APPLIED OPTOELECTRONICS, INC.
For the period ended Jun 30, 2026. Filed Aug 6, 2026.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2026 · Filed Aug 6, 2026
AAOI$50.13+6.9%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2026-03-31; filed 2026-05-07.
0001437749-26-015620
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-06-30; filed 2026-08-06.
0001437749-26-026278
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 91 previous paragraphs and 96 current paragraphs.
51 unchanged; 29 reworded; 14 added; 11 removed; 0 previous and 2 current paragraphs rearranged.
Tables are not compared: 22 previous and 40 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (14)
Current report
Demand for our data center products remained strong during the six months ended June 30, 2026, driven by continued investments by hyperscale customers in artificial intelligence, cloud computing and high-speed networking infrastructure. We experienced significant growth in sales of data center products during the period, reflecting increased customer deployments and demand for higher speed optical connectivity solutions.
Current report
At the same time, the global economic environment remains subject to uncertainty resulting from evolving trade policies, tariffs, export controls, geopolitical developments and other macroeconomic factors. These conditions may impact the availability and cost of materials and components, customer purchasing decisions, deployment schedules and capital spending plans. In addition, changes in global trade policies and regulations could affect our manufacturing operations, supply chain and customer demand.
Current report
We continue to monitor these developments and have implemented strategies intended to reduce potential disruptions, including supply chain diversification, inventory management initiatives and operational efficiencies. However, future demand may be affected by changes in customer deployment schedules, inventory levels, capital spending plans and general market conditions.
Current report
Revenues for the six months ended June 30, 2026 increased by $140.3 million, or 69.2%, compared to the six months ended June 30, 2025. The increase was primarily driven by:
Current report
Future revenue trends are expected to depend on customer demand, customer deployment schedules, competitive pricing, supply chain conditions and broader macroeconomic conditions.
Current report
Cost of goods sold increased by $104.8 million, or 74.3%, for the six months ended June 30, 2026 compared to the six months ended June 30, 2025. The increase was primarily attributable to:
Current report
Research and development expense increased by $14.3 million, or 69.2%, for the three months ended June 30, 2026 compared to the three months ended June 30, 2025. The increase was primarily attributable to:
Current report
Research and development expense increased by $22.1 million, or 57.5%, for thesix months ended June 30, 2026 compared to thesix months ended June 30, 2025. The increase was primarily attributable to:
Current report
Sales and marketing expense increased by $3.4 million, or 41.2%, for the three months ended June 30, 2026 compared to the three months ended June 30, 2025. The increases were primarily attributable to:
Current report
Sales and marketing expense increased by $4.3 million, or 32.2%, for thesix months ended June 30, 2026 compared to thesix months ended June 30, 2025. The increases were primarily attributable to:
Current report
Interest income increased by $3.0 million, or 1,035.7%, for the three months ended June 30, 2026 compared to the three months ended June 30, 2025. Interest income increased by $4.5 million, or 875.5%, for thesix months ended June 30, 2026 compared to thesix months ended June 30, 2025. The increase was primarily attributable to higher average cash and savings balances, as well as higher interest income earned on those balances during the period.
Current report
Interest expense increased by $0.1 million, or 13.3%, for the three months ended June 30, 2026 compared to the three months ended June 30, 2025. Interest expense increased by $0.04 million, or 2.2%, for thesix months ended June 30, 2026 compared to thesix months ended June 30, 2025. The increase was primarily attributable to changes in outstanding debt balances and related financing costs during the period.
Current report
Comprehensive loss increased by $19.4 million, or 133.0%, for the six months ended June 30, 2026 as compared to the six months ended June 30, 2025.
Current report
The increase in prepayments for equipment and others, primarily reflects advance payments for equipment and facility related capital expenditures associated with the Company's manufacturing expansion projects in the United States, Taiwan and China. These advance payments are expected to be reclassified to property, plant and equipment as the related assets are received and placed into service.
Removed paragraphs (11)
Previous report
Recent developments in global trade policy, including the imposition of new and increased tariffs and export restrictions by the United States and certain foreign governments, have increased uncertainty in the global economic environment. In particular, ongoing trade tensions between the United States and China, as well as other key markets such as Taiwan, have resulted in higher tariffs and the potential for additional restrictions affecting the semiconductor industry.
Previous report
These developments have increased our costs for materials, components, and finished goods and may continue to disrupt our supply chain and manufacturing operations. In addition, uncertainty related to trade policies and geopolitical conditions may adversely affect customer demand, including demand from hyperscale data center customers, and could result in delays or reductions in customer orders.
Previous report
In February 2026, the U.S. Supreme Court held that tariffs imposed under the International Emergency Economic Powers Act (“IEEPA”) were unlawful, and the U.S. Customs and Border Protection subsequently announced IEEPA-based tariff provisions would be terminated effective February 24, 2026.
Previous report
During the quarter ended March 31, 2026, the Company entered into a Grant Agreement (the “Grant Agreement”) with the State of Texas, acting through the Office of the Governor's Texas CHIPS Office, under the Texas Semiconductor Innovation Fund. Under the Grant Agreement, the Company is eligible to receive cost-reimbursement of up to approximately $20.9 million for equipment expenditures related to the expansion of its semiconductor manufacturing and research and development capabilities in Sugar Land, Texas. The Grant Agreement terminates on December 31, 2027, or upon the earlier completion of the grant project or depletion of grant funds. The project is anticipated to create approximately 500 new full-time jobs.
Previous report
Receipt of funding under the Grant Agreement is subject to the Company’s compliance with specified program requirements and approval of qualifying expenditures by the Office of the Governor. As of March 31, 2026, no amounts have been recognized in the Company’s financial statements. The Company expects to recognize any funding received under the program as qualifying expenditures are incurred and the related conditions are satisfied.
Previous report
We continue to monitor these developments and have implemented mitigation strategies, including pricing adjustments, supply chain diversification, and operational efficiencies. However, these efforts may not fully offset the impact of increased costs or supply disruptions. Accordingly, these conditions could materially and adversely affect our business, results of operations, and financial condition.
Previous report
Management believes the volume increase was primarily attributable to stronger customer demand and increase purchases from large data center customers to support ongoing capacity expansion and network infrastructure upgrades. Based on current market conditions, management expects these demand trends to continue for the foreseeable future, subject to customer deployment timing, supply chain conditions and other factors related to our industry.
Previous report
Research and development expense increased by $7.8 million, or 44.1%, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025. The increases were primarily due to increased personnel-related expense and increased R&D related project costs. The increases in R&D expenses were driven by customer demand for new products as well as acceleration of previously-planned project expenditures which were necessary to accommodate accelerated demand projections for these products from certain customers.
Previous report
Sales and marketing expense increased by $1.0 million, or 18.5%, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025. The increases were primarily attributable to:
Previous report
Interest income increased by $1.5 million, or 675.4%, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025. The increase was due to higher saving balances in the first quarter of 2026.
Previous report
Interest expense decreased by$0.1 million, or 7.6%, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025. The decrease was due tothe lower effective interest rate for our 2030 Notes.
Reworded paragraphs (29)
Previous wording
We have based these forward-looking statements largely on our current expectations and projections about future events and industry and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. Such forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results and the timing of events to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified in "Part II —Item 1A. Risk Factors" provided below, those discussed in other documents we file with the SEC, including our Report on Form 10-K for the year ended December 31, 2025 and subsequent Quarterly Reports on Form 10-Q, and geopolitical tensions and conflicts, including with respect to international trade policies in areas such as tariffs and export controls. Furthermore, such forward-looking statements speak only as of the date of this Quarterly Report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of this Quarterly Report.
Current wording
We have based these forward-looking statements largely on our current expectations and projections about future events and industry and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. Such forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results and the timing of events to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified in "Part II —Item 1A. Risk Factors" provided below, those discussed in other documents we file with the SEC, including our Report on Form 10-K for the year ended December 31, 2025 and subsequent Quarterly Reports on Form 10-Q, and geopolitical tensions and conflicts, including with respect to international trade policies in areas such as tariffs and export controls, and the availability, timing and amount of refunds of previously paid tariffs. Furthermore, such forward-looking statements speak only as of the date of this Quarterly Report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of this Quarterly Report.
Previous wording
We are a leading, vertically integrated provider of fiber-optic networking products. We target four networking end-markets: internet data centers, CATV, telecom, and FTTH. We design and manufacture a range of optical communications products at varying levels of integration, from components, subassemblies and modules to complete turn-key equipment. In designing products for our customers, we typically begin with the fundamental building blocks of lasers and laser components. From these foundational products, we design and manufacture a wide range of products to meet our customers’ needs and specifications, and such products differ from each other by their end market, intended use and level of integration. We are primarily focused on the higher-performance segments within the internet data center, CATV, telecom and FTTH markets which increasingly demand faster connectivity and innovation.
Current wording
We are a leading, vertically integrated provider of fiber-optic networking products. We target four networking end-markets: internet and AI data centers, CATV, telecom, and FTTH. We design and manufacture a range of optical communications products at varying levels of integration, from components, subassemblies and modules to complete turn-key equipment. In designing products for our customers, we typically begin with the fundamental building blocks of lasers and laser components. From these foundational products, we design and manufacture a wide range of products to meet our customers’ needs and specifications, and such products differ from each other by their end market, intended use and level of integration. We are primarily focused on the higher-performance segments within the internet data center, CATV, telecom and FTTH markets which increasingly demand faster connectivity and innovation.
Previous wording
The four end markets we target are all driven by significant bandwidth demand fueled by the growth of network-connected devices, video traffic, cloud computing and online social networking. Within the internet data center market, we benefit from the increasing use of higher-capacity optical networking technology as a replacement for older, lower-speed optical interconnects, particularly as speeds reach 800 Gbps and above, as well as the movement to open internet data center architectures and the increasing use of in-house equipment design among leading internet companies. Within the CATV market, we benefit from a number of ongoing trends including the move to higher bandwidth networks among CATV service providers, especially the desire by CATV multiple system operators ("MSOs") to increase the return-path bandwidth available to offer to their customers. In the FTTH market, we benefit from continuing Passive Optical Networks ("PON") deployments and system updates among telecom service providers. In the telecom market, we benefit from deployment of new high-speed fiber-optic networks by telecom network operators, including 5G networks.
Current wording
The four end markets we target are all driven by significant bandwidth demand fueled by the growth of artificial intelligence (AI), cloud computing, network-connected devices, video traffic, and online social networking. Within the data center market, AI workloads are fueling the retooling of existing data centers and the construction of purpose-built data centers for AI, in both cases significantly increasing demand for higher speed optical networking technology. Existing internet data centers are also being upgraded with higher speed optical networking equipment to support ever-increasing data traffic. Within the CATV market, we benefit from a number of ongoing trends including the move to higher bandwidth networks among CATV service providers, especially the desire by CATV multiple system operators ("MSOs") to increase the return-path bandwidth available to offer to their customers. In the FTTH market, we benefit from continuing Passive Optical Networks ("PON") deployments and system updates among telecom service providers. In the telecom market, we benefit from deployment of new high-speed fiber-optic networks by telecom network operators, including 5G networks.
Previous wording
We have three manufacturing sites: Sugar Land, Texas, Ningbo, China and Taipei, Taiwan. Our research and development functions are generally partnered with our manufacturing locations, and we have an additional research and development facility in Duluth, Georgia. In our Sugar Land facility, we manufacture laser chips (utilizing our MBE and MOCVD processes), transceivers for the internet data center market, subassemblies and components. The subassemblies are used in the manufacture of components by our other manufacturing facilities or sold to third parties as modules. We manufacture our laser chips only within our Sugar Land facility, where our laser design team is located. In our Taiwan location, we manufacture optical components, such as our butterfly lasers, which incorporate laser chips, subassemblies and components manufactured within our Sugar Land facility. Additionally, in our Taiwan location, we manufacture transceivers for the internet data center, telecom, FTTH and other markets. We also manufacture CATV outdoor equipment including amplifiers. In our China facility, we do certain assembly operations on various products, including some optical subassemblies and transceivers for the CATV transmitters (at the headend), some CATV outdoor equipment and transceivers for our internet data center market. The extent of the assembly operations in our China facility do not always establish the country of origin for these products as China for U.S. tariff purposes. Each manufacturing facility conducts testing on the components, modules or subsystems it manufactures and each facility is certified to ISO 9001:2015. Our facilities in Ningbo, China, Taipei, Taiwan, and Sugar Land, Texas are all certified to ISO 14001:2015.
Current wording
We have three manufacturing sites: Sugar Land, Texas, Ningbo, China and Taipei, Taiwan. Our research and development functions are generally partnered with our manufacturing locations, and we have an additional research and development facility in Duluth, Georgia. In our Sugar Land facility, we manufacture laser chips (utilizing our MBE and MOCVD processes), transceivers for the internet data center market, subassemblies and components. The subassemblies are used in the manufacture of components by our other manufacturing facilities or sold to third parties as modules. We manufacture our laser chips only within our Sugar Land facility, where our laser design team is located. In our Taiwan location, we manufacture optical components, such as our butterfly lasers, which incorporate laser chips, subassemblies and components manufactured within our Sugar Land facility. Additionally, in our Taiwan location, we manufacture transceivers for the internet data center, telecom, FTTH and other markets. We also manufacture CATV outdoor equipment including amplifiers. In our China facility, we do certain assembly operations on various products, including some optical subassemblies and transceivers for the CATV transmitters (at the headend), some CATV outdoor equipment and transceivers for our internet data center market. The extent of the assembly operations in our China facility do not always establish the country of origin for these products as China for U.S. tariff purposes. Each manufacturing facility conducts testing on the components, modules or subsystems it manufactures, and each facility is certified to ISO 9001:2015. Our facilities in Ningbo, China, Taipei, Taiwan, and Sugar Land, Texas are all certified to ISO 14001:2015. We have recently announced plans to expand our manufacturing space in and around the Sugar Land, Texas area and are currently in the process of building out suitable facilities for this expansion. We expect the first of these new facilities to begin production later in 2026.
Previous wording
We generate revenue through the sale of our products to equipment providers and network operators for the internet data center, CATV, telecom, FTTH and other markets. We derive a significant portion of our revenue from our top ten customers, and we anticipate that we will continue to do so for the foreseeable future. The following charts provide the revenue contribution from each of the markets we served for the three months ended March 31, 2026 and 2025 (in thousands, except percentages):
Current wording
We generate revenue through the sale of our products to equipment providers and network operators for the internet data center, CATV, telecom, FTTH and other markets. We derive a significant portion of our revenue from our top ten customers, and we anticipate that we will continue to do so for the foreseeable future. The following charts provide the revenue contribution from each of the markets we served for the three and six months ended June 30, 2026 and 2025 (in thousands, except percentages):
Previous wording
Revenues for the three months ended March 31, 2026 increased by $51.3 million, or 51.4%, compared to the three months ended March 31, 2025. The increase was primarily attributable to:
Current wording
Revenues for the three months ended June 30, 2026 increased by $89.0 million, or 86.4%, compared to the three months ended June 30, 2025. The increase was primarily driven by:
Previous wording
For the three months ended March 31, 2026 and 2025, our top ten customers represented 98% and 97% of our revenue, respectively. We believe that diversifying our customer base is critical for our future success, since reliance on a small number of key customers makes our ability to forecast future results dependent upon the accuracy of the forecasts we receive from those key customers. We continue to prioritize new customer acquisition and growth of diverse revenue streams.
Current wording
For the three months ended June 30, 2026 and 2025, our top ten customers represented 99% and 98% of our revenue, respectively. For the six months ended June 30, 2026 and 2025, our top ten customers represented 99% and 97% of our revenue, respectively. We believe that diversifying our customer base is critical for our future success, since reliance on a small number of key customers makes our ability to forecast future results dependent upon the accuracy of the forecasts we receive from those key customers. We continue to prioritize new customer acquisition and growth of diverse revenue streams.
Previous wording
Cost of goods sold increased by $37.9 million, or 54.7%, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025. The increase was primarily attributable to:
Current wording
Cost of goods sold increased by $66.9 million, or 93.2%, for the three months ended June 30, 2026, compared to the three months ended June 30, 2025. The increase was primarily attributable to:
Previous wording
Gross margin decreased to 29.1% for thethree months ended March 31, 2026, compared to 30.6% in the three months ended March 31, 2025. Despite the decrease in gross margin percentage, gross profit increased by $13.4 million or 43.8%, driven by higher revenues. The decrease in gross margin is primarily attributable to:
Current wording
Gross margin decreased to 27.7% for the three months ended June 30, 2026, compared to 30.3% for the three months ended June 30, 2025. Despite the decrease in gross margin percentage, gross profit increased by $22.0 million, or 70.7%, driven by higher revenues. The decrease in gross margin was primarily attributable to:
Previous wording
Management continues to monitor tariff developments and their potential impact on its cost structure and pricing strategy. Based on current conditions, management expects shipping costs and tariff-related impacts to continue in 2026, likely at a reduced level compared to 2025 due to the Supreme Court’s decision overturning the IEPPA-related tariffs. Management cannot currently assess whether this tariff trend will continue given the Administration’s current stated goal to replace the IEPPA tariffs with tariffs under other sections of federal law (e.g. Section 301 tariffs, reciprocal tariffs, etc.).
Current wording
Management continues to monitor tariff developments and their potential impact on its cost structure and pricing strategy. Based on current conditions, management expects shipping costs and tariff-related impacts to continue in 2026, likely at a reduced level compared to 2025 due to the Supreme Court’s decision overturning the IEEPA-related tariffs. Management cannot currently assess whether this tariff trend will continue given the Administration’s current stated goal to replace the IEEPA tariffs with tariffs under other sections of federal law (e.g. Section 301 tariffs, reciprocal tariffs, etc.).
Previous wording
General and administrative expense increased by $8.6 million, or 52.7%, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025. The increases were primarily due to increased personnel-related expenseand expanded corporate infrastructure to support company growth.
Current wording
General and administrative expense increased by $13.2 million, or 71.7%, for the three months ended June 30, 2026 compared to the three months ended June 30, 2025. General and administrative expense increased by $21.8 million, or 62.7%, for the six months ended June 30, 2026 compared to the six months ended June 30, 2025. The increase was primarily due to increased personnel-related expenseand expanded corporate infrastructure to support company growth.
Previous wording
Other income (expenses) decreased by $1.6 million, or 334.7%, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025. The decrease was mainly due to thenegative foreign exchange impact.
Current wording
Other income (expenses) decreased by $6.5 million, or 87.7%, for the three months ended June 30, 2026 compared to the three months ended June 30, 2025. Other income (expenses) decreased by $8.1 million, or 102.5%, for the six months ended June 30, 2026 compared to the six months ended June 30, 2025. The decrease was mainly due to the negative foreign exchange impact.
Previous wording
The Company’s effective tax rates for the three months ended March 31, 2026 and 2025 were (7.9)% and 0%, respectively. The effective tax rate varied from the federal statutory rate of 21% primarily due to the change of the valuation allowance on federal, state, and Taiwan deferred tax assets ("DTA"), and the R&D super deduction in China.
Current wording
The Company’s effective tax rates for the three months ended June 30, 2026 and 2025 were (6.0)% and 0%, respectively. For the six months ended June 30, 2026 and 2025, the effective tax rates were (6.7)% and 0.0%, respectively. The effective tax rate varied from the federal statutory rate of 21% primarily due to the change of the valuation allowance on federal, state, and Taiwan deferred tax assets ("DTA"), and the R&D super deduction in China.
Previous wording
Comprehensive loss increased by $4.5 million, or 47.9%, for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025.
Current wording
Comprehensive loss increased by $14.9 million, or 285.8%, for the three months ended June 30, 2026, compared to the three months ended June 30, 2025.
Previous wording
As of March 31, 2026, we had $61.7 millionof unused borrowing capacity from all of our loan agreements. As of March 31, 2026, our cash, cash equivalents and restricted cash totaled $449.4 million. Cash and cash equivalents are held for working capital purposes and are invested primarily in money market or time deposit funds. We do not enter into investments for trading or speculative purposes.
Current wording
As of June 30, 2026, we had $106.5 millionof unused borrowing capacity from all of our loan agreements. As of June 30, 2026, our cash, cash equivalents and restricted cash totaled $508.8 million. Cash and cash equivalents are held for working capital purposes and are invested primarily in money market or time deposit funds. We do not enter into investments for trading or speculative purposes.
Previous wording
On March 12, 2026, the Company entered into Amendment No. 1 to the Agreement with the Sales Agents, to increase the aggregate offering price from $250 million to $500 million. On April 2, 2026, the Company completed the ATM Offering and sold approximately 4.8 million shares at a weighted average price of $103.51 per share, providing proceeds of approximately $490 million, net of expenses and underwriting discounts and commissions.
Current wording
On February 26, 2026, the Company entered into an Equity Distribution Agreement (the "First EDA") with Raymond James & Associates and Needham & Company, LLC (collectively, the "Sales Agents" and each, a "Sales Agent") pursuant to which the Company could issue and sell shares of the Company’s common stock, par value $0.001 per share having an aggregate offering price of up to $250 million (the "First ATM Offering"), from time to time through the Sales Agents. On March 12, 2026, the Company entered into Amendment No. 1 to the First EDA with the Sales Agents, to increase the aggregate offering price from $250 million to $500 million. On April 2, 2026, the Company completed the First ATM Offering and sold approximately 4.8 million shares at a weighted average price of $103.51 per share, providing proceeds of approximately $490 million, net of expenses and underwriting discounts and commissions.
Previous wording
On February 26, 2026, the Company entered into an Equity Distribution Agreement (the "Agreement") with Raymond James & Associates and Needham & Company, LLC (collectively, the "Sales Agents" and each, a "Sales Agent") pursuant to which the Company could issue and sell shares of the Company’s common stock, par value $0.001 per share (the "Shares") having an aggregate offering price of up to $250 million (the "ATM Offering"), from time to time through the Sales Agents.
Current wording
On May 14, 2026, the Company entered into an Equity Distribution Agreement (the "Second EDA") with the Sales Agents pursuant to which the Company could issue and sell shares of the Company's common stock, par value $0.001 per share (the "Shares") having an aggregate offering price of up to $600 million (the "Second ATM Offering"), from time to time through the Sales Agents.
Previous wording
Upon delivery of a placement notice and subject to the terms and conditions of the Agreement, sales of the Shares were made through the Sales Agents in transactions that are deemed to be “at the market” offerings as defined in Rule 415 of the Securities Act of 1933, as amended (the "Securities Act"), including sales made through the facilities of the Nasdaq Global Market, the principal trading market for the Company’s common stock, on any other existing trading market for the Company’s common stock, to or through a market maker or as otherwise agreed by the Company and the Sales Agents. In the placement notice, the Company would designate the maximum number of Shares to be sold through the Sales Agents, the time period during which sales were requested to be made, the minimum price for the Shares to be sold, and any limitation on the number of Shares that could be sold in any one day. Subject to the terms and conditions of the Agreement, the Sales Agents would use their commercially reasonable efforts to sell Shares on the Company’s behalf up to the designated amount specified in the placement notice.
Current wording
Upon delivery of a placement notice and subject to the terms and conditions of the Second EDA, sales of the Shares were made through the Sales Agents in transactions that are deemed to be “at the market” offerings as defined in Rule 415 of the Securities Act of 1933, as amended (the "Securities Act"), including sales made through the facilities of the Nasdaq Global Market, the principal trading market for the Company’s common stock, on any other existing trading market for the Company’s common stock, to or through a market maker or as otherwise agreed by the Company and the Sales Agents. In the placement notice, the Company would designate the maximum number of Shares to be sold through the Sales Agents, the time period during which sales were requested to be made, the minimum price for the Shares to be sold, and any limitation on the number of Shares that could be sold in any one day. Subject to the terms and conditions of the Second EDA, the Sales Agents would use their commercially reasonable efforts to sell Shares on the Company’s behalf up to the designated amount specified in the placement notice.
Previous wording
The Agreement provided that each of the Sales Agents would be entitled to compensation of up to 2% of the gross sales price of the Shares sold through such Sales Agent from time to time. The Company also agreed to reimburse the Sales Agents for certain specified expenses in connection with the registration of Shares under state blue sky laws and any filing with, and clearance of the offering by, the Financial Industry Regulatory Authority Inc., not to exceed $10,000 in the aggregate, and any associated application fees incurred. The Company agreed to indemnify the Sales Agents against certain liabilities, including liabilities under the Securities Act, or to contribute to payments that the Sales Agents could be required to make because of any of those liabilities.
Current wording
The Second EDA provided that each of the Sales Agents would be entitled to compensation of up to 2% of the gross sales price of the Shares sold through such Sales Agent from time to time. The Company also agreed to reimburse the Sales Agents for certain specified expenses in connection with the registration of Shares under state blue sky laws and any filing with, and clearance of the offering by, the Financial Industry Regulatory Authority Inc., not to exceed $10,000 in the aggregate, and any associated application fees incurred. The Company agreed to indemnify the Sales Agents against certain liabilities, including liabilities under the Securities Act, or to contribute to payments that the Sales Agents could be required to make because of any of those liabilities.
Previous wording
The details of the shares of common stock sold through the ATM Offering as of the end of March 31, 2026 are as follows (in thousands, except shares and weighted average per share price):
Current wording
The details of the shares of common stock sold through the First ATM Offering and the Second ATM Offering as of the end of June 30, 2026 are as follows (in thousands, except shares and weighted average per share price):
Previous wording
Net cash used in operating activities was $85.4 million during the three months ended March 31, 2026 as compared to $50.9 million during the three months ended March 31, 2025, an increase of 67.6%. Net cash used in operating activities consisted of our net loss of $14.3 million, adjusted for non-cash items of $19.0 million, and a net use of cash from changes in working capital of $90.1 million.
Current wording
Net cash used in operating activities was $73.8 million during the six months ended June 30, 2026 as compared to $116.4 million during the six months ended June 30, 2025, a decrease of 36.6%. Net cash used in operating activities consisted of our net loss of $37.1 million, adjusted for non-cash items of $33.9 million, and a net use of cash from changes in working capital of $70.6 million.
Previous wording
As of March 31, 2026, Digicomm represented approximately 74.5% of total accounts receivable. This concentration is primarily attributable to customer purchasing patterns, shipment timing, and billing concentration. Management has extended longer than typical payment terms to Digicomm in order to ensure Digicomm has adequate inventory on hand to quickly provide products to customers when needed for their network builds. The Company has a multi-year history with Digicomm and over this period the Company’s collection experience has been good. Digicomm’s payment history has generally been relatively consistent over time. In addition, to the extent customers in the Company’s data center business continue to grow relative to Digicomm, Management expects Accounts Receivable concentration with Digicomm to decline.
Current wording
As of June 30, 2026, Digicomm represented approximately 67.2% of total accounts receivable. This concentration is primarily attributable to customer purchasing patterns, shipment timing, and billing concentration. Management has extended longer than typical payment terms to Digicomm in order to ensure Digicomm has adequate inventory on hand to quickly provide products to customers when needed for their network builds. The Company has a multi-year history with Digicomm and over this period the Company’s collection experience has been good. Digicomm’s payment history has generally been relatively consistent over time. In addition, to the extent customers in the Company’s data center business continue to grow relative to Digicomm, Management expects Accounts Receivable concentration with Digicomm to decline.
Previous wording
For the three months ended March 31, 2026, revenues from Digicomm were approximately $66.7 million, representing approximately 44.1% of consolidated revenues. These revenues were primarily attributable to the CATV product category.
Current wording
For the six months ended June 30, 2026, revenues from Digicomm were approximately $147.0 million, representing approximately 42.8% of consolidated revenues. These revenues were primarily attributable to the CATV product category.
Previous wording
Net cash used in investing activities was $68.1 million during the three months ended March 31, 2026 compared with $36.3 million in the three months ended March 31, 2025. The increase was primarily driven by capital expenditures of $58.2 million, which included $26.6 million capital expenditures in the US, $9.9 million in Taiwan, and $21.7 million in China. 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. Based on current demand trends, Management expects that 2026 CapEx will be materially higher than 2025 CapEx.
Current wording
Net cash used in investing activities was $633.7 million during the six months ended June 30, 2026 compared with $75.2 million in the six months ended June 30, 2025, an increase of 742.8%, primarily driven by capital expenditures of $335.1 million, which included $169.0 million capital expenditures in the US, $62.8 million in Taiwan, and $103.3 million in China. 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. Management expects that 2026 CapEx will continue to be elevated above past year levels, driven by the need to expand production capacity to meet customer demand.
Previous wording
Net cash provided by financing activities was $389.3 million during the three months ended March 31, 2026 compared with $70.0 million in the three months ended March 31, 2025. The increase was primarily attributable to the net proceeds of $382.4 million from the ATM Offering, the net proceeds from line of credit borrowings of $6.8 million, and net proceeds from bank acceptance payable of $1.8 million, partially offset by tax payments related to share-based compensation of $1.7 million.
Current wording
Net cash provided by financing activities was $980.3 million during the six months ended June 30, 2026 compared with $196.0 million in the six months ended June 30, 2025, an increase of 400.2%, primarily attributable to the net proceeds of $1.03 billion from the ATM Offering, the net proceeds from line of credit borrowings of $22.2 million, the net proceeds of $1.7 million from issuance of notes payable and long-term debt, partially offset by net proceeds from bank acceptance payable of $0.6 million, and tax payments related to share-based compensation of $71.2 million.
Previous wording
As of March 31, 2026, we have lending arrangements with one U.S. bank, two financial institution in Taiwan, and four financial institutions in China. As of March 31, 2026, we were in compliance with the covenants in the lending arrangements. As of March 31, 2026, we had $61.7 million ofunused borrowing capacity.
Current wording
As of June 30, 2026, we have lending arrangements with one U.S. bank, three financial institutions in Taiwan, and sixfinancial institutions in China. As of June 30, 2026, we were in compliance with the covenants in the lending arrangements. As of June 30, 2026, we had $106.5 million ofunused borrowing capacity.
Previous wording
We had cash, cash equivalents and restricted cash of $449.4 million as of March 31, 2026, an increase of approximately $233.4 million compared to December 31, 2025. Our future capital requirements will depend on many factors including our growth rate, the timing and extent of spending to support our research and development efforts, the expansion of our sales and marketing activities, the introduction of new and enhanced products, the building improvement of a new factory in Taiwan or U.S., changes in our manufacturing capacity and the continuing market acceptance of our products.
Current wording
We had cash, cash equivalents and restricted cash of $508.8 million as of June 30, 2026, an increase of approximately $292.7 million compared to December 31, 2025. Our future capital requirements will depend on many factors including our growth rate, the timing and extent of spending to support our research and development efforts, the expansion of our sales and marketing activities, the introduction of new and enhanced products, the building improvement of a new factory in Taiwan or U.S., changes in our manufacturing capacity and the continuing market acceptance of our products.
Previous wording
As of March 31, 2026, wehad a total loan balance (excluding convertible notes) of $41.2 million from various lenders and had $61.7 million available borrowing capacity on existing credit lines. Should additional liquidity be needed, our Board may authorize issuance of additional common stock under an at-the-market offering in the future (see the discussion of "Liquidity and Capital Resources" in Item 2).
Current wording
As of June 30, 2026, we had a total loan balance (excluding convertible notes) of $58.9 million from various lenders and had $106.5 million available borrowing capacity on existing credit lines. Should additional liquidity be needed, our Board may authorize issuance of additional common stock under an at-the-market offering in the future (see the discussion of "Liquidity and Capital Resources" in Item 2).
Previous wording
During the three months ended March 31, 2026, we experienced continued inflationary pressures in certain areas of our operations. However, these pressures did not have a material impact on our business, financial condition, or results of operations. Compared to other global markets, China has experienced relatively stable inflationary conditions. While we have implemented pricing actions and operational efficiencies to mitigate the effects of inflation, there can be no assurance that these measures will fully offset future cost increases. Continued inflationary pressures, particularly related to labor, tariffs and raw materials, could adversely affect our cost structure, gross margins and operating results in future periods.
Current wording
During the six months ended June 30, 2026, we experienced continued inflationary pressures in certain areas of our operations. However, these pressures did not have a material impact on our business, financial condition, or results of operations. While we have implemented pricing actions, supply chain diversification initiatives and operational efficiencies to mitigate the effects of inflation, there can be no assurance that these measures will fully offset future cost increases. Continued inflationary pressures, particularly related to labor, tariffs and raw materials, could adversely affect our cost structure, gross margins and operating results in future periods.
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
Gross margin decreased to 28.3% for the six months ended June 30, 2026, compared to 30.4% for the six months ended June 30, 2025. Despite the decrease in gross margin percentage, gross profit increased by $35.4 million, or 57.4%, driven by higher revenues. The decrease in gross margin was primarily attributable to:
Current report — wording carried from elsewhere
The increase in gross profit was primarily attributable to: