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Why Shares of Applied Optoelectronics Jumped Today

By Timothy Green – May 5, 2017 at 1:31PM

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A near-doubling of revenue put the company's results ahead of analyst expectations.

What happened

Shares of Applied Optoelectronics (AAOI -4.84%) jumped on Friday following a first-quarter report that beat analyst expectations. Revenue nearly doubled as the fiber-optic networking company saw strong demand for its products, leading investors to push the shares 16.5% higher by 12:45 p.m. EDT.

So what

Applied Optoelectronics reported first-quarter revenue of $96.2 million, up 91% year over year and a bit more than $1 million higher than the average analyst estimate. Cable broadband revenue rose 90% to $13.1 million, data center revenue jumped 104% to $79.6 million, and fiber-to-the-home revenue contracted 77% to just $98,000.

Data cables going into a server.

Image source: Getty Images.

Non-GAAP earnings per share came in at $1.10, up from a loss of $0.04 during the first quarter of 2016 and $0.12 better than analysts expected. Non-GAAP gross margin expanded to 43.2%, up from 28.3% in the prior-year period. Higher revenue, a fatter gross margin, and a slow increase in operating expenses led to the surge in the bottom line.

President and CEO Dr. Thompson Lin spoke broadly about the first quarter:

AOI started off the year with a record performance, and in the first quarter, achieved the highest revenue and earnings in the company's history. Our record results this quarter were driven by continued demand for our market-leading datacenter products and solid execution. We are very pleased with the team's continued execution. Our commitment to technology innovation, manufacturing excellence and customer satisfaction are qualities that continue to set AOI apart, and we believe our performance in the quarter further demonstrates our commitment to excellence in these areas.

Now what

The company expects to produce second-quarter revenue between $106 million and $112 million, up from $55 million during the second quarter of 2016. Non-GAAP gross margin is expected between 41% and 42.5% and non-GAAP EPS between $1.09 and $1.19.

Applied Optoelectronics kept growing rapidly during the first quarter. With guidance calling for this explosive growth to continue, it's no surprise that investors bid up the stock.

Timothy Green has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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