent’s laser and optical networking products. In addition, NVIDIA will invest $2 billion in Coherent to support research and development, expand manufacturing capacity and strengthen operations as Coherent increases its U.S.-based production capabilities.
NVIDIA has also announced a multi-year strategic partnership with Lumentum to develop advanced optical technologies used in AI data centers. Under the agreement, NVIDIA has made a multibillion-dollar purchase commitment for Lumentum’s advanced laser components. In addition, NVIDIA will invest $2 billion in Lumentum to support research and development, expand manufacturing capacity and strengthen operations as Lumentum builds a new fabrication facility in the United States.
AAOI’s Price Performance, Valuation & Estimates
Shares of AAOI have surged 369.4% in the year-to-date period, outperforming the Zacks Electronics - Semiconductors industry’s return of 26.9%.
AAOI YTD Price Performance
Image Source: Zacks Investment Research
In terms of forward 12-month Price/Sales (P/S), Applied Optoelectronics is trading at 10.73X, higher than the industry’s forward 12-month P/S ratio of 8.77X.
AAOI Forward 12 Months (P/S) Valuation
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Applied Optoelectronics’ 2026 earnings is pegged at 84 cents per share, up by 52.7% over the past 60 days.
Image Source: Zacks Investment Research
Currently, Applied Optoelectronics carries a Zacks Rank #3 (Hold). You can seethe complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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