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Applied Optoelectronics is scaling 800G and 1.6T capacity as AI-driven optical demand surges, sharpening its challenge to major networking rivals.
Applied Optoelectronics AAOI is benefiting from accelerating optical networking demand, driven by artificial intelligence (AI) infrastructure investments and hyperscale data center upgrades. The company is seeing robust demand for 800G and 1.6T transceivers, putting it in direct competition with optical networking leaders Lumentum LITE and Coherent COHR.AAOI’s data center revenues surged 140.4% year over year to $107.7 million in second-quarter 2026. Revenues from 400G products increased more than fourfold, while 800G revenues climbed more than tenfold. Forecast demand for 800G and 1.6T products is expected to exceed production capacity through mid-2027.The company is aggressively expanding manufacturing to capture this demand. Monthly 800G and 1.6T capacity is expected to rise from nearly 200,000 units currently to more than 650,000 units by the end of 2026 and above 930,000 units by the end of 2027.Compared to competitors like Lumentum and Coherent, AAOI’s in-house laser manufacturing and rapid scaling of production capacity provide a strategic edge. The company’s ability to internally produce high-power lasers helps mitigate industry-wide component shortages, allowing it to meet customer demand more reliably. While Lumentum and Coherent are also major players, AAOI’s focus on U.S. manufacturing and its dual growth strategy across data center and CATV markets enhance its appeal, especially as potential U.S. restrictions on Chinese transceivers could further boost domestic demand.AAOI’s rapid capacity expansion, rising 800G/1.6T adoption and strong laser technology position the company to capture a larger share of AI-driven optical networking demand. For the third quarter of 2026, Applied Optoelectronics expects revenues between $255 million and $290 million.
