Applied Optoelectronics Inc. (NASDAQ:AAOI)

Applied Optoelectronics Inc. (NASDAQ:AAOI) Trading Higher On Rise of Data Centers

Applied Optoelectronics Inc. (NASDAQ:AAOI)

Applied Optoelectronics Inc. (NASDAQ:AAOI) impressive run in the market shows no signs of slowing down given the upgrade cycle in the data center market. The company’s core business is poised to receive a major boost as more tech companies continue to upgrade to superfast communications for cloud-based services.

Demand for Fiber-Optic Equipment

The fiber-optic device maker boasts of the likes of, Inc. (NASDAQ:AMZN), Facebook Inc. (NASDAQ:FB) and Microsoft Corporation (NASDAQ:MSFT) as its biggest customers. Given that these companies are aggressively ramping up investments in the cloud means the company remains well positioned to register strong growth going forward.

Expectations of increased demand for fiber-optic components from China later in the year also continues to bolster analyst expectations for Applied Optoelectronics Inc. (NASDAQ:AAOI). Last year telecommunications companies in the country aggressively upgraded to 4G networks. However, the market experienced a slowdown early this year with recovery only starting to kick in.

Earnings Beat Impact

Applied Electronic’s first quarter earnings beat estimates which provided a glimpse of what is in store as the race for superfast data centers heats up.

“We continue to believe AAOI remains in prime position to see impressive growth in 2017 as demand for 100 gigabit-per-second optics accelerates. Growth in the data center business was once again driven by their largest customers, Amazon and Facebook (19% of sales). Microsoft has historically been a 10% customer, but was below that threshold this quarter”, “said Piper Jaffray analyst Troy Jensen.

Shares of Applied Optoelectronics Inc. (NASDAQ:AAOI) are currently trading at all-time highs, investor’s sentiments having been bolstered by a stellar showing in the first quarter. For the first three months of the year, the company says its revenue grew by 91% to $96.2 million from $50.4 million as of Q1 2016.

The company reported a net income of $19.8 million in the period, compared to a net loss of (-$1.3) million for the same period last year. Gross margin in the quarter soared to highs of 43.1% from 28.3% as of Q1 2016.

For the second quarter, Applied Optoelectronics Inc. (NASDAQ:AAOI) expects its revenue to be in the range of between $106 million and $112 million in line with the current growth momentum. Net income should be between $22.2 million and $24.3 million representing earnings per share of between $1.09 and $1.19 a share.

Applied Optoelectronics stock was down by 2.93% in Tuesday’s trading session ending the day at $69.15 a share.

I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. All information, or data, is provided with no guarantees of accuracy.

About the author: Marc has a degree in economics and a MSc. in Finance. Over his 20-year career, Marc has worked for global investment firms in Europe and the United States as an analyst, fund manager, and consultant.