What happened

Shares of Applied Optoelectronics (NASDAQ:AAOI) sold off sharply today, down by 23% as of 3 p.m. EST, after the company reported third-quarter earnings. The results were mixed compared to analyst expectations, and the company's guidance left a lot to be desired.

So what

Revenue in the third quarter came in at $76.6 million, which was shy of the $79 million in sales that Wall Street was looking for. That resulted in an adjusted net loss of $1.4 million, or $0.06 per share. The consensus estimate had called for an adjusted net loss per share of $0.08. The fiber optic networking technology company finished the quarter with $58 million in cash.

Optical networking cable

Image source: Getty Images.

"We are pleased to report that we recently secured our second qualification for a 400G product with a major data center operator, and we are encouraged by the customer interest we continue to see for this product," CEO Thompson Lin said in a statement. "Looking ahead, while we expect headwinds in the fourth quarter as our hyperscale data center customers adjust their inventory levels downward, and we see effects of what we believe to be a temporary pause in 5G deployments in China, we believe our customer relationships and market share position remain strong, while the continued demand for higher bandwidth will drive long-term growth."

Now what

Revenue in the fourth quarter is expected to be in the range of $50 million to $55 million, which is significantly below the $84 million in sales that analysts are modeling for. That should result in an adjusted net loss per share of $0.19 to $0.25, while investors were hoping for the company to break even.

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