APPLIED OPTOELECTRONICS, INC.

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, 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.

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", 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.

Previous 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.

Current wording

We are a leading, vertically integrated provider of fiber-optic networking products. We target four networking end-markets: internet and artificial intelligence (“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 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.

Current wording

The four end markets we target are all driven by significant bandwidth demand fueled by the growth of 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. 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.

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 are expanding our manufacturing space in and around these existing facilities and are currently in the process of building out suitable facilities for this expansion. We expect the first of these new facilities to begin operation later in 2026.

Previous wording

Our business depends on winning competitive bid selection processes to develop components, systems and equipment for use in our customers’ products. These selection processes are typically lengthy, and as a result our sales cycles will vary based on the level of customization required, market served, whether the design win is with an existing or new customer and whether our solution being designed in our customers’ product is our first generation or subsequent generation product. We do not have any long-term purchase commitments (in excess of one year) with any of our customers, most of whom purchase our products on a purchase order basis. However, once one of our solutions is incorporated into a customer’s design, we believe that our solution is likely to continue to be purchased for that design throughout that product’s life cycle because of the time and expense associated with redesigning the product or substituting an alternative solution.

Current wording

Our business depends on winning competitive bid selection processes to develop components, systems and equipment for use in our customers’ products. These selection processes are typically lengthy, and as a result our sales cycles will vary based on the level of customization required, market served, whether the design win is with an existing or new customer and whether our solution being designed in our customers’ product is our first generation or subsequent generation product. However, once one of our solutions is incorporated into a customer’s design, we believe that our solution is likely to continue to be purchased for that design throughout that product’s life cycle because of the time and expense associated with redesigning the product or substituting an alternative solution.

Previous wording

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 wording

Demand for our data center products remained strong during the nine months ended September 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.

Previous wording

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 wording

Although market demand remains favorable, the global economic environment continues to be 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 also affect our manufacturing operations, supply chain and customer demand.

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 and six months ended June 30, 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 months and nine months ended September 30, 2026 and 2025 (in thousands, except percentages):

Previous 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:

Current wording

Revenues for the three months ended September 30, 2026 increased by $151.2 million, or 127.5%, compared to the three months ended September 30, 2025. The increase was primarily driven by:

Previous wording

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 wording

Revenues for the nine months ended September 30, 2026 increased by $291.5 million, or 90.7%, compared to the nine months ended September 30, 2025. The increase was primarily driven by:

Previous wording

Future revenue trends are expected to depend on customer demand, customer deployment schedules, competitive pricing, supply chain conditions and broader macroeconomic conditions.

Current wording

Future revenue trends are expected to depend on customer demand, customer deployment schedules, capital spending levels, competitive pricing, supply chain conditions and broader macroeconomic conditions.

Previous 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.

Current wording

For each of the three and nine months ended September 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 $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:

Current wording

Cost of goods sold increased by $108.4 million, or 126.9%, for the three months ended September 30, 2026, compared to the three months ended September 30, 2025. The increase was primarily attributable to:

Previous wording

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 wording

Cost of goods sold increased by $213.2 million, or 94.1%, for the nine months ended September 30, 2026, compared to the nine months ended September 30, 2025. The increase was primarily attributable to:

Previous 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:

Current wording

Gross margin increased to 28.2% for the three months ended September 30, 2026, compared to 28.0% for the three months ended September 30, 2025. The increase in gross margin was primarily attributable to:

Previous wording

The increase in gross profit was primarily attributable to:

Current wording

Gross profit increased by $42.9 million, or 128.9%for the three months ended September 30, 2026, compared to the three months ended September 30, 2025. The increase in gross profit was primarily attributable to:

Previous wording

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 wording

Gross margin decreased to 28.3% for the nine months ended September 30, 2026, compared to 29.5% for the nine months ended September 30, 2025. Despite the decrease in gross margin percentage, gross profit increased by $78.3 million, or 82.5%, 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 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.).

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 through the remainder of 2026, although at a reduced level compared to 2025. Following the termination of tariffs imposed under IEEPA, the Administration implemented replacement measures under other provisions of federal law, including new tariffs under Section 301 of the Trade Act of 1974 that became effective July 24, 2026, subject to applicable exemptions. The trade environment remains uncertain, and additional tariff measures or changes to existing tariffs could affect our costs and pricing strategy. Accordingly, management cannot currently predict whether the reduction in tariff-related impacts will continue or the extent to which future tariff developments may affect our results of operations.

Previous 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.

Current wording

General and administrative expense increased by $11.3 million, or 55.6%, for the three months ended September 30, 2026 compared to the three months ended September 30, 2025. General and administrative expense increased by $33.1 million, or 60.1%, for the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025. The increase was primarily due to increased personnel-related costs, including increased share-based compensation expense, as well asexpanded corporate infrastructure to support the Company's growth.

Previous wording

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 wording

Interest income increased by $2.6 million, or 586.0%, for the three months ended September 30, 2026 compared to the three months ended September 30, 2025. Interest income increased by $7.1 million, or 740.7%, for thenine months ended September 30, 2026 compared to thenine months ended September 30, 2025. The increases were primarily attributable to higher average cash and investment balances, as well as higher interest income earned on those balances during the period.

Previous wording

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 wording

Interest expense increased by $0.3 million, or 35.4%, for the three months ended September 30, 2026 compared to the three months ended September 30, 2025. Interest expense increased by $0.4 million, or 13.5%, for thenine months ended September 30, 2026 compared to thenine months ended September 30, 2025. The increases were primarily attributable to higher average outstanding debt balances and related financing costs during the period.

Previous 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.

Current wording

Other income (expenses) increased by $7.5 million, or 1,072.1%, for the three months ended September 30, 2026 compared to the three months ended September 30, 2025. The increase was primarily attributable to the government subsidy income recognized during the period, as well as the positive foreign exchange impact. Government subsidy income primarily relates to grants received by the Company's China entity under local government incentive programs. Included in government subsidy income for the three months ended September 30, 2026 was approximately $3.5 million of income recognized under the Texas Semiconductor Innovation Fund. The grants were recognized in earnings upon satisfaction of the applicable grant conditions and when receipt became reasonably assured. Other income (expenses) decreased by $0.6 million, or 6.5%, for the nine months ended September 30, 2026 compared to the nine months ended September 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 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.

Current wording

The Company’s effective tax rates for the three months ended September 30, 2026 and 2025 were 27.3% and 0%, respectively. For the nine months ended September 30, 2026 and 2025, the effective tax rates were (18.0)% 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 $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 wording

Comprehensive loss decreased by $7.0 million, or 21.4%, for the nine months ended September 30, 2026 as compared to the nine months ended September 30, 2025.

Previous wording

The functional currency for the Company’s operations is generally the applicable local currency. Accordingly, the assets and liabilities of companies whose functional currency is other than the U.S. dollar are included in the consolidated financial statements by translating the assets and liabilities into the U.S. dollar at the exchange rates applicable at the end of the reporting period. Translation gains or losses are accumulated in other comprehensive income (loss) in the consolidated statements of shareholders’ equity and are also included in comprehensive loss.

Current wording

The functional currency for the Company’s operations is generally the applicable local currency. Accordingly, the assets and liabilities of companies whose functional currency is other than the U.S. dollar are included in the consolidated financial statements by translating the assets and liabilities into the U.S. dollar at the exchange rates applicable at the end of the reporting period. Translation gains or losses are accumulated in other comprehensive income (loss) in the consolidated statements of shareholders’ equity and are also included in comprehensive income (loss).

Previous 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.

Current wording

As of September 30, 2026, we had $63.4 millionof unused borrowing capacity from all of our loan agreements. As of September 30, 2026, our cash, cash equivalents and restricted cash totaled $621.5 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 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.

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, selling 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 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.

Current wording

On August 21, 2026, the Company entered into an Equity Distribution Agreement (the "Third 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 "Third 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 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.

Current wording

Upon delivery of a placement notice and subject to the terms and conditions of the Third 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 Third 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 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.

Current wording

The Third 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 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):

Current wording

The details of the shares of common stock sold through the First ATM Offering, the Second ATM Offering and the Third ATM Offering as of the end of September 30, 2026 are as follows (in thousands, except shares and weighted average per share price):

Previous wording

On December 23, 2024, the Company issued approximately $125.0 million aggregate principal amount of 2.75% convertible senior notes due 2030 (the "2030 Notes"), and on the same day consummated various separate, privately negotiated exchange agreements with certain holders of its 2026 Notes to exchange approximately $76.6 million principal amount of the 2026 Notes for aggregate consideration consisting of (i) $125.0 million aggregate principal amount of the 2030 Notes, (ii) 1,487,874 shares of the Company's common stock, par value $0.001 per share and (iii) approximately $0.9 million of cash in aggregate. Also, refer to Note 12 "Convertible Senior Notes" to the consolidated financial statements for further discussion of the 2030 Notes.

Current wording

On December 23, 2024, the Company issued approximately $125.0 million aggregate principal amount of 2.75% convertible senior notes due 2030 (the "2030 Notes"), and on the same day consummated various separate, privately negotiated exchange agreements with certain holders of its 2026 Notes to exchange approximately $76.7 million principal amount of the 2026 Notes for aggregate consideration consisting of (i) $125.0 million aggregate principal amount of the 2030 Notes, (ii) 1,487,874 shares of the Company's common stock, par value $0.001 per share and (iii) approximately $0.9 million of cash in aggregate. Also, refer to Note 12 "Convertible Senior Notes" to the consolidated financial statements for further discussion of the 2030 Notes.

Previous 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.

Current wording

Net cash used in operating activities was $76.7 million during the nine months ended September 30, 2026 as compared to $144.9 million during the nine months ended September 30, 2025, a decrease of 47.1%. Net cash used in operating activities consisted of our net loss of $30.8 million, adjusted for non-cash items of $56.2 million, and a net use of cash from changes in working capital of $102.1 million.

Previous wording

Management believes these changes are consistent with ongoing production ramp and customer demand dynamics, which may result in variability in operating cash flows from period to period.

Current wording

Management believes these changes are consistent with ongoing production ramp activities and customer demand dynamics, which may result in variability in operating cash flows from period to period.

Previous 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.

Current wording

As of September 30, 2026, Digicomm represented approximately 56.7% 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 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.

Current wording

For the nine months ended September 30, 2026, revenues from Digicomm were approximately $257.0 million, representing approximately 41.9% of consolidated revenues. These revenues were primarily attributable to the CATV product category.

Previous 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.

Current wording

Net cash used in investing activities was $1.11 billion during the nine months ended September 30, 2026, compared with $125.7 million during the nine months ended September 30, 2025, an increase of 782.9%, primarily driven by capital expenditures of $702.1 million, which included $315.4 million capital expenditures in the US, $177.4 million in Taiwan, and $209.3 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 capital expenditure 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 $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.

Current wording

Net cash provided by financing activities was $1.59 billion during the nine months ended September 30, 2026, compared with $348.2 million in the nine months ended September 30, 2025, an increase of 357.0%, primarily attributable to the net proceeds of $1.59 billion from the ATM Offerings, the net proceeds from line of credit borrowings of $20.5 million, the net proceeds of $40.0 million from issuance of notes payable and long-term debt, and net proceeds from bank acceptance payable of $16.5 million, partially offset by tax payments related to share-based compensation of $76.0 million.

Previous 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.

Current wording

As of September 30, 2026, we have lending arrangements with one U.S. bank, four financial institutions in Taiwan, and five financial institutions in China. As of September 30, 2026, we were in compliance with the covenants in the lending arrangements. As of September 30, 2026, we had $63.4 million of unused borrowing capacity.

Previous 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.

Current wording

We had cash, cash equivalents and restricted cash of $621.5 million as of September 30, 2026, an increase of approximately $405.4 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 new factories in Taiwan, China and the U.S., changes in our manufacturing capacity and the continuing market acceptance of our products.