The analyst remains bullish on AAOI despite a recent 22% sell-off, valuing it at about 2x forward sales and expecting significant capacity expansion and revenue growth in the photonics market.
AAOI is valued at ~2x forward sales based on projected $5.6B annual revenue from monthly transceiver revenue of ~$471M. The company is undergoing significant capacity expansions for 800G/1.6T units, with a projected ~9x increase in monthly capacity from Q1 2026 to end of 2027. A recent $71M follow-on order doubled backlog from a hyperscale customer. The photonics market is expected to grow at 20-30% CAGR through 2030.
The ~22% sell-off on $AAOI in the past month definitely hurts. But I still like them even at $11.1B MC. Especially as they target ~$471M monthly transceiver revenue. Which is annual rev of ~$5.6B = prices $AAOI at just ~2x fwd sales. Ofc you'd want the ramp to actually deliver off the back of their ongoing capacity expansions for 800G/1.6T units. At which point, there'd be a ~9x inflection in monthly capacity when you compare Q1 2026 to End of 2027 projections. And that whole Texas capacity expansion is still ongoing w/ ClassOne Technology just announcing orders from $AAOI for multiple wet processing systems. So still early, as expected. Naturally things have gotten a bit quiet lately on the news-front given they're mid-qualification from their hyperscale customer. When they received a new $71M follow-on order back in April from them which >2x'd their backlog for that single customer. Just important to bear in mind that it's still early in the photonics cycle too. With firms like Yole projecting SiPh and Optical Interconnect markets to grow at 30% and 20% CAGR through to 2030.
| Horizon | Raw move | vs SPY |
|---|---|---|
| 1 day | -2.1% | -1.3% |
| 1 week | -12.7% | -14.1% |
| 1 month | -29.4% | -30.0% |
| 3 months | — | — |
| 6 months | — | — |