Applied Optoelectronics(AAOI) - 2025 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company recorded total revenue of $118.6 million in Q3 2025, which represents a 15% sequential increase and an 82% year-over-year increase, achieving the highest quarterly revenue in its history [9][20][32] - Non-GAAP gross margin was 31%, consistent with guidance and up from 25% in Q3 2024 [26] - Non-GAAP loss per share was $0.09, aligning with the guidance range of a loss of $0.10 to a loss of $0.03 [10][28] - GAAP net loss for Q3 was $17.9 million, or a loss of $0.28 per basic share, compared to a loss of $0.42 per share in Q3 2024 [28] Business Line Data and Key Metrics Changes - Revenue from the CATV segment reached a record $70.6 million, more than tripling year-over-year and increasing 26% sequentially [10][21] - Data center product revenue was $43.9 million, up 7% year-over-year but down 2% sequentially [20][21] - Revenue for 100G products increased 32% year-over-year, while 400G product revenue decreased 65% year-over-year, primarily due to shipment timing issues [10][21] Market Data and Key Metrics Changes - In Q3, 60% of total revenue came from CATV products, while 37% was from data center products [20] - The company expects a substantial sequential increase in data center revenue in Q4, driven by growth in 400G and 800G products [32] Company Strategy and Development Direction - The company is focused on expanding its production capacity for 800G and 1.6 terabit transceivers, with plans to reach 35,000 transceivers per month by mid-2026 [15][17] - The company has signed an agreement to lease an additional building in Texas to support production expansion [16] - The management emphasizes the importance of U.S.-based production to meet customer demand and has plans to onshore production to support a robust domestic supply chain [19][20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving over $300 million in CATV revenue in 2026, driven by new product introductions [34] - The company anticipates continued strong demand for its products, particularly in the data center segment, and expects to see meaningful shipments of 800G products in Q4 [36][55] - Management noted that the direct tariff impact on income was $1.1 million in Q3, but they are working to minimize future impacts [19][31] Other Important Information - The company ended Q3 with $150.7 million in cash and equivalents, up from $87.2 million at the end of Q2 [29] - Total inventory increased to $170.2 million, primarily due to raw material purchases for upcoming production [29][30] - The company raised $147 million through an ATM program, intended for capital investments in production and R&D [30] Q&A Session Summary Question: What is the outlook for CATV revenue? - Management believes that achieving over $300 million in CATV revenue in 2026 is still feasible, with growth expected from new products and existing customer relationships [34] Question: Can you provide details on the shipping delays? - The shipping delays were due to a single hyperscale customer and were resolved in the first few days of Q4, with no expectation of recurrence [39][40] Question: What are the capital expenditure plans for 2026? - While specific numbers for 2026 are not yet available, management expects capital expenditures to exceed those of 2025 due to strong customer demand [41] Question: How is the company positioned for 400G and 800G products? - The company is on track to increase production capacity for 400G and expects meaningful shipments of 800G products in Q4, with customer commitments supporting this growth [46][57] Question: What is the competitive landscape regarding transceiver technologies? - The company sees strong interest in silicon photonics (SIFO) technology due to its scalability and lower laser requirements compared to EMLs, which are currently facing shortages [51]