AAOI Benefits From Strong 800G Demand: Can It Beat LITE & COHR?

Applied Optoelectronics AAOI is benefiting from accelerating demand for 800G optical transceivers, strengthening its position against Lumentum LITE and Coherent COHR in the AI-driven optical connectivity market. In the second quarter of 2026, AAOI’s 800G revenues reached $12.8 million, accounting for 11.9% of data center revenues. The figure increased more than tenfold year over year and more than doubled sequentially, highlighting the rapid adoption of its next-generation optical products.

Momentum is expected to accelerate further. AAOI expects 800G revenues to grow nearly fivefold sequentially in the third quarter of 2026, with management indicating that 800G will be the main contributor to sequential growth. Demand is currently running ahead of AAOI’s ability to supply products, suggesting that production capacity rather than customer demand is the primary near-term constraint. Forecast demand for 800G and 1.6T modules is expected to exceed production capacity through mid-2027.

AAOI is aggressively expanding manufacturing to capitalize on this opportunity. Manufacturing capacity for 800G and 1.6T products is expected to ramp up from 200,000 units per month to over 650,000 by year-end, and to 930,000 by the end of 2027, with most near-term incremental output expected to support 800G demand. Management also expects 800G revenues to reach roughly $217 million per month by mid-2027.

While Lumentum and Coherent remain formidable competitors with established customer bases and technology portfolios, AAOI’s strong demand for 800G optical transceivers and its strategic manufacturing expansion gives it a competitive edge. For the third quarter of 2026, Applied Optoelectronics expects revenues between $255 million and $290 million.

How Competitors Fare Against AAOI

Applied Optoelectronics is facing stiff competition from Lumentum and Coherent in the optical networking market.

Lumentum is benefiting from strong demand for its optical components and systems, driven by the industry shift to AI workloads and increased data center connectivity. Key growth drivers include record shipments of 800G and next-generation 1.6T cloud transceivers, strong momentum in pump and EML laser sales and successful ramp-up of new technologies like near-packaged optics and co-packaged optics.

Coherent is benefiting from the strong demand in AI data center and communications markets, leading to record revenues and accelerated growth. Key drivers included strong customer bookings, expansion of production capacity, especially in 6-inch indium phosphide output, and the ramp-up of new products like advanced transceivers and optical circuit switching systems.

AAOI’s Share Price Performance, Valuation, and Estimates

Applied Optoelectronics shares have skyrocketed 208.7% in the year-to-date period, outperforming the Zacks Computer & Technology sector’s rise of 15.6% and the Zacks Electronics - Semiconductors increase of 27.5%.

AAOI Stock’s Performance

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Applied Optoelectronics shares are currently overvalued, as suggested by its Value Score of F. AAOI stock is trading at a premium with a trailing 12-month Price/Sales of 14.73X compared with the Electronics - Semiconductors industry’s 13.40X.

AAOI’s Valuation

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The Zacks Consensus Estimate for 2026 earnings is pegged at 79 cents per share, which has decreased 16.84% over the past 30 days. This suggests 403.85% year-over-year growth.

Applied Optoelectronics, Inc. Price and Consensus

Applied Optoelectronics, Inc. price-consensus-chart | Applied Optoelectronics, Inc. Quote

AAOI’s Zacks Rank

Applied Optoelectronics currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. 

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