What happened

Shares of Acacia Communications (NASDAQ:ACIA) have risen on Friday following the optical interconnect supplier's second-quarter report. The company beat expectations for revenue despite a steep decline, and its guidance for the third quarter was well above analyst estimates. The stock was up about 15.6% at 10:45 a.m. EDT.

So what

Acacia reported second-quarter revenue of $65 million, which was down 18% year over year but about $1.7 million above the average analyst estimate. That decline wasn't as bad as it could have been after the U.S. Department of Commerce banned the sale of components to China's ZTE Corp. in April. ZTE was responsible for about 30% of Acacia's revenue in 2017.

A close-up view of fiber optic cables.

Image source: Getty Images.

That ban has now been lifted, and Acacia is "cautiously optimistic" that the situation will go back to normal over the next few quarters. The company expects to produce between $86 million and $94 million of revenue in the third quarter, which is much higher than analyst expectations of $73.7 million.

Non-GAAP earnings per share came in at a loss of $0.08 in the second quarter, down from a profit of $0.26 in the prior-year period and in-line with analyst expectations. The company expects to produce non-GAAP EPS between $0.10 and $0.22 in the third quarter, which is above the average analyst estimate of $0.08.

Now what

Shares of Acacia tanked in April when the ZTE ban was announced. With Friday's surge, the stock has now regained most of that lost ground, although it's still down about 69% from its all-time high reached in late 2016.

Acacia's heavy dependence on a single customer gave investors a crash course in revenue concentration risk earlier this year. The company is working to diversify its customer base, but it has a lot of work left to do.

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