What happened

Shares of Applied Optoelectronics (NASDAQ:AAOI) fell as much as 13.5% early Thursday, then settled to close down 9.4% after the maker of fiber-optic network products announced weaker-than-expected results for the first quarter of 2019.

More specifically, Applied Optoelectronics' revenue declined 19.2% year over year to $52.7 million. That translated to an adjusted (non-GAAP) net loss of $5.4 million, or $0.27 per share, swinging from adjusted net income of $0.28 per share in the year-ago period. For perspective, CEO Dr. Thompson Lin noted their revenue was in line with the company's latest guidance for a range of $50 million to $55 million. But the bottom line fell near the worse end of expectations for a per-share loss ranging from $0.18 to $0.29.

Colorful close up of fiber-optic cables with light shining through the ends

Image source: Getty Images.

So what

"During the quarter, we continued to make progress on our efforts to diversify our customer base, develop innovative optical products, and expand the reach of our products into new markets, such as 5G," Dr. Lin said.

He said the company had six new design wins during the quarter, including three with customers outside its core hyperscale base. But stubbornly high inventories at those core hyperscale customers continue to represent a significant headwind to growth.

Now what

With that in mind, it expects second-quarter 2019 revenue of $40 million to $45 million, with an adjusted net loss per share of $0.35 to $0.43. Even the more optimistic end of each range was far worse than analysts' consensus models for a Q2 loss of $0.23 per share on revenue of $52.4 million.

After coupling that weak outlook with Applied Optoelectronics' relative underperformance in the first quarter, the stock is simply responding in kind.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.