Is Applied Optoelectronics, Inc. (AAOI) overvalued or undervalued?
Updated Nov 10, 2026 · hand-researched model · educational, not advice
At a recent price of $52.10, Applied Optoelectronics, Inc. (AAOI) sits inside our range of estimates: our valuation lenses put the business somewhere between $25.36 and $80.17 per share. They disagree too widely for us to state a single fair value. We publish the range rather than a midpoint because a number that precise would claim more than the methods can support. This is an educational model, not a price target or a recommendation.
The valuation discounts Applied Optoelectronics, Inc.'s projected free cash flows at a weighted-average cost of capital (WACC) of 15.2%, with a long-run terminal growth rate of 2.5%. About 111% of the enterprise value comes from the terminal value — the portion beyond the explicit forecast window — which is unusually high — most of the answer comes from a single assumption about the far future, so treat this figure as low-confidence and lean on the multiples alongside it.
Sensitivity matters more than any single number. Across a reasonable band of discount-rate assumptions, AAOI's modeled DCF value ranges from about $12.47 to $19.69 per share. If that range still sits below today's price, the market is optimistic relative to the model across the whole band; if it brackets the price, the stock is roughly fairly valued on our assumptions. Use the interactive slider to see exactly where your own cost-of-capital view lands.
How to read this page: the DCF fair value is what Applied Optoelectronics, Inc. would be worth if its cash flows grow as modeled and are discounted at the stated WACC. The assumptions table shows every input and its source; the reverse-DCF shows what the market believes; the sensitivity band shows how fragile the answer is. None of this is investment advice — it is a transparent, auditable framework for forming your own view of AAOI's intrinsic value. Figures update as new filings and prices come in.
The assumptions behind AAOI's DCF
| Input | Value | Source |
|---|---|---|
| Base-year revenue | $455,715,000 | Applied Optoelectronics FY2025 10-K (accession 0001437749-26-005875, filed 2026-02-26): us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax, FY2025 = $455,715K, +82.7% on FY2024's $249,365K. Mix (10-K): CATV 53.8%, data center 42.9%, telecom 3.0%. UNCHANGED as the base — the 2026 ramp belongs in the forecast. CROSS-CHECK: H1 2026 revenue $343,066K (+69.2% on H1 2025's $202,811K); Q2 2026 $191,922K, a fifth straight record, with data center $107,662K (+140% YoY) now 56% of the quarter. HISTORY THAT MATTERS FOR THE RISK SECTION, same XBRL tag: revenue went $382.3M (2017) -> $267.5M (2018) -> $190.9M (2019) when data-center demand from a few customers rolled over, and stayed $210-250M until 2024. |
| Base EBIT margin | -12.0% | Applied Optoelectronics FY2025 10-K (accession 0001437749-26-005875, filed 2026-02-26): us-gaap:OperatingIncomeLoss FY2025 = -$54,602K / $455,715K = -11.98%. GAAP, with stock pay ($11.7M) inside. AAOI has posted a GAAP operating loss every year since 2018 (2019-2025: -$48.7M, -$48.8M, -$56.8M, -$59.0M, -$41.3M, -$70.9M, -$54.6M); its last operating profit was 2017's $87.0M (22.7% margin) at the top of the previous data-center cycle. CROSS-CHECK: H1 2026 GAAP operating loss -$37,718K = -11.0% of revenue (Q2 alone -12.9%), so the losses have NOT yet turned despite revenue up 69% — R&D rose 57.5% and G&A 62.7% in H1 as the company staffs up for the ramp. Because the base is a loss, the cyclical flag's peak test uses Year 1's margin. |
| Forecast revenue growth | 130% → 120% → 20% → 8% → 4% | Assumption — TickerWorth's 5-year explicit forecast |
| Risk-free rate | 5.2% | US 10Y Treasury constant maturity (FRED DGS10): 5.24% on 2026-10-01, the latest published observation. |
| Beta | 2.00 | Assumption — normalized estimate (published Yahoo 5Y-monthly beta 3.783 via yfinance, read 2026-10-02): Published 5Y-monthly beta 3.783. NORMALIZED DOWN to 2.0 — GENEROUS (lowers the discount rate, raises the value). My own regressions of yfinance monthly returns on the S&P 500 all say AAOI is a very high-beta stock: 3.98 (60 months), 6.43 (36 months), 2.81 (120 months), 2.77 (60 months to 2025-06), 2.39 (60 months to 2024-12); 2-year weekly 3.57. The published figure is inflated by the 2025-26 run from ~$18.50 to $233.67 and back to ~$100, a share-price path dominated by company-specific news (orders, ATMs) rather than the market. Optical peers on the same 60-month method: Coherent 2.19, Lumentum 1.62, Fabrinet 1.31, Ciena 1.32. 2.0 sits just under Coherent and above the 1.60 this tracker uses for its other AI-cycle hardware names (MU, SNDK, AMD), which is the right ordering for a loss-making $10B company whose top three customers take 92% of revenue. Even so it gives a 15.2% cost of equity, applied forever — the single largest input. SIZING: beta 2.4 (AAOI's lowest measured 5-year window) gives ~$12.65; 1.6 gives ~$19.15; the published 3.78 gives ~$7.40. No beta in the plausible range closes the gap to the price. |
| Terminal growth | 2.5% | Assumption — house default: House default 2.5%, kept for comparability. Must stay well below the 15.2% WACC; it does. For a company still growing 4% in 2030 in a market growing faster, 2.5% is a hard stop — but optical components are also a sector where products commoditise and share shifts violently, so I see no case for a higher perpetuity here. |
| Diluted shares | 93M | Assumption — Applied Optoelectronics Q2 2026 earnings release, 8-K Ex-99.1 (accession 0001683168-26-006055, filed 2026-08-06): POST-ISSUANCE COUNT, and not the 10-Q's GAAP 'diluted' figure. The Q2 10-Q's weighted-average diluted count is 81.568M, but it equals the basic count because AAOI made a loss (every option, RSU and convert is anti-dilutive) and it is a quarter AVERAGE that misses shares sold late in the quarter. Used instead: management's own Q3 2026 share count, 'approximately 92.8 million shares' (Q3 outlook, 8-K Ex-99.1). CROSS-CHECK, built from the 10-Q: 84,569,237 shares outstanding at 2026-08-03 (cover) + 2,884K shares underlying the 2.75% 2030 convertible notes (Note 6; conversion price $43.31, deep in the money) + 1,324K vested Amazon warrant shares (strike $23.70) + 2,503K RSUs = 91.3M; the ~1.5M difference is plausibly further ATM sales/grants. CONVERTS TREATED AS SHARES, NOT DEBT — the $124.9M principal is excluded from net debt, not counted twice. NOT INCLUDED: (a) any sales since 2026-08-21 under the new $600M ATM (unknown until the Q3 10-Q; at today's price a sale RAISES this model's per-share value, because new cash comes in at more than the model's value per share); (b) 6.62M UNVESTED Amazon warrant shares that vest only as Amazon buys up to $4B of product (10-Q Note 3) — on this model's revenue path that is plausible within the decade, which would dilute by ~7% at a $23.70 strike. |
| Market price | $52.10 | Delayed quote · as of 2026-11-10 06:12 UTC |
Companies people research alongside AAOI
Explore more
Most undervalued stocks (per our valuation) · Undervalued Technology stocks · All valued stocks · Interactive AAOI valuation & downloadable modelTickerWorth is an educational DCF tool, not a licensed investment adviser. Figures are estimates derived from public filings and market data and can be wrong.