The investors in Applied Optoelectronics, Inc.'s (NASDAQ:AAOI) will be rubbing their hands together with glee today, after the share price leapt 44% to US$136 in the week following its second-quarter results. It was a pretty bad result overall; while revenues were in line with expectations at US$192m, statutory losses exploded to US$0.28 per share. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

Following the latest results, Applied Optoelectronics' four analysts are now forecasting revenues of US$1.05b in 2026. This would be a huge 76% improvement in revenue compared to the last 12 months. Earnings are expected to improve, with Applied Optoelectronics forecast to report a statutory profit of US$0.005 per share. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$1.07b and earnings per share (EPS) of US$0.88 in 2026. The analysts seem to have become more bearish following the latest results. While there were no changes to revenue forecasts, there was a large cut to EPS estimates.

It might be a surprise to learn that the consensus price target was broadly unchanged at US$158, with the analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. The most optimistic Applied Optoelectronics analyst has a price target of US$220 per share, while the most pessimistic values it at US$109. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

Of course, another way to look at these forecasts is to place them into context against the industry itself. It's clear from the latest estimates that Applied Optoelectronics' rate of growth is expected to accelerate meaningfully, with the forecast 211% annualised revenue growth to the end of 2026 noticeably faster than its historical growth of 21% p.a. 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 15% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Applied Optoelectronics is expected to grow much faster than its industry.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Applied Optoelectronics. Fortunately, they also reconfirmed their revenue numbers, suggesting that it's tracking in line with expectations. Additionally, our data suggests that revenue is expected to grow faster than the wider industry. The consensus price target held steady at US$158, with the latest estimates not enough to have an impact on their price targets.

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 estimates - from multiple Applied Optoelectronics analysts - going out to 2027, and you can see them free on our platform here.

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.