What happened

Shares of Acacia Communications (NASDAQ:ACIA) have popped today, up by 19% as of 1 p.m. EDT, after the company reported third-quarter earnings results. The optical networking equipment specialist beat its own guidance.

So what

Revenue in the third quarter came in at $94.8 million, above the high end of Acacia's guidance, which had called for sales of $86 million to $94 million. The company crushed its profitability forecast, reporting non-GAAP net income of $17.6 million, or $0.42 per share. It had previously guided to just $0.10 to $0.22 per share in adjusted profits. Non-GAAP gross margin was 46.7% and adjusted EBITDA was $18.5 million.

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CFO John Gavin said strong demand for newer products and a favorable shift in the product mix boosted adjusted gross margin by 3 percentage points compared to a year ago.

Now what

"I am pleased with our strong third quarter results, which exceeded the high end of our guidance on revenue, non-GAAP net income and non-GAAP diluted earnings per share and included solid quarterly profitability," CEO Raj Shanmugaraj said in a statement. "In the third quarter, newer customers contributed 43% of our total revenue and a Tier 1 switch and router customer contributed greater than 10% of revenue for the first time. We believe there are several industry trends that are driving the adoption of DCO modules, reinforcing Acacia's market vision and playing to our strengths."

Looking to guidance, Acacia is forecasting fourth-quarter revenue in the range of $98 million to $106 million, which should translate into non-GAAP net income of $12.8 million to $16.6 million, or $0.30 to $0.40 per share.

Evan Niu, CFA has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.