The analysts might have been a bit too bullish on Applied Optoelectronics, Inc. (NASDAQ:AAOI), given that the company fell short of expectations when it released its first-quarter results last week. Revenues missed expectations somewhat, coming in at US$151m, but statutory earnings fell catastrophically short, with a loss of US$0.19 some 100% larger than what the analysts had predicted. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.

After the latest results, the five analysts covering Applied Optoelectronics are now predicting revenues of US$1.03b in 2026. If met, this would reflect a huge 103% improvement in revenue compared to the last 12 months. Applied Optoelectronics is also expected to turn profitable, with statutory earnings of US$0.88 per share. In the lead-up to this report, the analysts had been modelling revenues of US$962.4m and earnings per share (EPS) of US$0.83 in 2026. So there seems to have been a moderate uplift in sentiment following the latest results, given the upgrades to both revenue and earnings per share forecasts for next year.

It will come as no surprise to learn that the analysts have increased their price target for Applied Optoelectronics 48% to US$151on the back of these upgrades. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values Applied Optoelectronics at US$220 per share, while the most bearish prices it at US$57.50. As you can see the range of estimates is wide, with the lowest valuation coming in at less than half the most bullish estimate, suggesting there are some strongly diverging views on how analysts think this business will perform. With this in mind, we wouldn't rely too heavily the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. The analysts are definitely expecting Applied Optoelectronics' growth to accelerate, with the forecast 157% annualised growth to the end of 2026 ranking favourably alongside historical growth of 16% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 14% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Applied Optoelectronics to grow faster than the wider industry.

The Bottom Line

The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Applied Optoelectronics following these results. Pleasantly, they also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow faster than the wider industry. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.

With that in mind, we wouldn't be too quick to come to a conclusion on Applied Optoelectronics. Long-term earnings power is much more important than next year's profits. We have forecasts for Applied Optoelectronics going out to 2027, and you can see them free on our platform here.

Even so, be aware that Applied Optoelectronics is showing 3 warning signs in our investment analysis , and 2 of those are significant...

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.