Applied Optoelectronics AAOI has begun expanding its Pearland, TX, manufacturing campus, reinforcing its commitment to meeting rapidly growing demand for artificial intelligence (AI) networking infrastructure. The project will add nearly 400,000 square feet of production space across two facilities, supporting higher output of 800G and 1.6T optical transceivers used in hyperscale AI data centers.
The expansion builds on AAOI's broader U.S. manufacturing strategy and follows the company's previously announced plans to significantly increase domestic production capacity. Once fully operational, the Houston-area campus is expected to support production of up to 700,000 high-speed optical transceivers per month while substantially expanding laser manufacturing capacity by the end of 2027. The investment is aimed at strengthening AAOI's ability to serve hyperscale cloud providers as AI infrastructure deployments continue to accelerate.
The new facilities complement AAOI's vertically integrated manufacturing model, enabling the company to expand domestic production while maintaining greater control over product quality, supply chain resilience and manufacturing efficiency. The expansion also positions AAOI to capitalize on the industry's transition to higher-speed optical networking solutions.
AI Networking Demand Continues to Fuel AAOI's Growth
Applied Optoelectronics shares have soared 212.9% year to date, significantly outperforming the broader Zacks Computer and Technology sector's 15.8% growth. The rally reflects investors' optimism surrounding the company's expanding AI optics business, increasing hyperscaler engagements and aggressive manufacturing expansion.
Applied Optoelectronics, Inc. Price and Consensus
Applied Optoelectronics, Inc. price-consensus-chart | Applied Optoelectronics, Inc. Quote
The Pearland expansion supports AAOI's strategy of becoming a leading U.S. supplier of AI optical networking products. Demand for 800G and 1.6T optical transceivers is rising rapidly as hyperscale cloud providers build AI data centers, with management expecting demand to exceed production capacity through mid-2027, providing strong revenue visibility.
The company's AI optics business is gaining momentum. In the first quarter of 2026, 800G transceivers generated $4.6 million, or 5.6% of data center revenues, following the first volume shipment to a major hyperscale customer. Management expects 800G shipments to nearly quadruple in the second quarter, while 1.6T transceiver shipments are expected to begin in the third quarter after the company secured its first volume order from another hyperscale customer.
To support growing demand, AAOI plans to increase production capacity from nearly 100,000 units per month at the end of the first quarter to more than 650,000 units by the end of 2026 and 930,000 units by the end of 2027, alongside a 350% expansion in laser fabrication capacity.
AAOI’s strong position in the 800G transceiver market is fueling both operational and financial momentum. The company forecasts 800G revenues will reach approximately $217 million per month by mid-2027, contributing to total data center transceiver revenues of about $471 million per month.
AAOI Offers Strong Q2 2026 Outlook
Applied Optoelectronics' expanding U.S. manufacturing footprint, accelerating AI infrastructure deployments and growing 800G and 1.6T optical transceiver business are expected to benefit the company’s top-line growth.
AAOI expects second-quarter 2026 revenues to be between $180 million and $198 million.
The Zacks Consensus Estimate for second-quarter 2026 revenues is pegged at $191.13 million, indicating year-over-year growth of 85.66%.
The consensus mark for second-quarter 2026 earnings is pegged at 3 cents per share, unchanged over the past 30 days. The figure implies a year-over-year increase of 118.75%.
AAOI's Zacks Rank & Stocks to Consider
Currently, Applied Optoelectronics carries a Zacks Rank #3 (Hold).
Digital Turbine APPS, Dell Technologies DELL and Analog Devices ADI are some better-ranked stocks that investors can consider in the broader Zacks Computer and Technology sector. Digital Turbine, Dell Technologies and Analog Devices sport a Zacks Rank #1 (Strong Buy) each at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
APPS shares have rallied 94.6% in the year-to-date period. The long-term earnings growth rate for Digital Turbine is pegged at 18.98%.
DELL shares have surged 227.8% in the year-to-date period. The long-term earnings growth rate for Dell Technologies is pegged at 26.35%.
Shares of ADI have gained 44.1% in the year-to-date period. The long-term earnings growth rate for Analog Devices is pegged at 28.76%.
Zacks' Research Chief Names "Stock Most Likely to Double"
Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest.
This top pick is a little-known satellite-based communications firm. Space is projected to become a trillion dollar industry, and this company's customer base is growing fast. Analysts have forecasted a major revenue breakout in 2025. Of course, all our elite picks aren't winners but this one could far surpass earlier Zacks' Stocks Set to Double like Hims & Hers Health, which shot up +209%.
Free: See Our Top Stock And 4 Runners UpWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Applied Optoelectronics, Inc. (AAOI): Free Stock Analysis Report
Analog Devices, Inc. (ADI): Free Stock Analysis Report
Dell Technologies Inc. (DELL): Free Stock Analysis Report
Digital Turbine, Inc. (APPS): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).