Applied Optoelectronics Inc. (NASDAQ: AAOI)’s 1Q2016 Revenue Spikes 67%


Applied Optoelectronics Inc. (NASDAQ: AAOI) reported a fairly strong 1Q2016 in which revenue came on the upper side of the guidance and growth registered across key operating segments. However, a problem at the company’s Chinese factors opened the floodgate of expenses, causing the company to post a poorer EPS figure than previously guided. Nevertheless, management is upbeat that the company is poised to take advantage of the shift to 100G in data centers.

What happened in 1Q2016 With Applied Optoelectronics Inc?

Applied Optoelectronics Inc. (NASDAQ: AAOI) generated revenue of $50.4 million, up 67% YoY and came near the higher end of the guidance of $50 to $50.5 million. The bright spot when talking about 1Q2016 revenue was its data center business. The 67% jump in revenue was primarily driven by strong demand for data center products during the quarter. As such, the data center unit ended up registering its fourth quarter in a row of record revenue. Sales in the segment in the latest quarter totaled $39 million.

Bottom-line disappointment

Despite the sharp rise in sales relative to a year ago, Applied Optoelectronics Inc. (NASDAQ: AAOI) posted disappointing bottom-line results and management pinpointed the blame. According to CEO, Thompson Lin, operational challenges at a Chinese factory triggered massive spending that eventually had an adverse impact on the bottom-line. As such, the company posted EPS loss of $0.04 for the quarter, worst than the internal guidance of EPS profit of $0.21 to $0.28 for the quarter. The EPS figure also deteriorated from the corresponding quarter in 2015.

Market opportunity

Beyond the 1Q2016 headwinds that weakened the bottom-line, management of AAOI remains confident about the future. CEO Lin said that they hoped to capitalize on the anticipated strong demand for 100G gears for data centers.

2Q2016 summary

For 2Q2016, Applied Optoelectronics Inc. (NASDAQ: AAOI) guided revenue in the band of $49.5 to $52 million, suggest flat to 5% growth. Adjusted EPS is expected in the range of $0.04 to $0.08.

Analysts at Piper Jaffary weighed in on Applied Optoelectronics Inc. (NASDAQ: AAOI) after the 1Q2016 results and 2Q2016 guidance. The analysts maintained Overweight rating on the stock but trimmed their price target to $14 from $21.


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