# AAOI Quarter forecast · Q3 2026

> Applied Optoelectronics reports Q3 2026. Our numbers below have a cutoff of 5 November 2026, 12:27 ET and do not change. Minutes after the release, the release review shows what it reported against them.

Canonical: https://pricedin.markets/aaoi/fq3-2026/preview/

Thursday 5 November, after the close

Applied Optoelectronics reports Q3 2026. Our numbers below have a cutoff of 5 November 2026, 12:27 ET and do not change. Minutes after the release, the release review shows what it reported against them.

AAOI · earnings preview · our forecast as of 2026-11-05 12:27:28 ET · 7 AI analysts · 80% ranges, 1 in 10 to 9 in 10

## AAOI reports Q3 2026 on 5 November 2026

release after the close · call 16:30 ET

Next report · Q3 2026

Sales $272M +130% on Q3 2025

Adjusted EPS $0.19 −311% on Q3 2025

Quarter after · Q4 2026

Sales $485M +261% on Q4 2025

Adjusted EPS $0.74 −7500% on Q4 2025

### Q3 2026 · the quarter AAOI reports

##### Sales

PricedIn **$272M** $245M – $300M

$245M $260M $272M $287M $300M

##### adjusted EPS

PricedIn **$0.19** $0.05 – $0.30

$0.05 $0.12 $0.19 $0.24 $0.30

**Middle** the forecast **50% range** 1 in 4 chance the result comes in below this bar, 1 in 4 above it. Half the time it lands inside. **80% range** 1 in 10 chance below this line, 1 in 10 above it. These are the low and high printed by each number. **The room** The lowest 1-in-10 low and the highest 1-in-10 high among the seven analysts, as each handed them in before the round, with who holds each.

All seven analysts put sales in a narrow band near the middle of the company's range, with the lowest middle sales at $268M and the highest sales at $280M. They differ more on adjusted earnings per share: Analyst F's $0.15 sits below the rest because it expects less interest income and a smaller tax benefit, while Analyst B alone sees an operating profit.

The analysts expect third-quarter sales of about $272M, near the middle of the company's range, as 800-gigabit modules ramp.

Sales **$272M** +130% on Q3 2025 ($119M)

*50% range* $260M – $287M *80% range* $245M – $300M *The room* $240M – $310M E low · E high

Adjusted EPS **$0.19** −311% on Q3 2025 (−$0.09)

*50% range* $0.12 – $0.24 *80% range* $0.05 – $0.30 *The room* $0.02 – $0.36 E low · E high

#### Investment and cash generation

Base case

Capital spending **$380M**

Free cash flow **−$420M**

Free cash flow: operating cash flow less capital spending.

- **Spending buys 800-gigabit and 1.6-terabit transceiver lines, laser fabrication tools in Texas and building fit-out, which add capacity for the fourth quarter and 2027 rather than this quarter's sales. On the basis of operating cash flow less capital spending, base free cash flow is −$420M on capital spending of $380M, as receivables and inventory grow with the ramp. Analyst D's capital spending is lowest, at $160M. Equipment prepayments sit outside this measure. *3 of 7***
  - **Analyst F** I put property and equipment purchases at $300 million in the third quarter and $350 million in the fourth, on top of the $335 million already spent in the first half.
  - **Analyst G** Free cash flow here is operating cash flow less positive cash property-and-equipment purchases, consistent with the opening sheet.
  - **Analyst C** forecast: working capital scales with the rapid ramp toward Q4

Sales reached $192M in the second quarter, up from first-quarter sales of $151M, and adjusted earnings per share turned positive at $0.06. The step-up came from 800-gigabit data center modules and cable television amplifiers, while the company kept spending heavily on factories in Texas and Taiwan.

For the third quarter the company guided sales of $255 million to $290 million and adjusted earnings per share of $0.11 to $0.26. It expects 800-gigabit sales to grow nearly fivefold and cable television sales of $100 and $110 million, while a customer's memory shortage cuts its 100-gigabit business.

The PricedIn number puts sales at $272M, a sales gain of +42% on the second quarter, and adjusted earnings per share at $0.19. The analysts expect a gross margin near +29% and a small operating loss, with interest income and a foreign tax benefit lifting adjusted earnings.

The analysts agree closely: the lowest middle sales forecast is $268M and the highest sales forecast $280M, while adjusted earnings per share runs from $0.15 to a highest earnings per share of $0.19. The larger uncertainty is earnings, because the company's adjusted tax line has swung sharply on a small profit base.

Adjusted earnings per share of $0.19 rests on gross profit covering most operating costs, with interest income and an adjusted tax benefit carrying the rest, spread over the diluted share count the company guided.

#### The company's outlooks

Q1 2025 guided “$94 million to $104 million”

Q2 2025 guided “$100 million to $110 million”

Q3 2025 guided “$115 million to $127 million”

Q4 2025 guided “$125 million to $140 million”

Q1 2026 guided “$150 million to $165 million”

Q2 2026 guided “$180 million to $198 million”

Q3 2026 guided “$255 million to $290 million”

Each outlook is the one the company gave before the quarter, in its own words. It is on another measure than the reported sales line, so it is not set against the result.

#### The quarter forecast, line by line

| Line | Q2 2026 reported | Q3 2025 reported | Q3 2026 forecast | Q4 2025 reported | Q4 2026 forecast |
| --- | --- | --- | --- | --- | --- |
| Revenue, net | $192M | $119M | $272M | $134M | $485M |
| Sales growth, year on year | +86% | +82% | +129% | +34% | +261% |
| Operating Segments |  |  |  |  |  |
| Single Reportable Segment | $192M | $119M | $272M | $134M | $485M |
| Cost of goods sold | $139M | $85M | $193M | $92M | $335M |
| Gross profit | $53M | $33M | $79M | $42M | $150M |
| Gross margin | 27.7% | 28.0% | 28.9% | 31.2% | 31.0% |
| Research and development | $34.9M | $21.3M | $38.0M | $25.8M | $42.0M |
| Sales and marketing | $11.5M | $9.9M | $12.5M | $6.9M | $14.0M |
| General and administrative | $31.6M | $20.3M | $32.5M | $20.7M | $36.0M |
| Total operating expenses | $77.9M | $51.5M | $83.0M | $53.4M | $92.0M |
| Loss from operations | −$24.7M | −$18.2M | −$4.3M | −$11.5M | $58.4M |
| Operating margin | −12.9% | −15.3% | −1.6% | −8.6% | 12.0% |
| Interest income | $3.25M | $0.45M | $5.80M | $0.83M | $7.00M |
| Interest expense | $0.93M | $0.90M | $1.00M | $0.84M | $1.30M |
| Other income (loss) | $0.91M | $0.70M | $0.80M | $1.02M | $1.00M |
| Total other income (expense), net | $3.23M | $0.25M | $5.60M | $1.00M | $6.70M |
| Loss before income taxes | −$21.5M | −$17.9M | $1.3M | −$10.5M | $65.0M |
| Income tax expense | $1.29M | $0 | $0.90M | −$8.48M | $7.00M |
| Tax rate | −6.0% | −0.0% | 69.2% | 80.7% | 10.8% |
| Net loss | −$22.8M | −$17.9M | $0.4M | −$2.0M | $58.0M |
| Diluted (in shares) | 0.08B | 0.06B | 0.09B | 0.07B | 0.10B |
| GAAP EPS | −$0.28 | −$0.28 | $0.01 | −$0.03 | $0.61 |
| Share-based compensation expense | $4.86M | — | $4.64M | — | $5.79M |
| Expenses associated with discontinued products | $3.59M | — | $1.86M | — | $0.96M |
| Non-cash expenses associated with discontinued products | $1.10M | — | $0.93M | — | $0.96M |
| Amortization of intangible assets | $0.12M | — | — | — | — |
| Non-recurring (income) expense | $4.74M | — | $2.78M | — | $2.90M |
| Unrealized exchange loss (gain) | −$0.43M | — | — | — | — |
| Tax (benefit) expense related to the above | $14.3M | — | $6.5M | — | $1.9M |
| Adjusted net income | $5.5M | — | $17.8M | — | $71.3M |
| Adjusted EPS | $0.06 | −$0.09 | $0.19 | −$0.01 | $0.74 |

The lines as the company's statement shows them. The forecast columns are the tab's PricedIn forecast, one analyst's whole plan, the analyst nearest the middle of the seven on both sales and earnings per share, so the lines add up to the numbers above. Sales growth is the change on the same quarter a year earlier. Earnings per share is the headline's: the company's own for the reported quarter, and for a forecast quarter that analyst's own, worked from its lines with the company's adjustments. GAAP EPS is net income over diluted shares; under it, each adjustment is its effect on net income after tax, to adjusted net income and the adjusted figure: for a forecast as that analyst states it, for a reported period from the company's own table where we hold it, and — where we do not.

#### What it rests on

**Sales outlook**

$255 million to $290 million for the third quarter “Revenue in the range of $255 million to $290 million.” Second-quarter earnings release

**Earnings outlook**

Adjusted earnings per share of $0.11 to $0.26 “non-GAAP income per share in the range of $0.11 to $0.26 using approximately 92.8 million shares.” Second-quarter earnings release

**800-gigabit growth**

Sales expected to grow nearly fivefold from the second quarter “Looking ahead, we expect revenue from our 800G products to grow by nearly five times” Second-quarter earnings call

**Cable outlook**

Cable television sales of $100 and $110 million “Looking ahead to Q3, we expect our CATV revenue will be between $100 and $110 million.” Second-quarter earnings call

**100-gigabit decline**

A customer's memory shortage cuts 100-gigabit sales this quarter “We currently expect to see a decline in 100G business in Q3” Second-quarter earnings call

#### Scenarios Explained: Base, Low, and High

Base the middle forecast

Q3-2026

Sales **$272M**

Adjusted EPS **$0.19**

Capital spending **$380M**

Free cash flow **−$420M**

**FCF walk and spending detail**

Forecast dollars. Free cash flow is operating cash flow less capital spending.

| non-GAAP net income (about $0.18 per share on ~92.8 million shares) | $17.1M |
| --- | --- |
| depreciation | $13.0M |
| inventory and receivables build net of payables | −$70.1M |
| Operating cash flow | −$40.0M |
| Less capital spending | −$380M |
| Free cash flow | −$420M |

**non-GAAP net income (about $0.18 per share on ~92.8 million shares)**

forecast at the middle of the company's Q3-2026 non-GAAP net income guidance of $10.1 million to $24 million

**depreciation**

forecast: depreciation rises with newly installed equipment, from $10.5 million in Q2-2026 (the half-year's $19.7 million less Q1's $9.2 million)

**inventory and receivables build net of payables**

forecast: working capital scales with the rapid ramp toward Q4

##### Capital spending

These allocations are my forecast, not a company-disclosed dollar split; the company discloses total capital investments and describes purposes in words. The unallocated $10 million covers intangibles and items I cannot responsibly allocate.

| continued expansion of manufacturing operations for 400G, 800G, and 1.6T transceiver products | $240M |
| --- | --- |
| laser capacity | $70.0M |
| facility expansion | $50.0M |
| manufacturing capacity for our external light source | $10.0M |
| Unallocated capital spending | $10.0M |
| Total capital spending | $380M |

**continued expansion of manufacturing operations for 400G, 800G, and 1.6T transceiver products** my forecast allocation: the largest share, per management's description of the expenditures

“The increase in capital expenditures was primarily attributable to facility expansion and equipment purchases to support increased production capacity for the Company’s internet data center and broadband product lines, including investments related to Quantum Bandwidth products and the continued expansion of manufacturing operations for 400G, 800G, and 1.6T transceiver products.”

**laser capacity** my forecast allocation of the Texas laser investment

“So that is why we announced we will invest $300,000,000 in Texas—triple, even more than triple. The purpose, as we said, we need to increase our laser capacity by Q2 next year, and that is to fulfill our transceiver demand.”

**facility expansion** my forecast allocation for the Houston-area buildouts coming online late in the quarter

“The increase in capital expenditures was primarily attributable to facility expansion and equipment purchases to support increased production capacity for the Company’s internet data center and broadband product lines, including investments related to Quantum Bandwidth products and the continued expansion of manufacturing operations for 400G, 800G, and 1.6T transceiver products.”

**manufacturing capacity for our external light source** my forecast allocation for initial ELSFP capacity

“At OFC, we also discussed our plans to increase our manufacturing capacity for our external light source, or ELSFP.” “We made a total of $565.5 million in capital investments in the second quarter, including” “We expect CapEx intensity in the second half of the year will be higher than in the first”

#### Three ways the base case happens

These levers explain the outcome together.

1. **800-gigabit sales rise nearly fivefold as new Taiwan capacity starts producing.** The company guided this growth in August and says capacity, not demand, limits output. This supplies most of the quarter's growth over the second quarter; a shortfall would pull sales toward the bottom of the company's range and gross profit with them. Parts bought for this ramp also drive the quarter's inventory build and operating cash outflow.
  Watch The 5 November 2026 release: how far 800-gigabit sales grew against the nearly fivefold target.
  **Analyst reasoning**
  - **Analyst G** The second-quarter call anchors $273 million third-quarter sales, with about $105 million cable television, $64 million 800-gigabit products, and smaller contributions from other products.
  - **Analyst C** 800G growing nearly fivefold sequentially in Q3-2026 and dominating Q4
2. **Cable television holds inside the company's guided range.** Cable was over half of 2025 sales, mostly through one distributor, and the company guided a narrow range. Cable is the second large block of the quarter's sales in every build; holding it steady lets the data center ramp show through to total sales, and it needs little new capital spending.
  Watch Cable television sales in the 5 November 2026 release against the guided range.
  **Analyst reasoning**
  - **Analyst A** CATV holds at $100-110 million in the third quarter and around $325 million a year
  - **Analyst C** CATV holding at $100-110 million in Q3 and above $325 million for the year
3. **A steady gross margin and a continued tax benefit carry adjusted earnings.** The second quarter's adjusted profit came largely from a foreign tax benefit the company expects to continue. Gross margin stays near the second quarter's level as expedite fees offset volume, so operating profit is near zero; the adjusted tax benefit and interest on cash raised from share sales decide whether adjusted earnings per share lands near the middle of the company's range.
  Watch The non-GAAP gross margin and tax line in the 5 November 2026 release.
  **Analyst reasoning**
  - **Analyst F** The second-quarter beat on adjusted earnings came from a foreign tax benefit that the company expects to continue.
  - **Analyst A** the earnings range is wide on a tax line I cannot pin down

Sales near $272M need 800-gigabit output to rise nearly fivefold as Taiwan lines start, cable television to stay inside the company's range and the 100-gigabit loss to stay within what the company flagged. A gross margin near +29% and operating costs near the company's range leave an operating margin of about −1.6%; interest income and an adjusted tax benefit then lift adjusted earnings per share to $0.19.

High about 1 chance in 10 of better

Q3-2026

Sales **$300M** +10% vs base

Adjusted EPS **$0.30** +58% vs base

Capital spending **$300M**

Free cash flow **−$294M**

**FCF walk and spending detail**

Forecast dollars. Free cash flow is operating cash flow less capital spending.

| GAAP net income | $10.0M |
| --- | --- |
| Depreciation, share-based compensation and other non-cash items | $26.0M |
| Receivables, inventory and payables | −$35.0M |
| Tariff refund and other operating items | $5.00M |
| Operating cash flow | $6.00M |
| Less capital spending | −$300M |
| Free cash flow | −$294M |

**GAAP net income**

High-case earnings benefit from faster shipments and better absorption.

**Depreciation, share-based compensation and other non-cash items**

More equipment in service raises forecast non-cash add-backs.

**Receivables, inventory and payables**

Strong collections and supplier terms partly offset the working-capital cost of faster growth.

**Tariff refund and other operating items**

Includes the remaining tariff recovery and modest government-related operating receipts.

##### Capital spending

The high case pulls equipment and facility spending forward. Allocations are my estimates, not company guidance; 5% remains unallocated for smaller categories and uncertain timing.

| data center transceiver | $225M |
| --- | --- |
| semiconductor lasers | $45.0M |
| Quantum Bandwidth broadband products | $15.0M |
| Unallocated capital spending | $15.0M |
| Total capital spending | $300M |

**data center transceiver** My high-case allocation accelerates high-speed module lines to meet demand.

“data center transceiver, semiconductor lasers, and Quantum Bandwidth broadband products”

**semiconductor lasers** My high-case allocation accelerates laser fabrication.

“data center transceiver, semiconductor lasers, and Quantum Bandwidth broadband products”

**Quantum Bandwidth broadband products** My high-case allocation supports stronger broadband shipments.

“data center transceiver, semiconductor lasers, and Quantum Bandwidth broadband products” “We expect CapEx intensity in the second half of the year will be higher than in the first”

#### Three ways the high case happens

These levers explain the outcome together; each is not a separate one-in-ten event.

1. **Chip supply eases and 800-gigabit output beats the fivefold target.** Management says near-term revenue is bounded almost entirely by capacity and component availability. Each extra module shipped adds sales against costs already in place, lifting gross margin and adjusted earnings; faster equipment acceptance also raises capital spending, so free cash flow need not improve.
  Watch 800-gigabit sales above the fivefold target in the 5 November 2026 release.
  **Analyst reasoning**
  - **Analyst B** component supply bottlenecks for digital signal processors and amplifiers ease quickly, allowing the company to reach 293 million dollars of revenue in the third quarter
  - **Analyst A** Demand to support next-generation AI infrastructure remains so robust that our near-term revenue is bounded almost entirely by our production capacity and key component availability.
  - **Analyst E** New lines qualify quickly, component allocations improve, and the company converts more of its sold-out demand into revenue.
2. **Cable television lands at the top of its range.** Newer cable customers are adding volume, and management expects cable to grow for a few more years. Cable adds sales with little new investment, so it lifts total sales and earnings in the quarter without extra capital spending.
  Watch Cable television sales at the top of the guided range.
  **Analyst reasoning**
  - **Analyst A** CATV comes in at the top of the $100-110 million range as the newer cable customers add volume
  - **Analyst C** CATV guided to $100-110 million in Q3 and management expects the business to grow for a few more years
3. **The 100-gigabit loss proves smaller and margin improves.** The memory shortage hit one customer, and its supply could recover sooner than assumed. Keeping more 100-gigabit sales protects mix and better yields absorb fixed cost, so gross margin moves above the guided range and adjusted earnings per share rises toward the high end.
  Watch A non-GAAP gross margin above the guided range.
  **Analyst reasoning**
  - **Analyst A** The memory-related 100G loss proves smaller than $20-25 million and returns sooner
  - **Analyst G** Better yields and greater fixed-cost absorption

Sales would have to reach about $300M, above the company's top, with adjusted earnings per share near $0.30. That needs chip supply to ease so 800-gigabit output beats the fivefold target, cable television to land at the top of its range and the 100-gigabit loss to prove smaller, lifting gross margin above its guided range. Analyst E goes furthest, to sales of $310M and adjusted earnings per share of $0.36, because it assumes new lines qualify quickly and convert more of the sold-out demand into shipments than the others allow.

Management says demand exceeds what it can build, so near-term sales are bounded by capacity and parts rather than orders.

The seven highs run from $290M (Analyst F) to $310M (Analyst E).

First sign Sales above the company's top in the 5 November 2026 release.

Low about 1 chance in 10 of worse

Q3-2026

Sales **$245M** −10% vs base

Adjusted EPS **$0.05** −74% vs base

Capital spending **$210M**

Free cash flow **−$290M**

**FCF walk and spending detail**

Forecast dollars. Free cash flow is operating cash flow less capital spending.

| Reported net income or loss | −$11.0M |
| --- | --- |
| Depreciation, share compensation and customer warrants | $21.5M |
| Trade receivables and inventories | −$110M |
| Trade accounts payable | $25.0M |
| Operating prepayments and accrued operating costs | −$5.00M |
| Operating cash flow | −$79.5M |
| Less capital spending | −$210M |
| Free cash flow | −$290M |

**Reported net income or loss**

Forecast reported loss in the $245 million sales and two-cent adjusted earnings case; compensation, residual wind-down and adjusted tax exclusions explain the difference from positive adjusted earnings.

**Depreciation, share compensation and customer warrants**

Assume $14 million depreciation, $5 million share compensation and $2.5 million warrant-related charges.

**Trade receivables and inventories**

Assume $60 million receivables investment and $50 million inventory investment; slower sales do not instantly unwind purchased components.

**Trade accounts payable**

Assume supplier credit partly funds continued component purchasing.

**Operating prepayments and accrued operating costs**

Assume net operating prepayments exceed accrued expenses during ramp preparation; no financing proceeds or equipment deposits included.

##### Capital spending

Slower output permits some timing deferral, but committed expansion continues. The rest cannot be reliably divided among facilities, fit-outs and other property purchases. Capital spending is only the property-and-equipment cash line, not all equipment prepayments or separate land purchases.

| production equipment and machinery | $150M |
| --- | --- |
| Unallocated capital spending | $60.0M |
| Total capital spending | $210M |

**production equipment and machinery** My allocation to disclosed equipment spending, not a company-published project budget.

“Speaker not named: But, you know, all of that CapEx is really going into production equipment and machinery.” “As a result, we continue to expect to have a significant amount of working capital invested in inventory.” “Purchase of property, plant and equipment”

#### Three ways the low case happens

These levers explain the outcome together; each is not a separate one-in-ten event.

1. **Chip shortages cap 800-gigabit output.** Management named signal-processor and amplifier-chip supply as the binding constraint on its August call. Fewer 800-gigabit modules ship, so sales fall toward or below the company's floor; parts already bought sit in inventory, worsening operating cash flow while payments for committed equipment continue.
  Watch Comments on 5 November 2026 about chip lead times or expedite fees.
  **Analyst reasoning**
  - **Analyst F** chip and amplifier-chip supply limits on 800-gigabit and 1.6-terabit output
  - **Analyst B** Persistent shortages of third-party digital signal processors, transimpedance amplifiers, and switch memory delaying 1.6 terabit and 800 gigabit transceiver shipments and prolonging 100 gigabit weakness
2. **The 100-gigabit loss runs deeper than flagged.** A customer cannot source enough 100-gigabit switches because of a memory shortage. The company already put the loss in its range, so a deeper or longer cut takes sales below the range and removes a higher-margin product, lowering gross margin and adjusted earnings too.
  Watch Whether the 5 November 2026 release says the 100-gigabit decline exceeded the August expectation.
  **Analyst reasoning**
  - **Analyst A** DSP and TIA supply for 800G and 1.6T stays tight and the flagged 100G decline proves deeper than $20-25 million
  - **Analyst C** 100G decline of $20-25 million per quarter from the memory shortage persisting into 2027
3. **Idle new lines and expedite fees press gross margin.** New Texas and Taiwan lines carry fixed costs before they ship qualified product. Gross margin slips, so a small operating loss becomes a larger one and adjusted earnings per share falls toward zero; inventory and receivables still absorb cash.
  Watch A non-GAAP gross margin below the guided range in the 5 November 2026 release.
  **Analyst reasoning**
  - **Analyst F** Expedite fees and under-used new lines hold gross margin near 28%.
  - **Analyst G** Lower factory utilization and weaker product mix

Sales would have to fall to about $245M, below the company's floor, with adjusted earnings per share near $0.05. That needs signal-processor and amplifier-chip shortages to hold back 800-gigabit output, the 100-gigabit loss to run deeper than flagged, and under-used new lines plus expedite fees to push gross margin below the second quarter's. Analyst E goes furthest, to sales of $240M and adjusted earnings per share of $0.02, because it alone also lets cable television orders normalize from their peak while high-speed shipments slip.

The company has landed inside its sales range in each of the last six quarters, often in the lower half. In August it named signal-processor and amplifier-chip supply as the main constraint.

The seven lows run from $240M (Analyst E) to $256M (Analyst A).

First sign Sales below the company's floor in the 5 November 2026 release.

#### The odds the analysts give

Two questions each analyst answers with a probability.

Sales: the company's own range for Q3 2026, from its release of 6 August 2026.

A print above the top of the company's range, $290M

12% the seven: 8% to 28%

The company's record: above the top of its own range in **0 of its last 6** quarters, 0 of 12 since 2023.

A print below the bottom of the range, $255M

10% the seven: 9% to 25%

The company's record: below the bottom of its range in **2 of 12** quarters since 2023.

Together: 22% odds of a print outside the company's range.

Adjusted EPS: the company's own range for Q3 2026, from its release of 6 August 2026.

A print above the top of the company's range, $0.26

15% the seven: 13% to 27%

A print below the bottom of the range, $0.11

13% the seven: 12% to 32%

Together: 28% odds of a print outside the company's range.

#### Surfaced outlier views

For Q3-2026 the seven analysts sit within 2.8% of the PricedIn number on sales and within 21.1% on adjusted EPS. The furthest, and why:

- **Analyst A** · Q3-2026: sales **$280M**, the highest of the seven (PricedIn $272M)
  Why Analyst A builds sales above the middle of the company's range because it reads the 100-gigabit loss as already inside the guide. It also carries a thinner operating loss, an operating margin of −0.2% against the PricedIn operating margin of −1.6%, on gross profit of $81.5M. Yet its adjusted earnings per share of $0.18 is no higher than the others, because it assumes an income tax charge of $1.50M.
  “I put my middle slightly above the revenue midpoint and at the midpoint of earnings, because the revenue guide already contains the 100G loss the company flagged while the earnings range is wide on a tax line I cannot pin down.”
- **Analyst F** · Q3-2026: adjusted EPS **$0.15**, the lowest of the seven (PricedIn $0.19)
  Why Analyst F puts sales of $268M a little under the middle of the company's range, because the company often lands in the lower half and the 100-gigabit loss bites. It assumes interest income of $3.50M against PricedIn interest income of $5.80M and an income tax charge of $1.30M, leaving a small book loss that only a modest adjusted tax benefit turns positive.
  “So I put sales at $268 million, a little under the $272.5 million midpoint, and adjusted earnings per share at $0.15.”
- **Analyst B** · Q3-2026: sales **$273M** and adjusted EPS **$0.19**, near the PricedIn numbers of $272M and $0.19, by a different route
  Why Analyst B lands on the PricedIn sales and earnings by a cost route: total operating expenses of $77.5M against PricedIn operating expenses of $83.0M give it an operating margin of +1.4%, where the others carry a small operating loss. It needs less from interest and tax to reach adjusted earnings per share of $0.19.
  “Strong operating leverage as research and development and general and administrative expenses grow more slowly than revenue”

#### The cases

The analyst with the highest 1-in-10 high argues the bull case; the one with the lowest 1-in-10 low argues the bear case. Each claim stands on a line the harness replays. The other analysts adopt a line or deny in a sentence, before their finals.

- The bull case · Analyst E · Q3-2026: sales $310M, adjusted EPS $0.36, as the 1-in-10 high
  The case Third-quarter sales can reach $310 million if the promised nearly fivefold sequential 800-gigabit increase, initial 1.6-terabit shipments and $100 million to $110 million of cable revenue all arrive without component or acceptance delays. Demand already exceeds capacity, so earlier qualification and component delivery would convert directly into a beat above the $290 million guidance ceiling. At that volume, better absorption and richer high-speed mix could push gross margin above 30.5% and adjusted EPS to $0.36, above the $0.26 guidance ceiling.
  “Looking ahead, we expect revenue from our 800G products to grow by nearly five times” “and we expect full qualification of our first 1.6 terabit product by this customer within the next couple of weeks,” “Looking ahead, forecast demand for 800G and 1.6 terabit modules are projected to continue to exceed our production capacity through mid-2027.” “Looking ahead to Q3, we expect our CATV revenue will be between $100 and $110 million.” “We expect non-GAAP gross margin to be in the range of 29% to 30.5%.” “and non-GAAP earnings per share between $0.11 per share and $0.26 per share”
  Verdicts: adopted by 0, denied by 6
- The bear case · Analyst E · Q3-2026: sales $240M, adjusted EPS $0.02, as the 1-in-10 low
  The case Third-quarter sales can fall to $240 million because management already expects 100-gigabit revenue to decline until memory supply recovers, while the offsetting 800-gigabit ramp remains gated by production capacity and components. If cable also slips below its $100 million floor or customer acceptance moves high-speed shipments into the fourth quarter, revenue would breach the $255 million guidance floor. The resulting under-absorption and expedite costs could pull gross margin below 29% and adjusted EPS to $0.02, well under the $0.11 guidance floor.
  “We currently expect to see a decline in 100G business in Q3” “We believe that this shortage of switches is related to memory shortage” “and expect that 100G weakness will persist until the memory supply recovers.” “sequentially in the third quarter and expect continued strong growth gated by our production” “capacity and component supply in the fourth quarter.” “We expect Q3 revenue to be between $255 million and $290 million,” “We expect non-GAAP gross margin to be in the range of 29% to 30.5%.” “and non-GAAP earnings per share between $0.11 per share and $0.26 per share”
  Verdicts: adopted by 0, denied by 6

#### Watch

The 5 November 2026 release after the close: sales above the company's top with gross margin above its range point higher; sales under its floor, weak 800-gigabit growth or a larger 100-gigabit loss point lower.

### Q4 2026 · the quarter after

##### Sales

PricedIn **$485M** $360M – $560M

$360M $435M $485M $520M $560M

##### adjusted EPS

PricedIn **$0.74** $0.30 – $1.12

$0.30 $0.55 $0.74 $0.89 $1.12

**Middle** the forecast **50% range** 1 in 4 chance the result comes in below this bar, 1 in 4 above it. Half the time it lands inside. **80% range** 1 in 10 chance below this line, 1 in 10 above it. These are the low and high printed by each number. **The room** The lowest 1-in-10 low and the highest 1-in-10 high among the seven analysts, as each handed them in before the round, with who holds each.

All analysts expect a large step-up, but middle sales run from $425M to highest sales of $500M. Analysts F, G and D cut the company's path for chip, material and qualification delays, while Analysts A, B, C and E sit near the company's year view. Adjusted earnings per share spreads further, because margin, interest and share count all move with volume.

The analysts expect fourth-quarter sales of about $485M, as 800-gigabit and first 1.6-terabit shipments scale on new capacity.

Sales **$485M** +261% on Q4 2025 ($134M)

*50% range* $435M – $520M *80% range* $360M – $560M *The room* $310M – $620M D low · D high

Adjusted EPS **$0.74** −7500% on Q4 2025 (−$0.01)

*50% range* $0.55 – $0.89 *80% range* $0.30 – $1.12 *The room* $0.08 – $1.25 D low · E high

#### Investment and cash generation

Base case

Capital spending **$400M**

Free cash flow **−$480M**

Free cash flow: operating cash flow less capital spending.

- **Fourth-quarter spending pays for lines meant to reach 650,000 units a month by year end and for laser fab and building work that serve 2027. On the basis of operating cash flow less capital spending, base free cash flow is −$480M on cash capital spending of $400M, as receivables jump with sales. Analyst A expects operating cash flow of $70.0M, with payables funding the step-up; a new equipment term loan helps pay for tools. *3 of 7***
  - **Analyst F** Term loans under the new $170 million facility help fund equipment.
  - **Analyst A** a much smaller build than earlier quarters because the revenue step-up is partly financed by payables and by inventory already on hand
  - **Analyst C** forecast: revenue grows about 78 percent sequentially, so working capital builds sharply

Fourth-quarter sales must step up sharply for the company to reach its year view. The PricedIn sales of $485M are a sales gain of +78% on the third-quarter middle and a sales gain of +261% on a year earlier, and adjusted earnings per share reaches $0.74.

In August the chief executive said capacity could support more than $500 million revenue in the quarter, but that 1.6-terabit sales could be committed only at $70 million to $80 million in Q4, because material is short. The company expects capacity of over 650,000 800-gigabit and 1.6-terabit units a month by year end.

The analysts expect gross margin to rise to about +31% as volume covers the new fixed costs and 1.6-terabit mix grows, taking the operating margin to +12%. Interest on new equipment loans and a normal tax charge replace the tax benefit of earlier quarters.

They differ more than for the third quarter: middle sales run from $425M to highest sales of $500M, and adjusted earnings per share from $0.50 to highest earnings per share of $0.80. Analysts F, G and D discount the step-up for chip supply and qualification delays; Analysts A and E sit close to the company's path.

Adjusted earnings per share of $0.74 comes from operating profit on much higher volume at a gross margin near +31%, spread over more shares after stock sales and less helped by tax.

#### What it rests on

**Capacity remark**

Capacity could support more than $500 million revenue “In Q4, I think based on your capacity, we should be able to deliver, I would say, more than $500 million revenue.” Second-quarter earnings call

**1.6-terabit commitment**

Committed 1.6-terabit sales of $70 million to $80 million in Q4 “but right now, while we can commit maybe, I would say, $70 million to $80 million in Q4,” Second-quarter earnings call

**Year-end capacity**

Over 650,000 800-gigabit and 1.6-terabit units a month “Looking ahead, we continue to expect by the end of this year that we will be capable of producing over 650,000 pieces of 800G and 1.6 terabit products per month.” Second-quarter earnings call

**Year-end margin**

Gross margin exiting the year in the low to mid 30s “the low to mid 30% range.” August investor conference

**New credit facility**

Equipment term loans plus a revolving line “The New Credit Facility provides the Company with $30 million in revolving commitments and $170 million in initial term loan commitments.” Credit agreement filing, November 2026

#### Scenarios Explained: Base, Low, and High

Base the middle forecast

Q4-2026

Sales **$485M**

Adjusted EPS **$0.74**

Capital spending **$400M**

Free cash flow **−$480M**

**FCF walk and spending detail**

Forecast dollars. Free cash flow is operating cash flow less capital spending.

| non-GAAP net income (about $0.73 per share on ~96.5 million shares) | $70.6M |
| --- | --- |
| depreciation | $15.0M |
| inventory and receivables build net of payables | −$166M |
| Operating cash flow | −$80.0M |
| Less capital spending | −$400M |
| Free cash flow | −$480M |

**non-GAAP net income (about $0.73 per share on ~96.5 million shares)**

forecast consistent with the quarter plan

**depreciation**

forecast: the equipment base keeps growing

**inventory and receivables build net of payables**

forecast: revenue grows about 78 percent sequentially, so working capital builds sharply

##### Capital spending

These allocations are my forecast, not a company-disclosed dollar split. The unallocated $10 million covers intangibles and items I cannot responsibly allocate.

| continued expansion of manufacturing operations for 400G, 800G, and 1.6T transceiver products | $250M |
| --- | --- |
| laser capacity | $75.0M |
| facility expansion | $50.0M |
| manufacturing capacity for our external light source | $15.0M |
| Unallocated capital spending | $10.0M |
| Total capital spending | $400M |

**continued expansion of manufacturing operations for 400G, 800G, and 1.6T transceiver products** my forecast allocation: the largest share, per management's description of the expenditures

“The increase in capital expenditures was primarily attributable to facility expansion and equipment purchases to support increased production capacity for the Company’s internet data center and broadband product lines, including investments related to Quantum Bandwidth products and the continued expansion of manufacturing operations for 400G, 800G, and 1.6T transceiver products.”

**laser capacity** my forecast allocation of the Texas laser investment

“So that is why we announced we will invest $300,000,000 in Texas—triple, even more than triple. The purpose, as we said, we need to increase our laser capacity by Q2 next year, and that is to fulfill our transceiver demand.”

**facility expansion** my forecast allocation for the Houston-area buildouts

“The increase in capital expenditures was primarily attributable to facility expansion and equipment purchases to support increased production capacity for the Company’s internet data center and broadband product lines, including investments related to Quantum Bandwidth products and the continued expansion of manufacturing operations for 400G, 800G, and 1.6T transceiver products.”

**manufacturing capacity for our external light source** my forecast allocation for initial ELSFP capacity

“At OFC, we also discussed our plans to increase our manufacturing capacity for our external light source, or ELSFP.” “We made a total of $565.5 million in capital investments in the second quarter, including” “We expect CapEx intensity in the second half of the year will be higher than in the first”

#### Three ways the base case happens

These levers explain the outcome together.

1. **800-gigabit and 1.6-terabit shipments scale on new capacity.** The company expects over 650,000 units a month of capacity by year end and holds a 1.6-terabit order. This carries nearly all of the quarter's growth. Equipment and parts bought for it keep capital spending and inventory high, while receivables jump with sales.
  Watch The fourth-quarter outlook in the 5 November 2026 release.
  **Analyst reasoning**
  - **Analyst C** Q4-2026 reaches roughly $485 million as 800G scales and 1.6T contributes $70-80 million
  - **Analyst E** High-speed transceiver revenue ramps from two large hyperscale customers, with 1.6 terabit adding to 800G in the fourth quarter.
2. **Gross margin rises as volume covers fixed costs.** The finance chief expects margins exiting the year in the low to mid 30s, held back by expedite fees. Higher volume spreads the cost of new Texas and Taiwan lines, and 1.6-terabit modules carry better margins, so gross profit grows faster than sales and the quarter turns to a solid operating profit.
  Watch Third-quarter gross margin and any fourth-quarter margin outlook on 5 November 2026.
  **Analyst reasoning**
  - **Analyst F** I use 31.5% adjusted gross margin for the fourth quarter.
  - **Analyst E** The August session supports a fourth-quarter non-GAAP gross margin around 32.5%, continued high capital spending and cable growth for another year or two.
3. **More shares and a normal tax charge dilute the profit.** The company sells stock under a program and its earlier tax benefit fades as profit grows. The diluted share count rises and a tax charge replaces earlier benefits, so adjusted earnings per share grows less than operating profit; loan interest adds a little cost.
  Watch The share count and tax assumptions in the fourth-quarter outlook on 5 November 2026.
  **Analyst reasoning**
  - **Analyst F** I use about 86 million basic shares in the third quarter (92.8 million diluted, as the company guided), 96 million diluted in the fourth, 100 million in 2027 and 108 million in 2028.
  - **Analyst F** and a small tax charge once profits are large in the fourth
  - **Analyst G** I forecast fully diluted adjusted-profit denominators of 93 million and 100 million for the next two quarters, 110 million in 2027 and 120 million in 2028.

Sales near $485M need 800-gigabit output to keep growing as Taiwan lines fill, 1.6-terabit shipments on the first large order to reach roughly what the company could commit, and cable television to ease only slightly. Gross margin near +31% and operating costs growing far slower than sales give an operating margin of +12% and adjusted earnings per share of $0.74 after a normal tax charge.

High about 1 chance in 10 of better

Q4-2026

Sales **$560M** +15% vs base

Adjusted EPS **$1.12** +51% vs base

Capital spending **$330M**

Free cash flow **−$240M**

**FCF walk and spending detail**

Forecast dollars. Free cash flow is operating cash flow less capital spending.

| GAAP net income | $100M |
| --- | --- |
| Depreciation, share-based compensation and other non-cash items | $32.0M |
| Receivables, inventory and payables | −$45.0M |
| Other operating items | $3.00M |
| Operating cash flow | $90.0M |
| Less capital spending | −$330M |
| Free cash flow | −$240M |

**GAAP net income**

High-case earnings reflect a faster high-speed ramp and stronger product mix.

**Depreciation, share-based compensation and other non-cash items**

A larger operating asset base increases forecast non-cash add-backs.

**Receivables, inventory and payables**

Strong collections and payables partly fund the working-capital needed for rapid growth.

**Other operating items**

Modest government-related and miscellaneous operating receipts are assumed.

##### Capital spending

The high case accelerates equipment and facility investment to meet stronger demand. Percentages are my estimates; 5% remains unallocated.

| data center transceiver | $248M |
| --- | --- |
| semiconductor lasers | $49.5M |
| Quantum Bandwidth broadband products | $16.5M |
| Unallocated capital spending | $16.5M |
| Total capital spending | $330M |

**data center transceiver** My high-case allocation pulls high-speed module capacity forward.

“data center transceiver, semiconductor lasers, and Quantum Bandwidth broadband products”

**semiconductor lasers** My high-case allocation accelerates laser fabrication.

“data center transceiver, semiconductor lasers, and Quantum Bandwidth broadband products”

**Quantum Bandwidth broadband products** My high-case allocation supports stronger broadband demand.

“data center transceiver, semiconductor lasers, and Quantum Bandwidth broadband products” “We expect CapEx intensity in the second half of the year will be higher than in the first”

#### Three ways the high case happens

These levers explain the outcome together; each is not a separate one-in-ten event.

1. **1.6-terabit material arrives early.** The first large 1.6-terabit order is in hand; only material limits how much ships. More of the order ships in the quarter, adding high-value sales and lifting gross margin; capital spending also rises as equipment is accepted faster, so free cash flow stays deeply negative.
  Watch A fourth-quarter outlook on 5 November 2026 with 1.6-terabit sales above the committed amount.
  **Analyst reasoning**
  - **Analyst A** 800G ramps faster than guided and 1.6 terabit material arrives early enough for more than $100 million of 1.6T in the fourth quarter
  - **Analyst D** The $200 million 1.6 terabit order is largely delivered in the fourth quarter
2. **Year-end capacity ships fully.** The company targets over 650,000 units a month by year end and says demand exceeds capacity. With lines qualified on time, output follows capacity, so sales clear the chief executive's remark while operating costs barely rise, lifting the operating margin well above the base.
  Watch A fourth-quarter outlook above the chief executive's August capacity remark.
  **Analyst reasoning**
  - **Analyst F** 650,000 units a month of 800-gigabit and 1.6-terabit capacity by year end
  - **Analyst E** New lines qualify quickly, component allocations improve, and the company converts more of its sold-out demand into revenue.
  - **Analyst D** A third hyperscale customer becomes a 10 percent customer on schedule
3. **Gross margin heads toward the mid-30s.** Better 1.6-terabit yields and faster absorption of fixed cost would beat the finance chief's year-end view. A higher margin on a much larger sales base adds strongly to adjusted earnings per share within the quarter.
  Watch Third-quarter gross margin above the guided range on 5 November 2026.
  **Analyst reasoning**
  - **Analyst A** Gross margin exits the year near 33-34% as 1.6T yield improves and fixed overhead is absorbed faster
  - **Analyst F** gross margin heading to the mid-30s

Sales would have to reach about $560M, with adjusted earnings per share near $1.12. That needs 1.6-terabit material to arrive early, the full year-end capacity to ship qualified product and gross margin to head toward the mid-30s on better yields. Analyst D goes furthest on sales, to $620M, because only it adds a third hyperscale customer reaching a tenth of sales on schedule; Analyst E goes furthest on adjusted earnings per share, to $1.25, on a faster ramp and richer mix.

The chief executive said capacity could support more than the year view requires, but chips and material have limited output before.

The seven highs run from $515M (Analyst F) to $620M (Analyst D).

First sign A fourth-quarter outlook above the chief executive's August capacity remark on 5 November 2026.

Low about 1 chance in 10 of worse

Q4-2026

Sales **$360M** −26% vs base

Adjusted EPS **$0.30** −59% vs base

Capital spending **$225M**

Free cash flow **−$239M**

**FCF walk and spending detail**

Forecast dollars. Free cash flow is operating cash flow less capital spending.

| GAAP net income | $20.0M |
| --- | --- |
| Depreciation, share-based compensation and other non-cash items | $28.0M |
| Receivables, inventory and payables | −$65.0M |
| Other operating items | $3.00M |
| Operating cash flow | −$14.0M |
| Less capital spending | −$225M |
| Free cash flow | −$239M |

**GAAP net income**

Low-case earnings remain positive but are limited by a delayed high-speed ramp.

**Depreciation, share-based compensation and other non-cash items**

Forecast non-cash add-backs increase with the expanded asset base.

**Receivables, inventory and payables**

Inventory and receivables build ahead of the delayed ramp faster than payables expand.

**Other operating items**

Modest government-related and miscellaneous operating receipts are assumed.

##### Capital spending

Some module spending is deferred in the low case, but long-lead laser and facility projects continue. Percentages are my estimates; 5% is unallocated.

| data center transceiver | $169M |
| --- | --- |
| semiconductor lasers | $33.8M |
| Quantum Bandwidth broadband products | $11.2M |
| Unallocated capital spending | $11.2M |
| Total capital spending | $225M |

**data center transceiver** My low-case allocation slows some high-speed module additions.

“data center transceiver, semiconductor lasers, and Quantum Bandwidth broadband products”

**semiconductor lasers** My low-case allocation continues laser projects with long lead times.

“data center transceiver, semiconductor lasers, and Quantum Bandwidth broadband products”

**Quantum Bandwidth broadband products** My low-case allocation supports broadband production.

“data center transceiver, semiconductor lasers, and Quantum Bandwidth broadband products” “Management expects to continue to make investments in capacity expansion through at least the end of 2027”

#### Three ways the low case happens

These levers explain the outcome together; each is not a separate one-in-ten event.

1. **Material caps 1.6-terabit shipments.** The company could commit only a limited 1.6-terabit amount for the quarter because material is short. 1.6-terabit sales stay small and the first large order spills into 2027, removing the highest-margin growth; sales and adjusted earnings fall well below the base while parts inventory builds.
  Watch A fourth-quarter outlook on 5 November 2026 that leaves 1.6-terabit sales small.
  **Analyst reasoning**
  - **Analyst C** 1.6T material and component constraints capping quarterly deliverables near $70-80 million
  - **Analyst A** the 1.6 terabit order that management says will mostly ship in the fourth quarter slips into 2027
2. **New Texas lines qualify late.** Past 800-gigabit qualification and firmware delays pushed sales out by quarters. Installed Texas capacity does not ship qualified product, so fixed costs land before sales and gross margin stays near the third quarter's level; committed equipment is still paid for.
  Watch Word on 5 November 2026 that Texas lines or customer audits slipped.
  **Analyst reasoning**
  - **Analyst F** delays bringing the new Texas capacity into qualified production
  - **Analyst B** Construction, cleanroom validation, or customer audit delays at the new Sugar Land and Pearland Texas facilities pushing capacity additions to the right and leaving fixed overhead under-absorbed
3. **A large customer pushes orders out.** Three customers made up nearly all second-quarter sales, and orders can be rescheduled on short notice. A pause at one hyperscale or cable customer removes a large slice of the quarter's sales at once and leaves inventory on hand, hurting both earnings and operating cash flow.
  Watch A fourth-quarter outlook on 5 November 2026 that grows little from the third quarter.
  **Analyst reasoning**
  - **Analyst D** One large hyperscale customer pushes orders out
  - **Analyst C** customer concentration: three customers were 92% of Q2-2026 revenue
  - **Analyst D** the second-half step-up that management is counting on slips into 2027

Sales would have to stop near $360M, with adjusted earnings per share near $0.30. That needs 1.6-terabit material to cap shipments at or below the committed amount, the new Texas lines to qualify late and a large customer to push orders out, leaving fixed costs under-absorbed. Analyst D goes furthest, matched by Analyst G on sales, to sales of $310M and adjusted earnings per share of $0.08, because D lets the whole second-half step-up slip into 2027 while operating costs stay at their higher level.

The chief executive could commit only part of the 1.6-terabit volume, and the company softened its year view from exceeding to around its target between May and August.

The seven lows run from $310M (Analyst D) to $415M (Analyst C).

First sign A fourth-quarter sales outlook well short of the company's year view, given on 5 November 2026.

#### The odds the analysts give

Two questions each analyst answers with a probability.

Sales: the company's own normal, its year-over-year growth over the last eight quarters, +4.2% to +145.5%.

Growth above +145.5% on Q4 2025, the company's highest in eight quarters (Q1 2025)

96% the seven: 85% to 99%

On Q4 2025's $134M that is fourth-quarter sales above $330M.

Growth below +4.2%, the company's lowest in eight quarters (Q3 2024)

1% the seven: 0.1% to 2%

On Q4 2025's $134M that is fourth-quarter sales below $140M.

Together: 97% odds of a quarter outside the company's normal.

#### Surfaced outlier views

For Q4-2026 the seven analysts sit within 12.4% of the PricedIn number on sales and within 32.4% on adjusted EPS. The furthest, and why:

- **Analyst F** · Q4-2026: sales **$425M**, the lowest of the seven (PricedIn $485M)
  Why Analyst F cuts the company's path because it names signal-processor and amplifier-chip supply as the limit and reads the change from exceeding to around the year target as a warning. Its gross profit of $132M sits below PricedIn gross profit of $150M, and it adds interest on new equipment loans, leaving adjusted earnings per share of $0.55.
  “I put the fourth quarter at $425 million and the year at about $1.04 billion, with the company's figure near my high.”
- **Analyst G** · Q4-2026: adjusted EPS **$0.50**, the lowest of the seven (PricedIn $0.74)
  Why Analyst G holds sales to $435M for qualification and firmware delays, then layers on heavier costs: total operating expenses of $94.0M and interest expense of $4.00M. That leaves book net income of $39.7M against PricedIn net income of $58.0M, spread over a larger diluted share count.
  “This supports a fourth-quarter 2026 middle of $435 million rather than the roughly $484 million needed to meet $1.1 billion for the year.”
- **Analyst B** · Q4-2026: sales **$477M** and adjusted EPS **$0.80**, near the PricedIn numbers of $485M and $0.74, by a different route
  Why Analyst B reaches adjusted earnings per share of $0.80, near the PricedIn number, on slightly lower sales of $477M, because it holds total operating expenses to $83.8M against PricedIn operating expenses of $92.0M. The others need more sales to earn the same.
  “We expect Applied Optoelectronics to deliver third quarter 2026 revenue near the midpoint of management's guidance at 273 million dollars and adjusted earnings per share of 0.19 dollars, followed by a sharp fourth quarter ramp to around 477 million dollars as new 800 gigabit and 1.6 terabit transceiver capacity comes online, bringing full-year 2026 revenue to 1.093 billion dollars and adjusted earnings per share to 0.98 dollars.”

#### The cases

The analyst with the highest 1-in-10 high argues the bull case; the one with the lowest 1-in-10 low argues the bear case. Each claim stands on a line the harness replays. The other analysts adopt a line or deny in a sentence, before their finals.

- The bull case · Analyst D · Q4-2026: sales $620M, adjusted EPS $1.12, as the 1-in-10 high
  The case Fourth-quarter sales can clear the company's more-than-$500 million capacity remark by a wide margin, toward $620 million, because that remark already assumes about 60 percent growth from the third quarter, demand for 800 gigabit and 1.6 terabit is projected to exceed capacity through mid-2027, and year-end output is planned above 650,000 pieces a month against roughly 200,000 now. If the December rate is in place for more of the quarter than that remark assumed, and customers take what they have already asked for, the quarter lands in this tail rather than at $500 million. Earnings per share can clear a dollar on that sales level because 1.6 terabit is the highest-margin product, and the company's own target is that first-quarter 1.6 terabit revenue doubles the fourth quarter, which requires the fourth quarter to already be a large, high-mix print.
  “Speaker not named: In Q4, I think based on your capacity, we should be able to deliver, I would say, more than $500 million revenue.” “Speaker not named: It's like 60% of growth from Q3 to Q4.” “Speaker not named: Looking ahead, we continue to expect by the end of this year that we will be capable of producing over 650,000 pieces of 800G and 1.6 terabit products per month.” “Speaker not named: The more we deliver for 1.60, the higher gross margin it will be.” “Speaker not named: Q1 next year will be double Q4.” “Speaker not named: Looking ahead, forecast demand for 800G and 1.6 terabit modules are projected to continue to exceed our production capacity through mid-2027.”
  Verdicts: adopted by 0, denied by 6
- The bear case · Analyst D · Q4-2026: sales $310M, adjusted EPS $0.08, as the 1-in-10 low
  The case Fourth-quarter sales can stall near $310 million, only a modest step from a weak third quarter, because the company can commit only $70 million to $80 million of 1.6 terabit and says the binding change is the digital signal processor and amplifier, not empty factory space. 800 gigabit revenue was only $12.8 million in the second quarter, the new Texas plant starts initial production only late in the third quarter, and 100 gigabit is already losing $20 million to $25 million, so the 60 percent jump does not have to arrive. Earnings per share stay near eight cents because the margin improvement depends on how much 1.6 terabit is delivered, and that is the product the parts shortage caps.
  “Speaker not named: but right now, while we can commit maybe, I would say, $70 million to $80 million in Q4,” “Speaker not named: But right now, the big change, as I say, is the DSP and TIA.” “Speaker not named: 800G revenue of $12.8 million, or 11.9% of our total data center revenue, increased more” “Speaker not named: We continue to expect to begin initial production in this facility late in the third quarter.” “Speaker not named: I think we lose about 20 to 25 million dollars of revenue for 100G single-mortons transceiver.” “Speaker not named: The more we deliver for 1.60, the higher gross margin it will be.”
  Verdicts: adopted by 0, denied by 6

#### Watch

On 5 November 2026 the company gives its fourth-quarter outlook: a range above the chief executive's August capacity remark, with more 1.6-terabit volume, points higher; a range near the third quarter's pace, chip or Texas delays, or a cut to the year view points lower.